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Exposing Tether [video]

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Re: Exposing Tether [video]

#61

Post by ethbr0 »

espadrine wrote: post #44
fuzzybear3965 wrote: post #25

Earlier quoted context omitted.

All assets liquidated today, what do you think the true value of a Tether is? $.70 USD? The answer is not clear to me, but it seems like this is an important value. Also, aren't some of those assets (like treasury bills) interest-accruing? That would seem to offset some of the losses incurred by a short-term, high-volume liquidation event.

> All assets liquidated today, what do you think the true value of a Tether is? $.70 USD? Given that only 3% of each dollar is backed by fiat, they can only guarantee $0.03 on each dollar requested. In the case of a bank run, the commercial paper etc. would be considered valueless, and unlike a real bank, their deposits are not insured. So the value of a Tether would theoretically fall to $0.03. In practice however,…

> In the case of a bank run, the commercial paper etc. would be considered valueless

It would not be considered valueless.

It would be valued at the current market price it could be quickly cleared at.

That price is substantially less than face value, but probably more than $0. And of course depends on who wrote the note and the terms.

Re: Exposing Tether [video]

#62

Post by jkhdigital »

espadrine wrote: post #44
fuzzybear3965 wrote: post #25

Earlier quoted context omitted.

All assets liquidated today, what do you think the true value of a Tether is? $.70 USD? The answer is not clear to me, but it seems like this is an important value. Also, aren't some of those assets (like treasury bills) interest-accruing? That would seem to offset some of the losses incurred by a short-term, high-volume liquidation event.

> All assets liquidated today, what do you think the true value of a Tether is? $.70 USD? Given that only 3% of each dollar is backed by fiat, they can only guarantee $0.03 on each dollar requested. In the case of a bank run, the commercial paper etc. would be considered valueless, and unlike a real bank, their deposits are not insured. So the value of a Tether would theoretically fall to $0.03. In practice however,…

The commercial paper is not “valueless” as long as there is an active market for it. The key question, of course, is who issued the paper. Given Tether’s difficulties obtaining banking services, you have to wonder what capital markets they have access to.

Re: Exposing Tether [video]

#63

Post by qeternity »

dannyw wrote: post #40
qeternity wrote: post #36

Earlier quoted context omitted.

> If I want a super-duper legit stablecoin, I'd use USDC They are morphing into Tether. Look at recent legal structure change, attestations, reserves breakdown, etc. But your core premise (Tether as a dollar substitute for the unbankable) is predicated on there being two states of the universe (USD in risky places vs. Tether) which isn't true and ignores the key issue: all of those Tethers may not hold any value. In…

The Sci-Hub founder can hold any other major crypto, sure, but it's volatile. How do you propose she allow international donations? Via a SWIFT bank account? Via cash in the mail to a postal address? The easiest and most liquid mechanism is for people like her to accept crypto donations (e.g. Bitcoin), and convert it to non-KYC stablecoins like USDT so the purchasing power is preserved. It's not hard to explain the 6…

> The Sci-Hub founder can hold any other major crypto, sure, but it's volatile.

Why do you guys do this? It's so painful speaking with crypto die-hards. I said she could hold any other major currency, which of course implies fiat. How about EUR? How about CHF? How about GBP? I don't know enough about her but hell she could hold RUB...still less volatile than crypto.

> How do you propose she allow international donations?

That's her problem. This goes with the territory of running an illegal website, no matter how idealistic you find her cause. But basically once again, crypto's primary use-case (as you've outlined) is skirting laws. That's fine, it's a real use-case. But just quit pretending that crypto is the future of money.

> It's not hard to explain the 60B market cap when you combine "non-KYC" and "stablecoin", and if you believe it's not backed by anything, you can open a short on USDT right now, using DeFi like Compound. Your upside is 100%, your downside is the cost of borrowing (about a few percentage a year).

I agree, it's very easy to explain. That's what this video is all about. As for shorting USDT, that's about the dumbest thing you could do, and your DeFi example is absolutely naive. I want to be short USDTUSD...I can't do that in DeFi. I can be short Tether against something else whose value at the moment is determined by circulating Tethers. If you think DAI survives a Tether implosion, you're dreaming. And if it did, I still need a fiat offramp and if you think Coinbase is a good counterparty in that scenario, well then I am beginning to understand you a little bit. In my career as a hedge fund trader, I don't think I've come across a worse trade than shorting USDT.

> The market believes $1 = 1 USDT, with a volume of $53 billion in the past 24 hours.

Yes, and? If the market didn't believe this, then there wouldn't be a story here.

Re: Exposing Tether [video]

#64

Post by qeternity »

gruez wrote: post #54
qeternity wrote: post #50

Earlier quoted context omitted.

> 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…

>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 their USDT to USD, but BTCUSD will be a bloodbath. 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?

No, it would have the effect of all the BTC on unbanked Tether exchanges being sent to banked exchanges to be sold for fiat. So the price would be high in USDT terms and low in USD terms. This is how the "peg" breaks.

BTC/USDT only goes up because the denominator (USDT) goes to zero.

Re: Exposing Tether [video]

#65

Post by csomar »

raesene9 wrote: post #17

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…

USDC has been growing at a faster pace. Tether has attraction because it was there first. This reminds me when Bitfinex was the exchange that moves Bitcoin price. Now, it's just another exchange. It'll take time but it'll eventually happen.

> https://coinmarketcap.com/currencies/usd-coin/

Re: Exposing Tether [video]

#66

Post by qeternity »

elliekelly wrote: post #58
qeternity wrote: post #42

Earlier quoted context omitted.

> 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…

As someone who has worked at a big four accounting firm hearing the clip of Tether’s CEO insisting no one would audit them was infuriating. I don’t know a single public accounting firm that wouldn’t be jumping at the opportunity to do that audit and use it to show how tech-savvy they are in an effort to drum up consulting business. Unless, of course, while negotiating every potential engagement Tether insisted on exc…

Exactly. What Tether really mean is that nobody will give them the audit and rubber stamp that they want, which is of course different from nobody being willing to audit them.

Re: Exposing Tether [video]

#67

Post by qeternity »

ethbr0 wrote: post #46
raesene9 wrote: post #24

Earlier quoted context omitted.

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.…

> At worst, they're choosing investments to maximize personal gain.

At worst, they don't have any investments.

Re: Exposing Tether [video]

#68

Post by ethbr0 »

qeternity wrote: post #67
ethbr0 wrote: post #46

Earlier quoted context omitted.

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.…

> At worst, they're choosing investments to maximize personal gain. At worst, they don't have any investments.

It's possible, but given a choice between "flagrantly lying to the New York AG who just investigated you" vs "buying cheap debt no one else would touch and then overvaluing it, because you aren't regulated", the latter seems like a less legally perilous way of keeping things going.

Re: Exposing Tether [video]

#69

Post by qeternity »

ethbr0 wrote: post #68
qeternity wrote: post #67

Earlier quoted context omitted.

> At worst, they're choosing investments to maximize personal gain. At worst, they don't have any investments.

It's possible, but given a choice between "flagrantly lying to the New York AG who just investigated you" vs "buying cheap debt no one else would touch and then overvaluing it, because you aren't regulated", the latter seems like a less legally perilous way of keeping things going.

Yes, that might be more likely. I was just framing things "at worst".

Deltec, the bank that Tether bought, has a desk specializing in zombie debt, so it's entirely possible they have loads of debt bought for pennies on the dollar, that they have through accounting/market shenanigans recognized at par as their "commercial paper".

Re: Exposing Tether [video]

#70

Post by ethbr0 »

qeternity wrote: post #69
ethbr0 wrote: post #68

Earlier quoted context omitted.

It's possible, but given a choice between "flagrantly lying to the New York AG who just investigated you" vs "buying cheap debt no one else would touch and then overvaluing it, because you aren't regulated", the latter seems like a less legally perilous way of keeping things going.

Yes, that might be more likely. I was just framing things "at worst". Deltec, the bank that Tether bought, has a desk specializing in zombie debt, so it's entirely possible they have loads of debt bought for pennies on the dollar, that they have through accounting/market shenanigans recognized at par as their "commercial paper".

I mean... technically they're completely unregulated, right?

So they don't even have to perform shenanigans.

They can just buy $1 par debt at $0.01 from Bob's Used Cars and value / declare it at $1. It's a super shady move, and would shake confidence if known, but would seem legally defensible. ("We valued it at a fair price. It turned out we were wrong and overvalued it. Oops.")

They could probably declare it at >$1 if they really wanted to, but why do hard fraud instead of easy fraud?

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