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Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

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Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#11

Post by SkyMarshal »

Tenoke wrote: post #5
Havoc wrote: post #3

Honestly stablecoins - specifically tether - is about the only thing about crypto that genuinely frightens me. Crypto rollercoaster - up down sideways and in circles - sure I'm game. Tether that is stable until it implodes...hell no. Even without direct exposure the blast radius worries me.

For what is worth, there's a huge blast radius if any of the top 3 collapse, with Tether (as the 3rd) likely having the smallest one - think of what happens to everything else when bitcoin crashes or even dips significantly.

Bitcoin crashes and dips all the time. It's lost over 80% of its value at least four times since it launched, plus the recent big 50% drawdown. It slows the cryptoeconomy for a year or so, but doesn't stop it, and then there's another bubble again ~2yrs later.

Bitcoin's high but natural volatility is not the same thing as the price collapsing due to the system itself fundamentally breaking. For example, the Global Financial Crisis was the result of the system itself fundamentally breaking, not natural volatility, and its blast radius was immense.

Tether or other major stablecoin collapsing due to being exposed as a fraud, or a fractional reserve with no reserves, or similar, would be more analogous to the GFC. And the blast radius could be worse than any of Bitcoin's 80% drawdowns, both economically and wrt to regulatory and legal attention.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#12

Post by Tenoke »

SkyMarshal wrote: post #11
Tenoke wrote: post #5

Earlier quoted context omitted.

For what is worth, there's a huge blast radius if any of the top 3 collapse, with Tether (as the 3rd) likely having the smallest one - think of what happens to everything else when bitcoin crashes or even dips significantly.

Bitcoin crashes and dips all the time. It's lost over 80% of its value at least four times since it launched, plus the recent big 50% drawdown. It slows the cryptoeconomy for a year or so, but doesn't stop it, and then there's another bubble again ~2yrs later. Bitcoin's high but natural volatility is not the same thing as the price collapsing due to the system itself fundamentally breaking. For example, the Global Fi…

I just don't see it being worse. There are plenty of replacements in place - USDC is also in the top 10. BTC crashing 80% is at least similarly drastic (many losing 'faith' or all their savings in crypto) and I don't expect the recovery from a Tether crash (which is also a much smaller part of the market and again, has replacements) to be worse or take longer.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#13

Post by R0b0t1 »

Animats wrote: post #10

I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...

I've been following cryptocurrencies since their inception. No one who knows anything is investing in or holding fiat based currencies. It may make some people some money, but it is assuredly not going to make you any money, and will probably make you lose money.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#15

Post by rawtxapp »

Animats wrote: post #10

I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...

Stablecoins are an unfortunate side-effect of limited banking for the crypto industry. For the longest time, even legitimate exchanges had issues getting deposits/withdrawals working properly with normal banking system.

Most traders I know use tether to move funds between exchanges for arbitrages and/or wait out a correction. Some are also using it to generate yield, but other than that, nobody is holding onto it for the very long term.

And Tether is not the only game in town, USDC (which is by well known/regulated entities here in US) has been getting a lot of traction, it now has about 1/3rd of Tether's market cap.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#16

Post by TacticalCoder »

Animats wrote: post #10

I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...

> Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time.

It looks like USDC, issued by a company co-owned by Coinbase (YC incubated right?) and Circle, is quickly replacing tether. One year ago there were about 1/10th of USDC compared to tether, now it's half.

Apparently USDC are really fully backed by real USD and the smart contract for USDC can block any address containing USDC at any time (which eases some concerns regarding complying with authorities while it probably raises some concerns for others).

I take it for those concerned it wouldn't be unwise to sell your USDTs for USDCs.

For somehow I don't believe that Coinbase is pulling a ponzi scheme with USDC.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#17

Post by young_unixer »

Havoc wrote: post #3

Honestly stablecoins - specifically tether - is about the only thing about crypto that genuinely frightens me. Crypto rollercoaster - up down sideways and in circles - sure I'm game. Tether that is stable until it implodes...hell no. Even without direct exposure the blast radius worries me.

Tether imploding would just mean a couple more years to stack up.

People who don't understand the technology would flee, thinking it was just a fad, those that do understand it would stay, stack up and wait a few years.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#18

Post by wmf »

TacticalCoder wrote: post #16
Animats wrote: post #10

I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...

> Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time. It looks like USDC, issued by a company co-owned by Coinbase (YC incubated right?) and Circle, is quickly replacing tether. One year ago there were about 1/10th of USDC compared to tether, now it's half. Apparently USDC are really fully backed by real USD and the smart contract for USDC can block any address containing US…

Something is off in USDC land though: https://news.bitcoin.com/usdc-attestations-run-late-raising-...

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#19

Post by ve55 »

lurkerasdfh8 wrote: post #9
ahthat wrote: post #2

I wrote about a similar comparison way back in the middle of 2017: https://benshieldsblog-blog.tumblr.com/post/165101127465/let... https://drive.google.com/file/d/0B9li-Wu3-bPEWEswQVdIOHVKTmM...

honestly, anyone with half a brain do not see that cryptocurrencies are re-hashing (heh) every single scam from the unregulated investment market times? every single one of them. Many times over. I think everyone knows, because, c'mon. But everyone thinks they are the smarter one and will be the ones fooling others and making money. Which makes this article, and yours, pointless, because, everyone already knows that.

I think you're significantly overestimating how much experience and knowledge most that briefly dabble in currency have both over what is currently going on and over what types of finance scams have happened in the past.

Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance

#20

Post by initplus »

Tether as an organization operates with no transparency, and has a toxic symbiotic relationship with exchanges. I'm certain that Tether has backroom relationships with major exchanges - Tether provides liquidity to exchanges in the form of short term USDT loans. So Tether can claim their issues are backed by real reserves https://tether.to/wp-content/uploads/2021/05/tether-march-31..., omitting the convenient fact that much of the debt they own is itself denominated in USDT.

Tether uses this scheme to issue loans and collect interest without the pesky step of actually having cash reserves to loan out.

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