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

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

#131

Post by dmix »

Thorrez wrote: post #117
vegannet wrote: post #104

Earlier quoted context omitted.

I’m not clear how that applies to Tether: “[...] each tetherUSD in circulation represents one US dollar held in our reserves (i.e. a one­to­one ratio) which means the system is fully reserved when the sum of all tethers in existence (at any point in time) is exactly equal to the balance of USD held in our reserve.” Where does the 5% come from?

5% isn't possible, but you can make over 2% on treasury bills currently. The risk of the US government defaulting on loans can be essentially ignored.

This might be a dumb question but can you sell a treasury bond to a 3rd party before the terms are over without losing too much money?

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

#132

Post by darawk »

village-idiot wrote: post #114
darawk wrote: post #66

Earlier quoted context omitted.

No. The short term securities would be things like treasuries. The loan to Bitfinex represents the 26% shortfall in the reserves.

Normally it would, if the guys behind Tether were trustworthy

It does whether or not they're trustworthy. You may think the loan will not get repaid...but it's in their interest to repay it. They're making plenty of money at Bitfinex. The idea that they're going to run some elaborate ponzi scheme to steal money, when they're making several hundred thousand dollars per day in fees is kind of silly.

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

#133

Post by scottlocklin »

tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

>Tether is a fundamentally a risk free money making concept, it works just like gift certificates. T

No, it actually works like fractional reserve banking, which for some reason, nobody has a problem with.

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

#134

Post by Zarath »

qaq wrote: post #95
gridlockd wrote: post #92

Earlier quoted context omitted.

> You give the bank a dollar. The bank loans 90 cents of it to Bob who puts it in the bank too. The bank didn’t invent 90 cents. There are now 1.90$ credited to both me and Bob, where before there was only 1$ credited to me. The 90 extra cents are now part of the money supply. They appeared out of thin air. Perhaps it's unfair to say the bank "invented" the money, but it did create it. > They’re owed 90 cents from Bo…

"There are now 1.90$ credited to both me and Bob, where before there was only 1$ credited to me. The 90 extra cents are now part of the money supply. They appeared out of thin air." I think you are confusing money supply and record keeping. The only spendable money is what bank actually has so if you and Bob where the only customers of that bank and bank loaned 90c of your 1 dollar to Bob the only money you could spe…

That isn't true. You might want to take a look at this:

https://en.wikipedia.org/wiki/Money_creation#Fractional_rese...

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

#135

Post by Canada »

dmix wrote: post #131
Thorrez wrote: post #117

Earlier quoted context omitted.

5% isn't possible, but you can make over 2% on treasury bills currently. The risk of the US government defaulting on loans can be essentially ignored.

This might be a dumb question but can you sell a treasury bond to a 3rd party before the terms are over without losing too much money?

Yes, they are completely liquid.

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

#136

Post by marcus_holmes »

vegannet wrote: post #104
lupire wrote: post #103

Earlier quoted context omitted.

$100M in deposits is $5M/yr in returns on float, just as your bank and insurance companies do with your deposits and premiums. It's technically not risk-free (FDIC notwithstanding) but that doesn't stop anyone.

I’m not clear how that applies to Tether: “[...] each tetherUSD in circulation represents one US dollar held in our reserves (i.e. a one­to­one ratio) which means the system is fully reserved when the sum of all tethers in existence (at any point in time) is exactly equal to the balance of USD held in our reserve.” Where does the 5% come from?

It's the gamble that banks make. A bank holds your money and will give it to you at any time. To fund this, they make an assumption about how many of their customers will actually want their money at any one time, and they invest the rest.

If all their customers decide to withdraw their money, this is a "run on the bank" and generally dooms the bank.

Presumably Tether planned to do the same: a percentage of the money they held would be invested, based on the assumption that not everyone who held Tether would want USD at any one point in time.

Of course, this stretches the meaning of "reserve", and utterly fails if they mismanaged the investment bit and lost the money they invested

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

#137

Post by InclinedPlane »

scottlocklin wrote: post #133
tinco wrote: post #59

It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent. Let me start by saying I don't hold Tether nor have I ever, nor do I think it's a good idea. Tether is a fundamentally a risk free money making concept, it works just like gift certificates. The only thing Tether has to do is buy back Tether at any price lower than they sold it for and they make profi…

>Tether is a fundamentally a risk free money making concept, it works just like gift certificates. T No, it actually works like fractional reserve banking, which for some reason, nobody has a problem with.

"Some reason."

Could be, and now I'm just spitballing here, but it could be the use of government backed currencies, the heavy degree of government oversight and regulation, and the federally insured deposits.

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

#138

Post by dead_mall »

This is just good old Tether FUD. I remember the Tether fud that dropped it to the 80cent range, which was pretty much a free 10%+ gain. This recent fud was also another great arb opportunity. Though this time it held a lot stronger, I was expecting it to go much lower than it did. I think the timing was good too cause it happened over the weekend when the other markets were'nt open so the impact was not so bad. I mean, look at that USDT/USD discount on Kraken.

Also, let's not forget Bitfinex makes a ton of money already off it's premium btc price.

But yeah, checkout the 'City Wok Bitcoin FUD' meme on a search bar, this time it's the Tether FUD format

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

#139

Post by askafriend »

Scoundreller wrote: post #130
village-idiot wrote: post #109

Earlier quoted context omitted.

They’re claiming 74% “cash and cash like securities ”, which is one hell of a caveat. We know that they’ve “loaned” 900m to Bitfinex, a company run by the same people as Tether. My bet is that some of those “cash like securities” are unrecoverable “loans”.

I was reading through Apple’s 10K, and they define cash like securities as being highly liquid and having a maturity in less than 3 months.

Apple shouldn't have to suffer the horrible fate of being even implied in the same conversation as Tether/Bitfinix as far as reporting standards and corporate trust go.

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

#140

Post by rags2riches »

dmix wrote: post #131
Thorrez wrote: post #117

Earlier quoted context omitted.

5% isn't possible, but you can make over 2% on treasury bills currently. The risk of the US government defaulting on loans can be essentially ignored.

This might be a dumb question but can you sell a treasury bond to a 3rd party before the terms are over without losing too much money?

You can sell them before maturity, but their value will depend on current interest rates, of course. If rates are up, you will have to discount the price.
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