Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Tether starting to lose its peg too, after Terra did

community.intercoin.org

Post reply on HN
Print view View original

201–210 of 976 posts

Re: Tether starting to lose its peg too, after Terra did

#201

Post by legulere »

turtledove wrote: post #59
rtpg wrote: post #32

Earlier quoted context omitted.

You need to show up with $100k to do the redemption. Granted if you did the round trip with only $10k you’re looking at peanuts in arbitrage but it _is_ a way for them to prevent real arbitrage that feeds into itself. I bet the fact that people wanting to short don’t believe they have the funds doesn’t help. But hey if you are a millionaire short tether might be worth setting up the recurring trade out!

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.

Yes, until they run out of cash and you sit on worthless tether.

Re: Tether starting to lose its peg too, after Terra did

#202

Post by charcircuit »

prox wrote: post #173
tcharlton wrote: post #140

Earlier quoted context omitted.

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.

>So why would one want to have Luna when you got Terra?

There are 3 different things: Governance related, market module related, and staking related.

You can spend 50 LUNA to submit a governance proposal. The second is to stake your LUNA. When your LUNA is staked the first benefit is that you can vote on governance proposals. Proposals can be onchain changes such as modifying a parameter or an offchain change which people should respect even if there is nothing technically forcing them to follow it.

There is a limited amount of UST that exists so what happens if more people want UST? You can burn LUNA to mint new UST. In times where the demand for UST is strong enough to make UST go above $1 it may be profitable for someone to burn their LUNA to mint UST.

Every transaction has gas fees. Any swaps between stable coins have a tobin tax. Using the market module to exchange UST for LUNA has a spread fee. All of these fees are collected and then distributed to the stakers. To help protect against times when the protocol is less active the fees are actually spread out over time. Right now every 5 blocks 5/9400000 of the reward pool is paid out to people staking. 9400000 is how many blocks there are in 2 years.

Re: Tether starting to lose its peg too, after Terra did

#203

Post by FeepingCreature »

stevekemp wrote: post #186
outside1234 wrote: post #135

Earlier quoted context omitted.

We have been saying it - but have been dismissed as being "anti-crypto"

Yeah it's a tricky one. It seems obvious that "digital money" is going to be very useful in a lot of ways, and in the future is almost certain to appear. There was a very brief period when bitcoin might have been the start of such a thing. When companies were adding support for it, and people were spending 200+ bitcoin on pizza, actually doing useful things like transferring money internationally, etc. But these days…

A deflationary currency was never going to be viable as money.

Re: Tether starting to lose its peg too, after Terra did

#204

Post by jcbrand »

eterm wrote: post #56
fastball wrote: post #35

Watch the sell orders rack up in real time: https://ftx.com/trade/USDT/USD

In times like this I miss the trollbox.

Cryptowatch has a trollbox right next to their charts. https://cryptowat.ch/charts/KRAKEN:USDT-USD?period=1h

Click the chat icon (under the bell icon) on the rightmost sidebar to open it up.

Re: Tether starting to lose its peg too, after Terra did

#205

Post by randomsearch »

tcharlton wrote: post #140
xmprt wrote: post #125

Earlier 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…

I don't understand.

How do you ensure you have enough Luna to maintain the exchange? If you hold enough Luna but then the price of Luna goes down, where do you get your extra Luna from? A run on your promise kills you.

Re: Tether starting to lose its peg too, after Terra did

#206

Post by eudoxus »

fastball wrote: post #116
gassit wrote: post #87

Earlier quoted context omitted.

This isn't how it works. You need to look at how much of the flows into BTC (supporting the price) are coming from Tether. You will find this is a whole lot more than 16%. So if it drops to zero 5 minutes from now (not going to happen, but just to use the same scenario), then all those flows which supported the price drop to zero. A comparison between the relative market caps doesn't tell you much, it's the buying vo…

That's not really how it works either. If the 24hr USDT volume is $175B, that just means people are trading the same USDT for other things multiple times in a 24 hour period. That's it. But two people cannot use the same Tether to buy different things at the same time, so market inflation due to USDT can never really be beyond its market cap. Tether is a vehicle, not the money in the system. People use Tether because…

Thats not really how it works either :).

If you and I both agree to trade 0.000001BTC @ a price of $1,000,000/BTC, meaning the total value of our trade is $1, and we both know that the supply of bitcoin is 19,000,000 coins. Does that make the "Market cap" of bitcoin 1.9Quintillion dollars? Obviously not.

Market cap is a historically bad metric to track when comparing things like this.

So back to your question at hand, how would a $80B USDT market cap topple a $500B market cap. Well, first we realize based on the above silly example, $500B isn't necessarily the real value. If Bitfinex (tether) has been printing USDT and using that to buy bitcoin, then the market cap of BTC is inflated by an asset effectively worth $0.

Once this realization sets in, panic selling starts, and there is an overwhelming greater number of sellers than buyers, and it doesn't take $500B worth of trades to topple a coin with a $500B market cap (if that market cap is inflated by hopes and dreams).

Re: Tether starting to lose its peg too, after Terra did

#207

Post by FeepingCreature »

randomsearch wrote: post #197
bspammer wrote: post #132

Earlier quoted context omitted.

Tether the company guarantees it will buy all tether for $1 each. The drop in price reflects people suddenly realizing they can’t do that if everyone tries to turn in their tether at once.

Surely it is very difficult for a company to "guarantee" anything about the price of a commodity sold in a large open market. There are all sorts of reasons prices go up and down, it seems hubris to imagine you can tether anything. Even national governments struggle to do this. https://en.wikipedia.org/wiki/Black_Wednesday

Theoretically, they could guarantee it by just holding all dollars they are given originally.

A price is just an abstraction for the willingness to buy and sell. If you know there are 1000 of some token in the world, and you have 1000 of some item, you can guarantee that people will always be able to buy one item for one token - by selling your items to them at that price.

But of course, just holding the dollars makes it hard to profit.

Re: Tether starting to lose its peg too, after Terra did

#208

Post by mattdesl »

mwill wrote: post #191
thematrixturtle wrote: post #76

It'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…

Do people in crypto sincerely believe Tether is backed? I'm not being sarcastic here, I'm genuinely asking. I'm a bit of a skeptic of how the crypto market has developed overall, and the intentions of the major players, so I keep reminding myself that I'm biased, but I haven't believed Tether is even remotely close to being fully backed for a long while, and I've just sort of assumed everyone who's 'bought in' to the…

A lot of pro-crypto users avoid USDT like the plague and assume it will at some point come crashing down (and drag the market down along with it).

Re: Tether starting to lose its peg too, after Terra did

#209

Post by likpok »

davidweatherall wrote: post #189
adhesive_wombat wrote: post #30

The fact that they've been minting billions of tether without collateral should make it abundantly obvious that this isn't a stablecoin and never had been. Anyone can pretend to have a peg in the good times, that doesn't mean there's really a peg or that the peg will remain in bad times. And if you can't count on the peg in bad times, it's not a stablecoin. If you've been honestly working on the assumption that it is…

I don't understand how you bodge a stable coin startup. Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk investments (some form of treasury bonds), and then take the 0.5-1% interest per year as your revenue. Tether currently has $81b marketcap so you could be making $400-800m per year doing basically nothing?

It’s hard to find a bank to take your money, since you’re something that rhymes with money laundering. Tether had a bunch of money stolen from them because the money launderer they used turned out to be a crook.

It also takes a long time to get this going and there are moderately high costs to a minimally viable financial entity (reporting, compliance). A few years ago they only had a couple billion which makes it hard.

And all of that sets aside the allegation that tether has been printing tethers it’s entire life — that it’s basically never been fully backed by dollars.

Re: Tether starting to lose its peg too, after Terra did

#210

Post by FeepingCreature »

randomsearch wrote: post #205
tcharlton wrote: post #140

Earlier quoted context omitted.

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…

I don't understand. How do you ensure you have enough Luna to maintain the exchange? If you hold enough Luna but then the price of Luna goes down, where do you get your extra Luna from? A run on your promise kills you.

You just mint Luna at will.

The problem occurs when the amount of Luna that trades for $1 becomes undefined because nobody is willing to do the trade anymore.

Post reply on HN