501–510 of 697 posts
This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…
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If I understand correctly nobody has a useful handle to profit from killing it and all the players have an incentive in it's continued existence. Killing it would require large scale collaboration among individuals who collectively would all be hurt.
> all the players have an incentive in it's continued existence Even retail investors? Why do they hold a stablecoin that has any risk at all, with no upside? What is the retail investor’s end game here?
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Oh, I understand why it hasn't collapsed already. I just don't see how Tether refusing to honor redemptions makes it more resilient to a run in progress, rather than less . If nobody wants to buy 1 USDT for a dollar, the peg will break all the same. If Tether stepped in as a buyer of last resort, that would make it more resilient- but if it doesn't, that worse for the peg, not better. It's better for anyone with phys…
> Oh, I understand why it hasn't collapsed already. I feel stupid, but I still actually don't. If considerably more people will want to sell it than there is a demand for it, the price will have to go down, no matter what, as long as "price" is anything more than a decorative label on the exchange's website and you actually can swap it for any currency at all. So, either the exchange should cover all that demand, whi…
There are two ways this can be done. The first is to be a large holder of USDT already, one whose nominal position is greater than the entire reserve pile, and attempt to liquidate it in favor of USD (this is basically a bank run). Or you can artificially induce this by borrowing enough USDT and selling it to either soak up the entire reserves or induce others to do so as well. But Tether's reserves are probably substantial enough to make this latter option infeasible except for the very largest financial institutions.
Now the largest holders of USDT are those exchanges that immediately convert any USD you put into them into USDT. And so long as you don't try to withdraw that USDT for real USD, they're unlikely to sell any stocks of USDT they hold (in your name or in their own name). Effectively, this means that so long as there is a net inflow of hard currency into the cryptocurrency ecosystem, no Tether crisis is likely to happen. However, should there be a sustained net outflow... well, we'll discover who the equivalent of Lehman Brothers in the cryptocurrency world is.
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> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? All of these systems are already software. > If there was no value in it, why did we create all those institutions in the first place? Centralization makes them massively more efficient than crypto. If there was a way to make them more efficient that did not involve throwing risk models out the window or reg…
Do you think we will forever be organized and segregated by governments? Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind a…
> Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future?
All of this is doing nothing to change my view that cryptocurrency requires me to buy into this whole weird worldview in a way that few other products do. No, I don't particularly want to be an anarcho-capitalist.
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> But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them. How would the smart money profit from obliterating them? If you’re referring to a Soros/GBP style trade, how would one borrow enough USDT to pull it off?
Somebody holds large chunks of the $70.5 billion in USDT. Presumably, people who hold hundreds of millions of the stuff are well aware of every accusation made against Tether. If they wanted to, they could trade their USDT for actual US fiat on a 1:1 basis if they thought USD was worth more than USDT. The really smart money with large crypto stashes could borrow USDT with crypto as collateral, and trade the USDT for…
Have you looked into the mechanics of this trade? The crypto loans I'm aware of are all significantly overcollateralized. You would have to pledge say 1m BTC to get 0.8m BTC worth of USDT which you could then sell for dollars. If you succeeded USDT tanks, everyone who holds USDT would be rushing for the exit, wiping out the crypto you pledged as collateral also. So you succeed in losing 20% of your money on the initial USDT trade and almost all of the value of the crypto assets you pledged for the loan as well.
These markets are nowhere near as flexible and liquid as regular fx - I would be amazed if you ended up making money overall on this kind of strategy and the execution risk is significant.
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It's similar gold, yes. Gold is an unproductive asset. You are correct that there is base demand for it in the form of jewelry and electronics. In fact, a percentage of the world's gold output goes into making Bitcoin miners each year. However, its value is not supported by its demand in these industries. This is why I personally do not invest in gold. The difference is that if you shut down gold mining, existing gol…
I think you are a little unfair in your comparison of bitcoin and gold. Gold has advantages over bitcoin, but bitcoin also has advantages over gold. Storing gold is more expensive then storing bitcoin. Transacting gold is much more difficult than transacting bitcoin. One of the downsides of bitcoin is that it could go to zero for some reason. I think gold has less of a risk of that, but other investments have a signi…
Now to be sure there are some customers of the bitcoin system, using bitcoin as an intermediary to move money across borders or purchase from certain online marketplaces, and those customers are paying some amount of money into the system to use bitcoin for this purpose (analogous to the 2% that VISA skims off the top when you use your card to buy something on Amazon), but the majority of the money flowing in to balance that $20B outflow is from investors buying in. Unless you think bitcoin has managed to capture something in the order of $20B/year in transaction fees from the likes of Western Union, AMEX and Paypal, what's mostly happening is money being funnelled from investors taken as a whole to the the supplier industries that bitcoin relies on.
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Do you think we will forever be organized and segregated by governments? Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind a…
> Do you think we will forever be organized and segregated by governments? > Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? All of this is doing nothing to change my view that cryptocurrency requires me to buy into this whole weird worldview in a way that few other products do. No, I don't particularly want to be…
> I really would like to see a defense of Bitcoin that doesn't rest on the assumption that I want to live in Galt's Gulch.
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Ampleforth is the most interesting 'stable coin' I've seen.
I agree on this, although ampleforth is not specifically a stablecoin, but nonetheless it's one of the most interesting economic experiments I've witnessed since bitcoin, a true Hayek money had never been possible before in humanity, thanks to chainlink a currency that even Satoshi Nakamoto dreamed of is now possible
Word "risk" appears in this doc 130+ times. However the sole existence of stablecoins and crypto is due to the fact that legacy, corrupt financial institutions and irresponsible government fiscal policies present the biggest risk to people wellbeing. So all these "risk" talks is a prerequisite for more taxes and more regulations that will only accelerate the natural evolution away from outdated, corrupt, centralized…