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Exposing Tether [video]

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Re: Exposing Tether [video]

#71

Post by espadrine »

ethbr0 wrote: post #61
espadrine wrote: post #44

Earlier quoted context omitted.

> 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.

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

To clarify: there are two markets, one is redemption of USDT through the Tether company, the other is independent transaction of USDT vs. payment typically through exchanges.

During asset liquidation, Tether’s assets would not be sold for the users’ redemption, but for the company’s creditors and shareholders. As soon as the suspicion of liquidation is there, there would be a bank run while redemptions still work.

In the case of a bank run, the price of USDT would be dictated by the exchange market exclusively. As a massive number of people sell through redemption, it is clear to the holders that when the cash dries out, redemptions will close. So they will theoretically be ready to sell through the exchange at 3%, because that is the expected value of the return across all USDT holdings.

Re: Exposing Tether [video]

#72

Post by _Nat_ »

fuzzybear3965 wrote: post #25
overtonwhy wrote: post #22

Earlier quoted context omitted.

Tether actually was forced to release a break down of their assets and they have https://www.coindesk.com/tether-first-reserve-composition-re...

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?

I guess you're assuming that their assets are truthfully reported, would be sold off, then evenly distributed?

Not worried that someone might run off with the money or something?

Re: Exposing Tether [video]

#73

Post by albntomat0 »

qeternity wrote: post #56
albntomat0 wrote: post #30

Earlier quoted context omitted.

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.

> It could also be an issue if a large number of people try to redeem a large amount of Tether for USD. 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.

> Not possible. Tether's terms of service explicitly state they have no obligation to redeem.

Which also leads to a scenario where no one wants to hold Tether

> Tethers only hold value so long as other people believe they do...which is the definition of a fiat currency.

True, but there's an incredible difference in kind between Tether and the Euro/USD/etc

Re: Exposing Tether [video]

#74

Post by michaelt »

fuzzybear3965 wrote: post #29
albntomat0 wrote: post #28

Earlier quoted context omitted.

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.

> But, the existential risk to the (crypto) economy at large seems pretty small

I believe the fear is:

1. The price of BTC is high because a lot of people are buying it.

2. A lot of those people buying it are paying with Tether's funny money which there is somehow $60 billion of.

3. If that $60 billion ceased to exist, the price of BTC would fall.

4. $60 billion is a lot of money, so the price of BTC would fall a lot.

Re: Exposing Tether [video]

#75

Post by ethbr0 »

espadrine wrote: post #71
ethbr0 wrote: post #61

Earlier quoted context omitted.

> 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.

> It would be valued at the current market price it could be quickly cleared at. To clarify: there are two markets, one is redemption of USDT through the Tether company, the other is independent transaction of USDT vs. payment typically through exchanges. During asset liquidation, Tether’s assets would not be sold for the users’ redemption, but for the company’s creditors and shareholders. As soon as the suspicion of…

Can't we excise non-redemptions from this picture? As redemptions are (ultimately) the only way USDT is converted back to USD (regardless of how many times the USDT was traded, or at what price).

That said, at the time of a redemption, isn't Tether legally required to sell or transfer assets to service the redemption (as long as they are able, subject to the timelines and qualifiers promised in their agreements)?

Which is where I'm saying that if Tether holds $0.03 USD + 5 short term notes for every 1 USDT, they are obligated to turn over (or sell) those 5 notes (and $0.03) when a redemption is requested.

While Tether may not be a bank, their users aren't just users: they're holders of Tether credit, subject to the terms that govern it.

Re: Exposing Tether [video]

#76

Post by qeternity »

ethbr0 wrote: post #70
qeternity wrote: post #69

Earlier quoted context omitted.

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…

Well if you take that view, then they don't need the $0.01 paper in the first place. If they are indeed totally unregulated, then they can just commit fraud without risk.

Re: Exposing Tether [video]

#77

Post by raesene9 »

csomar wrote: post #65
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/

USD Coin has indeed increased in use, although given the supposed liquidity of these two assets, you could wonder why the move doesn't happen far faster than it has...

Also there's a very interesting difference between USDC and Tether in terms of volume.

based on https://nomics.com/ Tether has a market cap of $62.85B and a 24 hour volume of $70.19B

USDC has a market cap of $23.90B and a 24h volume of $1.84B

So, for some reason, the velocity of Tethers is about 14 times higher than USDC, which seems unusual given they're nominally the same class of asset operating in similar markets.

Re: Exposing Tether [video]

#78

Post by ethbr0 »

qeternity wrote: post #76
ethbr0 wrote: post #70

Earlier quoted context omitted.

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…

Well if you take that view, then they don't need the $0.01 paper in the first place. If they are indeed totally unregulated, then they can just commit fraud without risk.

That's where the NY AG's case comes in, I think.

They are unregulated, but they're now required to publish a breakdown of their assets.

Before, they could have said "We have billions and billions in assets." Now, they're required to enumerate and value their assets, to the extent required to publish the breakdown, as part of a legal agreement.

So I guess before it could have been riskless fraud. Now, it's more risky fraud. And overvaluing assets seems like an easy way to keep the wheels turning without obviously pissing off a state AG.

Re: Exposing Tether [video]

#79

Post by thebean11 »

raesene9 wrote: post #35
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.

That's the key point of course, you don't know and neither do I. Nor does anyone else outside of Tether. Tether is the No.1 most traded coin (by a decent margin) which makes it a very large part of the ecosystem. Now if their assets are all high quality low risk treasuries, it's likely all fine. If however their asset are loans to people who used those loans to buy other crypto currencies, things get a lot more risky…

Wow, I just checked this and you're right. Tether volume is roughly the volume of BTC + ETH. Wonder why Tether and not DAI. Just not enough DAI available? DAI seems more risky to big traders?

Re: Exposing Tether [video]

#80

Post by thebean11 »

raesene9 wrote: post #77
csomar wrote: post #65

Earlier quoted context omitted.

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/

USD Coin has indeed increased in use, although given the supposed liquidity of these two assets, you could wonder why the move doesn't happen far faster than it has... Also there's a very interesting difference between USDC and Tether in terms of volume. based on https://nomics.com/ Tether has a market cap of $62.85B and a 24 hour volume of $70.19B USDC has a market cap of $23.90B and a 24h volume of $1.84B So, for s…

That seems potentially easy to explain given that some of the bigger (higher volume) exchanges support USDT and not USDC.
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