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

Post by menzoic » Sat, Jun 05, 2021, 4:56 AM UTC

matheusmoreira wrote: post #53

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...

Honestly Tether doesn't really to be that much different compared to fractional reserve banking. The biggest difference is the government protects banks from bank runs while Tether enjoys no such privilege.

Post by menzoic » Sat, Jun 05, 2021, 5:01 AM UTC

R0b0t1 wrote: post #13

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.

Post by WanderPanda » Sat, Jun 05, 2021, 5:10 AM UTC

lubujackson wrote: post #51

lhorie wrote: post #37

Earlier quoted context omitted.

Honest question. How's Tether imploding different from e.g. a public company suddenly shutting down and its stock price going to zero? I imagine the two scenarios being similar in the sense that anyone holding tether would eat a big loss, but aside from the event obviously affecting investor sentiment, wouldn't it just be more or less business as usual for other coins? As in, couldn't BTC/ETH/whatever people just use…

Tether imploding isn't at all like a public company closing shop, because public companies are Real Things and have public data about sales, revenue, employees, business relationships, etc. And even the ones that implode go through bankruptcy court where their assets are doled out to debtors and shareholders. Tether imploding would be more like a bank run, where you can see YOUR MONEY as a number on the screen then w…

Post by WanderPanda » Sat, Jun 05, 2021, 5:14 AM UTC

fastball wrote: post #100

cortesoft wrote: post #95

Earlier quoted context omitted.

Isn’t this like saying a run on the banks won’t damage you if you keep your money in a mattress? Even if you don’t keep any money in a bank, banks collapsing would still hurt you. The stock market crashing hurts more than just people who own stock.

Right, but a run on a bank does not necessitate collateral damage. As an example, let's say Capital One has been fractional banking (as they all do) but for some reason people get paranoid about it and there is a run on the bank. Everyone tries to withdraw money Capital One doesn't have. As long as the govt doesn't step in and socialize losses on the back of the taxpayer, you're left with a bunch of people who had "d…

Post by WanderPanda » Sat, Jun 05, 2021, 5:22 AM UTC

duskwuff wrote: post #56

bpodgursky wrote: post #8

Earlier quoted context omitted.

Not obvious to me that it would be catastrophic. There are other stablecoins even if Tether is a 75%-funded scam (and honestly, who in crypto _hasn't_ taken a 25% haircut at some point?) Some people holding cash* would get hit, but there's no real magic to starting a 1-1 backed stablecoin. Someone will fill the space, since it's obviously needed.

The suspicion is that Tether is much closer to 5% backed than 75%. A 95% "haircut" would be catastrophic.