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Tether starting to lose its peg too, after Terra did
171–180 of 976 posts
Re: Tether starting to lose its peg too, after Terra did
#172It's hard to overemphasize how big a deal the Tether peg breaking would be (is?). At $78B, it dwarfs UST/Terra, and it's supposed to be an asset-backed stablecoin, not a risky algorithmic boondoggle like UST. If Tether plunges, it will take the broader crypto markets with it. Emphasis on the "supposed to be", since many, many, many unanswered questions have been raised about Tether's reserves and they've previously b…
genuine question - why does the asset need to be backed? more specifically - who would you need to give the physical currency to?
The promise of a stablecoin, in this case Tether, is that you can always change 1 USDT into $1. When people buy Tether, they pay then $1 and believe the promise that they will get $1 when they want to.
Re: Tether starting to lose its peg too, after Terra did
#173Earlier quoted context omitted.
Can someone explain stablecoins to me? Most online explanations talk about how the currencies are "pegged" to various assets/real world currencies/physical objects/algorithms/cryptocurrencies, however they never explain how the pegging is done. What is happening right now that is causing the price to fall, what prevented it from falling over the last few years, and why isn't that thing preventing it from falling now?
Matt Levine did a great write up of algorithmic stablecoins here: https://www.bloomberg.com/opinion/articles/2022-05-11/terra-... "1. You wake up one morning and invent two crypto tokens. 2. One of them is the stablecoin, which I will call “Terra,” for reasons that will become apparent. 3. The other one is not the stablecoin. I will call it “Luna.” 4. To be clear, they are both just things you made up, just numbers o…
So why would one want to have Luna when you got Terra? I know Terra is backed, I know Luna is speculation, not any different from doing a roulette game.
Re: Tether starting to lose its peg too, after Terra did
#174Earlier quoted context omitted.
So wait, assuming I had a hundred k, and they were willing and able to pay out, I could buy 97k of tether and redeem it for 100k? Just an instant 3% return? This seems like there's no way they are opening themselves up to arbitrage like this.
>This seems like there's no way they are opening themselves up to arbitrage like this. That's what defending the peg means.
But they get to buy and sell tethers themselves, right? If a T costs less than a dollar, and Tether's owners know that it's perfectly backed by a liquid dollar, why don't THEY buy it?
If they don't, it suggests it's not, and they actually agree it's worth less than a dollar.
Re: Tether starting to lose its peg too, after Terra did
#175Earlier quoted context omitted.
It's $95k of tether now ;) And why wouldn't they allow this arb? By committing to that arbitrage you're pricing very low the risk of not actually being able to get your money once it has collapsed.
Isn't the point of pegging that you allow any arbitrage to keep the value from falling from about the nominal value?
Not in this case. With Tether, you can "always" (so long as they are willing the to shovel the cash) convert 100K USDT for 100K USD on tether.io. What we often see here in terms of the "price" fluctuating, actually has to do with Exchange prices, and not the tether.io price. Exchange prices are based on dozens of competing mechanics, most notably, the depth of their order book. Since its just people trading with people, you need buyers and sellers on both sides. But if market sentiment plummets, you might have more sellers than buyers who are looking to exit out of the market quick and are willing to take a 1-3% hit to do so, instead of going to tether.io and actually getting the full amount.
Until its "proven" that tether.io doens't have the assets (which they obvi dont), AND they stop allowing the 1:1 swap on their platform, UDST will always "be" pegged at $1USD.
Re: Tether starting to lose its peg too, after Terra did
#176Earlier quoted context omitted.
So wait, assuming I had a hundred k, and they were willing and able to pay out, I could buy 97k of tether and redeem it for 100k? Just an instant 3% return? This seems like there's no way they are opening themselves up to arbitrage like this.
It's not "they" as in "the people behind Tether" who are paying the 3%. The 3% returns - assuming the exchange works out in the end and you get your 100k USD - are paid for by the random guys who owned the 100k USDT that you bought on the open market. Effectively those were people who assumed the peg would break and they would be better off selling their USDT while they still got 97k USD for it.
Right the idea here is that somebody paid 100k to Tether for the tokens, those got into the market, being sold around, in the end I buy for 97k, then I hand those back to Tether for 100k - transaction feels (which would be ~250 USD). So in theory at the end of this whole operation Tether is up 250 USD
Though I think the cynical view for Tether stuff is that they have not been doing things by the book here and either they have been siphoning deposits, or printing Tether on their end. But hey, if they still got big deposits no problem for your original trade right?
Re: Tether starting to lose its peg too, after Terra did
#177Earlier quoted context omitted.
Can someone explain stablecoins to me? Most online explanations talk about how the currencies are "pegged" to various assets/real world currencies/physical objects/algorithms/cryptocurrencies, however they never explain how the pegging is done. What is happening right now that is causing the price to fall, what prevented it from falling over the last few years, and why isn't that thing preventing it from falling now?
Matt Levine did a great write up of algorithmic stablecoins here: https://www.bloomberg.com/opinion/articles/2022-05-11/terra-... "1. You wake up one morning and invent two crypto tokens. 2. One of them is the stablecoin, which I will call “Terra,” for reasons that will become apparent. 3. The other one is not the stablecoin. I will call it “Luna.” 4. To be clear, they are both just things you made up, just numbers o…
There is also the point that once trust in this ecosystem erodes, there will be tremendous pressure on Luna as people try to get rid of both their Luna and their Terra, and whatever you did to achieve 7 may just suddenly disappear. The spiral that's happening now.
And what coins do is in effect marketing for all other coins. If one stablecoin crashes, trust in others will erode.
Re: Tether starting to lose its peg too, after Terra did
#178No post body was provided.
Re: Tether starting to lose its peg too, after Terra did
#179I'm not sure the situation is comparable to Terra. If you can't read the Y-axis on a graph, and you only look at the last 7 days, then it looks like Tether has gone off a cliff. If you read the Y-axis you'll see it's barely moved, and if you zoom the graph out, it's barely a blip compared to previous deviations in price. Now it may well be that Tether is also heading to zero, but it's very different from the Terra fl…
A lot of people are using this post and news to air their completed unrelated grievances on crypto and Tether... but you are completely right. This is non-news unless the Tether company starts failing to deliver $1 for a tether.
Re: Tether starting to lose its peg too, after Terra did
#180Tether is back up to around $0.98, but volume is high. Somebody is pouring cash into Tether to support the price.
Similar over at UST. Price is back up to $0.60, but volume is far above normal.
Remember, with a stablecoin, there is no upside to holding. Any indication of risk means it's time to get out. Even if Tether has enough reserves to get the price back to $1, there will be substantial cashing out.
That's why a stablecoin has only two stable points: 1 and 0.