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Literally most of what Tether holds is commercial paper—basically IOUs for payroll. From who? Who knows. Probably other startups.
Do you have references? Edit: Haha.. asking legit question for data because I’m curious gets downvoted. Lol. I should know to avoid the crypto discussions here. Lots of emotion and not much useful information getting shared
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I've recently started listening to a lot of podcast episodes on the subject (primarily Unchained and a16z) which has been great for raising my general awareness of what's going on. I'm very skeptical of 90% of what I hear and I've limited interest getting involved in the industry right now but crypto is hugely impactful no matter how you look at it so it's worth keeping a decent amount of curiosity in my opinion. ---…
i'd be very sceptical of what a16z published about crypto topics; they are heavily invested both financially and reputationally. their whole game was/is leveraging their clout to give credibility to the scene, therefore increasing the value of their investments.
"use case for Bitcoin is micropayments", "Switching to Bitcoin, which charges no or very low fees" , "Another potential use of Bitcoin micropayments is to fight spam" https://a16z.com/2014/01/21/why-bitcoin-matters-nyt/
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The point of Tether is to make money—for Tether, not you. They are getting rich when you buy a million dollars worth.
How? They have to maintain that million dollars so I can withdraw it when I need it. Nothing has yet shown that is a problem or that’s not being done. Go deposit 1 million in a bank, and then ask for it in cash the next day. You won’t get it.
Here’s a discussion from may, “Tether says its reserves are backed by cash to the tune of 2.9%”
I'm no Tether apologist, but this doesn't seem like an issue to me? Alameda and Cumberland are the 2 biggest liquidity providers in crypto trading. Tether is the source of liquidity for many of the exchanges that they trade on. So of course they'd use Tether to on-ramp into the crypto ecosystem and trade. I suppose the real news here is that Alameda and Cumberland haven't redeemed much Tether (proportionally), so if…
Most likely they trade out of the USDT position shortly after creating it which would minimise their exposure.
My understanding is that Alameda is trading with fairly high frequency, so they would keep funds in USDT in order to facilitate those trades. Further, the on-chain data suggests that they don't trade out of USDT to USD – otherwise we'd see high corresponding USDT burns.
I often find the headlines, and even stories about, crypto to be inscrutable to those looking in from the outside. The stories also seem to come from an ecosystem of sites I don't recognize so it's hard to even judge if it's reputable site (or at least guess at the biases it might have). None of this is inherently bad, but there seems to be a growing divide between "mainstream" tech and the crypto world that is harde…
So... half the reasons are those you mention... subculture. Alien ecosystem, hard to distinguish between geniuses, quacks and con artists, blade runner theme music.
The other half is because crypto is an unregulated, start up financial sector. Stories and headlines about the financial sector tend to also look inscrutable those on the outside. Chase a rabbit down a financial story for real, and it always leads to a "they can't do that! outrageous!"
The fun thing about the gamestop thing, a few months back, was that every person had reached a different outrage. Margin lending by default. That the brokers' business model is selling users' trading data to competitors who frontrun it. That the hedge funds targeted for the short squeeze is the attackers' brokers' investor/partner/customer. That there is a layer of private clearing houses between brokers and markets that regulate the market. That this private regulator can impose unlimited capital requirements on brokers. That it did so, cutting most retail investors out of the market while institutions sorted out their positions. Etc.
Stablecoins are basically an unregulated USD account. Sounds innocuous enough, until you consider that USD is just numbers in regulated USD accounts. Someone is making US dollars, and it's not the issuer of that currency. That's what a totally unregulated bank is.
So... it's only natural to think "scandal" when you hear that some billionaire and a financial demigod minted $60 billion US Dollar denominated money.
There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?
You don't need to pay taxes. Example: You earn $1000/month. Cost of living is $500/month, labour tax is $500/month. By using cryptocurrency you can skip tax and save up $500/month, in legit employment (labour law, worker rights protection) you save up $0/month, you work for free, hand to mouth.
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It amazes me that more people don't read the Tether ToS and run away.
Maybe people are trying to run away from their own country's currency even more urgently? Is it really risky to get some tether for a short time to buy some other cryptocurrency? Maybe the question is why do some big exchanges still work with tether? Must be worth it to them!
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It's all fine and good until there is a run on tether and they can't actually give customers their money back. They will throttle customer withdrawals, the issue will be magnified, and I would guess tethers would be selling for pennies on the dollar on the secondary market.
Yup. https://tether.to/legal/ > Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warrantie…
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> Tether might be a scam in the sense that they don't actually have the backing assets they claim Tether is a scam on a whole other level than this
But like how? I get why the SEC might have words for Tether the company but I don't get how users of tether have been scammed. You buy coin at around $1 and sell at around $1. Like from an end-user perspective as long as the thing actually functions as a stablecoin for some time interval you care about what else is there?
We’ve seen bank runs before. We’ve seen failed currencies. These aren’t unprecedented events.
With that said, the old Buffett quote “it’s only when the tide goes out that you see who’s been swimming naked” has never been more apt than to this situation.
To take your hypothetical example, you’re correct that the user in question is able to trade on their token to someone else for another asset quickly - but as the article states, issuances outstrip redemptions by 20:1.
That means almost all of these tokens are still in circulation. Someone is on the hook for those losses.
The thing is, who’s liable? If the whole marketplace is a fugazi then it’s probably up to the exchanges to organise haircuts as they deem appropriate.
That isn’t even the real problem though. What’s the value of [COIN] if 95% of the market cap is suddenly revealed to be fake money?
I mean, sure, you can assume everyone will just shrug that off and hold what they have while you sell, but it seems really unlikely.
tldr; this information suggests that most of the value in most of cryptocurrency tokens does not and has never existed.
I often find the headlines, and even stories about, crypto to be inscrutable to those looking in from the outside. The stories also seem to come from an ecosystem of sites I don't recognize so it's hard to even judge if it's reputable site (or at least guess at the biases it might have). None of this is inherently bad, but there seems to be a growing divide between "mainstream" tech and the crypto world that is harde…
> others have found ways to build and keep an understanding of the crypto ecosystem without fully going down the rabbit hole You're right on the mark. Most of the content around crypto is heavily biased and just looks untrustworthy for a number of reasons. From what I can tell, it's because they're actually unreliable sources. Not because they're trying to scam you, but because there's more money in selling you crypt…