51–60 of 92 posts
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The only part that I wasn’t aware of is that Tether produced a pie chart of their holdings, which made it immediately clear that Tether’s reserves are simply a hedge fund. But this isn’t breaking news; I just hadn’t kept up on it in a while.
A "hedge fund" seems unnecessarily charitable. The majority of their holding is apparently unspecified "commercial paper", which in all likely is near-worthless IOUs from linked entities like Bitfinex.
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Indeed there were some interesting pieces in that. They would argue that the composition showed that they had the required reserves, others would argue it showed they were insolvent :) As tether specifies the right to repay any redeemed tokens in securities, assuming the securities they hold actually keep their value, it seems like they'd be fine From https://tether.to/legal/ "Tether reserves the right to delay the r…
It's all broken down in the video. A very large chunk is on "commercial paper" which is unsecured loans to...?
No Basel II capital adequacy requirements here :)
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> Tether provides a means for people and exchanges to transfer units of accounting, pegged to the US dollar, between each other without a hard AML or KYC wall; as Tether is a crypto token. Pegged by fiat, not by algorithm. Surely the future for such an oracle is an algorithmic peg, as several honest projects continue to forge. > A token that derives its utility from being shady (an unregulated way to move US dollar w…
> You may speak for your trust endorsement, but I think you go too far by translating price and liquidity into community trust. It's a calculation based on the small number of plausible available options. You are very welcome to place a short on the USDT if you believe that view. The only cost of doing so is the interest, which is a few percentage a year. Your reward is 100% if you are right. The market doesn't belie…
I agree on the massive risk associated with the usage of Tether and stable coins in general. It's working until one day the music stops. Regarding how it would affect the market, it seems all experts automatically assume that it would impact the price of cryptos negatively however: • Could a panic exit from Tether push people to immediately buyback cryptos at any price? • Could a flash pump of BTC while USDT/USD is u…
> Could a sudden pump of BTC while USDT/USD is unpegging be the signature of the downfall itself? Likely, but that is not bullish BTC. People who hold USDT at a given moment do so because they don't want to hold crypto. So you would likely see BTCUSDT panic bid (until the Tether exchanges presumably stop withdrawals) and relentless selling of BTCUSD. For those who managed to get out, they will have round tripped thei…
But if they're buying BTC only to convert it back to USD again (at a non USDT exchange), wouldn't the net effect on BTC be zero?
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Indeed there were some interesting pieces in that. They would argue that the composition showed that they had the required reserves, others would argue it showed they were insolvent :) As tether specifies the right to repay any redeemed tokens in securities, assuming the securities they hold actually keep their value, it seems like they'd be fine From https://tether.to/legal/ "Tether reserves the right to delay the r…
The broader historical observation is: given a large amount of money, a requirement to keep it continuously invested, and a cloak behind which to operate, what financial institution in the history of humanity has made good choices? At best, they're choosing investments incompetently. (Chance Tether's team is equivalent to professionals at major banks?) At worst, they're choosing investments to maximize personal gain.…
They do not need to have 100% USD at Tether. Exchanges buy UDST from Tether, that means that there is an exchange. It would be problematic if they would give it for free to the exchanges. The exchanges won't give you free USDT either, they charge something in return. The only way this could be a problem if they would use USDT from within Tether to buy crypto. I have not seen any evidence of this.
It could also be an issue if a large number of people try to redeem a large amount of Tether for USD. Ideally, it would be easy and high trust to go from Tether to USD and back. This requires high confidence that the various backings of Tether are low risk, which we cannot establish given the minimal information Tether has provided.
Not possible. Tether's terms of service explicitly state they have no obligation to redeem.
Tethers only hold value so long as other people believe they do...which is the definition of a fiat currency.
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In my understanding, part of the issue is that we can't value or risk assess the backing ourselves. This is due to the lack of transparency on whose commercial paper Tether is holding, etc.
For sure. I don't hold or trust Tether. But, the existential risk to the (crypto) economy at large seems pretty small, in my opinion. The unregulated, debased Tether seems less risky than holding regulated, backed-by-real-property mortgage-backed securities in 2007. It seems much a-do about not much, to me. But, I guess people need something to worry about.
Bad mortgage backed securities were the root risk.
The unregulated leverage piled on top of those MBSs (credit default swaps) ballooned the consequences of that risk.
But what really caused the global meltdown was (1) pervasiveness of exposure & (2) consequently, institutional uncertainty and withdrawal of liquidity.
When the MBSs failed, the CDSs multiplied the dollar impact. Which would have been that, except that these assets underpined large portions of institution's balance sheets. And critically, unknown large portions.
The "music stopping" was the breaking of institutional trust in the solvency of their counterparties, and hence evaporation of liquidity.
The sheer opaqueness of the crypto exchanges might actually be an advantage here, as unlike traditional exchanges and the banking system, they're not used to keeping an eye on their counterparties' balances.
The challenge with Tether is that it's basically impossible to prove or disprove their financial status. They don't have audited books, so no-one knows. So you need to decide whether they're a risk or not. To me, the idea of having what is effectively a bank with a $60b+ balance sheet that has no auditor and no regulators, seems kind of risky. We also know, via the NYAG case, that they have in the past, said things t…
> The challenge with Tether is that it's basically impossible to prove or disprove their financial status. It's impossible for outsiders to prove or disprove. It would be trivial for Tether to do, which begs the question of why they don't (their reserves pie chart does not qualify). Tether claims that it's basically the only $60B+ institution in the world incapable of being audited. And given their ludicrously simple…
Unless, of course, while negotiating every potential engagement Tether insisted on exceedingly unreasonable audit restrictions. (That’s assuming Tether has actually tried to engage an independent auditor, and I’m not really convinced they have.) Insane restrictions on the scope of the audit and/or the scope of auditor access is the one and only reason they’d be “unable” to find an accounting firm willing and able to conduct the audit. But lack of skill? Knowledge? Willingness to engage with potentially shady clients? Those are not really things that hinder an accounting firm’s ability to engage a client.
They do not need to have 100% USD at Tether. Exchanges buy UDST from Tether, that means that there is an exchange. It would be problematic if they would give it for free to the exchanges. The exchanges won't give you free USDT either, they charge something in return. The only way this could be a problem if they would use USDT from within Tether to buy crypto. I have not seen any evidence of this.
How are these two things related at all? If an exchange buys Tether with USD, then they will have 1:1 USD backing.
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> Tether provides a means for people and exchanges to transfer units of accounting, pegged to the US dollar, between each other without a hard AML or KYC wall; as Tether is a crypto token. That is probably why Tether was initially created but what Tether is now is a mechanism for insiders to cash out real money while leaving lots of "liquidity" in the market to keep the tasty scam going. Retail investors (AKA suckers…
OK, so if you're saying that the entire crypto world is operating on a giant fake dollar Ponzi scheme, then how can a US-regulated exchange like Coinbase (who operates another stablecoin, USDC) be listed on the NASDAQ? You'd think no one in the entire US government apparatus would let the SEC know? > The next economic downturn will wipe out the whole exercise. People have been calling the demise of bitcoin since 2008…
Both Coinbase and Greyscale are trading at a significant discount at the moment but that doesn't really matter for the insiders. If they cash out 80 cents of real money to 1 dollar of crypto then they are still doing well.