Tether Says Stablecoin Is Only Backed 74% by Cash, Securities • Hacker News Board

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#41

Post by [deleted] » Tue, Apr 30, 2019, 11:05 PM UTC

joshe wrote: post #39

dheera wrote: post #11

Earlier quoted context omitted.

Question -- why does this matter to me? As long as the market agrees to trade it for around 1.00 USD, +/- a few %, which seems to generally be happening, it shouldn't matter to me whether it's backed or not. It's just an abstract notion that the market has agreed to trade at a certain price. (It's not like I would hold onto USDT for a long time anyway -- it's only there to facilitate short-term needs. If I wanted to…

Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people mi…

[deleted]

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#42

Post by perl4ever » Tue, Apr 30, 2019, 11:06 PM UTC

joshe wrote: post #39

dheera wrote: post #11

Earlier quoted context omitted.

Question -- why does this matter to me? As long as the market agrees to trade it for around 1.00 USD, +/- a few %, which seems to generally be happening, it shouldn't matter to me whether it's backed or not. It's just an abstract notion that the market has agreed to trade at a certain price. (It's not like I would hold onto USDT for a long time anyway -- it's only there to facilitate short-term needs. If I wanted to…

Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people mi…

"Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money."

I'm not clear on whether they have discovered fractional reserve banking or whether they are insolvent. There's a big difference. If they are insolvent, I'd tend to assume tethers not trading at a discount just means people are idiots. But if not, not.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#43

Post by [deleted] » Tue, Apr 30, 2019, 11:16 PM UTC

dheera wrote: post #11

jpatokal wrote: post #5

Yet the Tether price of BTC is only 6% below the USD price: http://www.untether.space/

Question -- why does this matter to me? As long as the market agrees to trade it for around 1.00 USD, +/- a few %, which seems to generally be happening, it shouldn't matter to me whether it's backed or not. It's just an abstract notion that the market has agreed to trade at a certain price. (It's not like I would hold onto USDT for a long time anyway -- it's only there to facilitate short-term needs. If I wanted to…

[deleted]

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#44

Post by [deleted] » Tue, Apr 30, 2019, 11:20 PM UTC

[deleted]

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#45

Post by gruez » Tue, Apr 30, 2019, 11:21 PM UTC

cperciva wrote: post #40

joshe wrote: post #39

Earlier quoted context omitted.

Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people mi…

Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.

>because it's impossible to withdraw money at all.

I heard this meme being repeated since forever and it never made sense to me. As I understand it, you could exchange USDT for real USD at any participating exchange. Not being able to convert USDT would mean not being able to withdraw from any of those exchanges, but there's no widespread reports of this. Also, you could convert USDT to USD at Kraken, and they definitely don't have any withdraw problems. Finally, if you really couldn't withdraw USD from an exchange, it would become evident because BTC priced would skyrocket as people scramble to find other ways to withdraw their cash. We saw this with mtgox, but not here (there's a premium but nowhere close to mtgox levels)

edit: clarified which part I'm replying to

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#46

Post by bb88 » Tue, Apr 30, 2019, 11:25 PM UTC

cperciva wrote: post #40

joshe wrote: post #39

Earlier quoted context omitted.

Because if there is a "run on the bank", someone will end up short. Either the first people out will get 100% of their money and last 26% will get zero, or everyone will get 74% of their money. This very fact will actually cause a run on the bank in any sort of crisis. You don't need to actually believe that tether is a complete sham and has no money to decide to withdraw. You just need to worry that 74% of people mi…

Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.

Only if you ask for permission from Tether, first. If you have power to seize the bank accounts, however...

https://www.investopedia.com/terms/t/tether-usdt.asp

"On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers."

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#47

Post by bb88 » Tue, Apr 30, 2019, 11:32 PM UTC

gruez wrote: post #45

cperciva wrote: post #40

Earlier quoted context omitted.

Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.

>because it's impossible to withdraw money at all. I heard this meme being repeated since forever and it never made sense to me. As I understand it, you could exchange USDT for real USD at any participating exchange. Not being able to convert USDT would mean not being able to withdraw from any of those exchanges, but there's no widespread reports of this. Also, you could convert USDT to USD at Kraken, and they defini…

The point of having the reserves in US Dollars is that Tether could theoretically buy back surplus USDT's from an exchange that trades in it. Otherwise an exchange could be left holding millions of worthless USDT with no means to move that back to US dollars.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#48

Post by saalweachter » Tue, Apr 30, 2019, 11:38 PM UTC

e_tm_ wrote: post #19

eindiran wrote: post #2

Honestly, 74% is a much higher number than I was expecting.

This is assuming that the stated 74% number is true. Fool me once...

If it's a fake number, it's an interesting choice.

They aren't claiming to be 99% or 90% backed, which would be similarly disbelieved by the same people who disbelieved the 100% claim.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#49

Post by _tb1_ » Tue, Apr 30, 2019, 11:39 PM UTC

jpatokal wrote: post #5

Yet the Tether price of BTC is only 6% below the USD price: http://www.untether.space/

I find this pretty interesting. On the one hand, it's similar to the situation a lot of lenders are in. But on the other hand Tether isn't owed that money back as far as I understand it. You also have the fact that a lot of crypto people are very against fractional reserve.

Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities

#50

Post by wmf » Tue, Apr 30, 2019, 11:41 PM UTC

gruez wrote: post #45

cperciva wrote: post #40

Earlier quoted context omitted.

Ironically, tether is pretty much immune from bank runs... because it's impossible to withdraw money at all.

>because it's impossible to withdraw money at all. I heard this meme being repeated since forever and it never made sense to me. As I understand it, you could exchange USDT for real USD at any participating exchange. Not being able to convert USDT would mean not being able to withdraw from any of those exchanges, but there's no widespread reports of this. Also, you could convert USDT to USD at Kraken, and they defini…

Imagine if Bitfinex shut down with no warning. All the USDT stored in Bitfinex would simply be lost so it wouldn't cause a bank run. But massive amounts of USDT would flow from Bittrex, Hitbtc, and Poloniex to Kraken where the price would drop to pennies due to lack of liquidity. Maybe then Kraken suspends trading "to calm the market" and never resumes.

I am reminded of the default of BTCST which I guess no one remembers.