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Tether price manipulation

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Re: Tether price manipulation

#161

Post by notahacker »

shuntress wrote: post #147
tim333 wrote: post #75

Earlier quoted context omitted.

People do hold USDT. I hold some myself. If you are going to buy crypto again it saves the hassle and expense of converting into fiat money and back again. The majority of exchanges can't actually hold fiat money due to regulatory issues. Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.

In what way is Tether not a fiat currency?

Ironically Tether, whose quantity appears to be determined by however much the small private entity that runs it decides to create, appears to be a much purer example of 'fiat' currency than most national currencies have been for most of the last half century (quantity determined in a decentralised manner by the balance of supply and demand for credit at a base interest rate a centralised body periodically updates to hit a [decentralised market-driven] fixed target rate of inflation)

Re: Tether price manipulation

#162

Post by ldiracdelta »

user22 wrote: post #135
JohnJamesRambo wrote: post #119

Earlier quoted context omitted.

The killer app for Bitcoin is escaping government fiat money that is backed by literally nothing at all and is being printed at increasingly alarming rates. 40% of all USD ever created were “made” in 2020. That will have repercussions for decades and isn’t a currency I want to stay in. https://fred.stlouisfed.org/series/M1 Ironically (or not) Bitcoin was created in 2009 right when that graph gets really crazy.

I have a question, isn't the problem with the gold standard that the amount of dollars is fixed and in order to have enough currency to drive a rapidly growing economy you would in essence be buying a gallon of milk for .25 cents? It seems to me that either you the amount of currency in circulation needs to increase or the value of the existing currency needs to increase. Taking into account the gold standard was use…

Yes. That is called deflation. It also has to do with fractional reserve banking. The fraction of your outstanding dollars that you could actually cover with gold. If no one ever wants to make a run on your bank, you can keep the fraction very low.

Re: Tether price manipulation

#163

Post by alisonkisk »

c-fe wrote: post #105
shuntress wrote: post #96

Earlier quoted context omitted.

> Bitfinex as an organization ‘printing’ free money and using it to pump the market. How?

like I mentioned above, it is speculated that they are the ones who are printing the tether, then use that to buy bitcoin. They are then probably hoping that whoever receives tether for selling their bitcoin does not immediately want usd, but instead is happy with the tether as it is 'backed 1:1'. (Again, I have to stress that this is a theory i read somewhere on the internet, while lots of things add up, it may also…

But who is selling their (temporarily) valuable bitcoin for worthless tether instead of USD?

Re: Tether price manipulation

#164

Post by dylkil »

tromp wrote: post #114
dylkil wrote: post #27

Earlier quoted context omitted.

>Bitcoin's narrative has had to morph from "digital currency" to "digital gold". This narrative was an intentional morphing by various actors within the space (Blockstream) who believed raising the blocksize to allow higher throughput would cause 'centralisation'. Instead they want people to use layer 2 solutions such as blockstreams own federated product Liquid.

As explained by blockstream co-founder Greg Maxwell in [1], the blocksize is constrained in order to ensure a steady backlog of fee paying transactions, that allow bitcoin to remain secure in the long term when block subsidy becomes insignificant. [1] https://bitcointalk.org/index.php?topic=5306354.0

>that allow bitcoin to remain secure in the long term when block subsidy becomes insignificant.

this line of reasoning is silly. To match the current block subsidy with the current block size limit when miner subsidy runs out the average transaction fee will need to be >$127.

$45mil daily revenue / 350,000 txs per day

OR, you could increase the block size limit to 10mb, allowing 3.5mil txs per day, or 100mb allowing 35mil txs per day. Then the average fee paid per tx is significant lower.

The reason this was argued against by blockstream was because a bigger blocksize means more storage is needed by the miner and more txs means better hardware and bandwidth to process them, effectively pricing out normal people from running full nodes.

Essentially, the ability for normal people to send a transaction cheaply is being sacrificed so that normal people can setup a full node. Counter intuitive imo.

Re: Tether price manipulation

#165

Post by alisonkisk »

londons_explore wrote: post #142
bootlooped wrote: post #57

Earlier quoted context omitted.

Do most people even believe that Tether is backed 1:1? Or are they just playing along because it's in their interest?

All we can be sure of is that the money put into tether is greater or equal to the money taken out. If people didn't believe it, they would sell (either for BTC or real dollars), and if enough people did that then tether would collapse. My suspicion is there are enough dormant tether holders that the above will never occur, even if there have been some substantial fraud losses.

There's a lot of room for delayed fraud, same as when banks fail.

Imagine I secretly remove the contents of everyone's safe deposit boxes.

I get rich selling what I stole, but no one is any poorer until much later when they try to cash out their treasures and realize they are gone. USDTether is an empty safe deposit box.

Re: Tether price manipulation

#166

Post by dylkil »

gruez wrote: post #143
samvher wrote: post #120

Earlier quoted context omitted.

That may be true but there is definitely a difference between the way people talked about it earlier ("later we will all be paying with bitcoin") to how it is now ("it's a store of value and maybe there is potential for bitcoin-backed currencies").

I think the scaling limitations were well known at the beginning. If Bitcoin were to get as large as visa/mastercard the blockchain would be growing at a rate of a few gigabytes per day, which would kill decentralization.

the limitations have been researched extensively outside of the echo chamber of bitcoin development. It is possible to scale a utxo system like bitcoins to hundreds of millions of txs per day. Xthinner[1] can compress blocksizes by 99%, but bitcoin devs have ignored this with handywavy arguments.

[1]https://github.com/jtoomim/xthinner-spec

Re: Tether price manipulation

#167

Post by gillesjacobs »

c-fe wrote: post #105
shuntress wrote: post #96

Earlier quoted context omitted.

> Bitfinex as an organization ‘printing’ free money and using it to pump the market. How?

like I mentioned above, it is speculated that they are the ones who are printing the tether, then use that to buy bitcoin. They are then probably hoping that whoever receives tether for selling their bitcoin does not immediately want usd, but instead is happy with the tether as it is 'backed 1:1'. (Again, I have to stress that this is a theory i read somewhere on the internet, while lots of things add up, it may also…

> But who is selling their (temporarily) valuable bitcoin for worthless tether instead of USD?

You're asking what the utility of stablecoins is: Stablecoins are widely used as a legislatively advantageous on- and off-ramp for the whole crypto market.

Off-ramp: If people want to sell BTC or other volatile tokens because they want to realize profits, the obvious thing would be to sell for fiat (USD/EUR). But due to taxation and legislation this is often difficult. Stablecoins like Tether provide the utility of a low-volatility currency that fiat would fill. Main advantage is bypassing legislation.

This use is so common there is jargon for "Tethering up".

There also exist many debit cards that allow paying with stablecoins, increasing utility. The rise of DeFi and money markets for stablecoins also provides a good return on stablecoins while in theory being low-volatility.

On-ramp: If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation limiting the buying of a specific token or use of exchanges. This use is less common, I would wager.

Of course, for any of this to be actually useful Tether has to remain the same price. If Tether starts to deviate significantly from the 1USD peg, a liquidity crisis cuold be triggered.

Personally, I haven't trusted Tether since the first BitFinex scandals and avoid it like the plague. For my stablecoin needs, I use something that is audited and over-collateralized like DAIv2.

Re: Tether price manipulation

#168

Post by caeril »

newsclues wrote: post #106
caeril wrote: post #94

Earlier quoted context omitted.

It definitely has a killer app. Probably not a big enough app to justify these prices, but one nonetheless. As Stripe, PayPal, Visa, Gofundme, Patreon, et. al. shut down avenues of payments for legal, but unpopular purchases, BTC is the obvious workaround. Vendors of firearms, pornography, legal funds for unpopular causes, dissident content creators, etc have become increasingly estranged from the "normal" payments m…

If BTCs killer app is criminal transactions, then regulation is guaranteed.

Right, but I'm specifically referring to legal, but repressed transactions.

Re: Tether price manipulation

#169

Post by alisonkisk »

callamdelaney wrote: post #42
sharperguy wrote: post #19

Surely the only way to keep the valuer of tether stable is to "print" more of it whenever its value starts to increase? Otherwise it wouldn't be always worth $1.

Tethers only value is as a proxy for the dollar, as such it can only ever be worth a dollar. The exceptions are when a market is crashing people would rather have dollars, and we will see prices above a dollar due to high demand - though the intrinsic value should never change.

When market crashes Tether prices go below a dollar because dollars get (relatively) expensive.

Re: Tether price manipulation

#170

Post by tim333 »

shuntress wrote: post #147
tim333 wrote: post #75

Earlier quoted context omitted.

People do hold USDT. I hold some myself. If you are going to buy crypto again it saves the hassle and expense of converting into fiat money and back again. The majority of exchanges can't actually hold fiat money due to regulatory issues. Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.

In what way is Tether not a fiat currency?

Investopedia has:

>Fiat money is a government-issued currency that isn't backed by a commodity such as gold.

Tether fails the government-issued bit.

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