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Tether starting to lose its peg too, after Terra did

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

#221

Post by charcircuit »

irjustin wrote: post #166
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…

genuine question - why does the asset need to be backed? more specifically - who would you need to give the physical currency to?

The big fear with stable coins is for them to go into a death spiral and become worthless. Stablecoin are only worth $1 if people believe they are worth $1. When fear sets in and people no longer believe they are worth $1 it can cause the price to tank. Having a stablecoin be backed means that you can trust your stablecoins to not become worthless because they can be redeemed at anytime at a $1 price point even if the market says otherwise.

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

#222

Post by arinlen »

hnbad wrote: post #155
tluyben2 wrote: post #112

Earlier quoted context omitted.

The religious (for a lack of better word as it is a religion to believe that cryptocurrencies are inherently better than other assets (outside NFTs) but they do believe that if you read twitter/reddit) people are hodling but all the 'saner' people I know went out in december. There was enough writing on the wall to know that 2022 would not be a good year for some assets (and it's just beginning). Only the real believ…

You're perfectly describing the sunk cost fallacy. The naifs who overcomitted on a "guaranteed win" investment can't walk back from it because that would mean giving up on a lot (e.g. 50% or more) of their investments, which often as you said isn't money they really had "lying around" (even your retirement fund isn't really disposable once you actually need to retire on it). The failure to achieve the promised growth…

> You're perfectly describing the sunk cost fallacy.

Sounds like a classical pump-and-dump scheme.

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

#223

Post by eudoxus »

emehex wrote: post #63
emehex wrote: post #58

You can keep track of all of the various "stable"coins here: https://coinmarketcap.com/view/stablecoin/

USDT, UST, USDN, FEI, USDD, SUSD, FRAX, etc, have all lost their pegs

Made a similar comment on other sections of this post but I'll reiterate here as well.

Most (not all) of these stable coins are asset backed. If they can "prove" they have the 1:1 reserves OR there is a readily available "official" platform/tool/service/website that allows you to swap $1 USDX to $1 USD, then they haven't "lost" their pegs.

What we see here on coinmarketcap.com is just poor market sentiment causing an overwhelming number of sellers compared to buyers that are happy to take a 1-3% hit to exit quickly. Slowing burning through the order book depth until the arbitragers out number sellers, and things stabilize.

Eg. Tether USDT, you can still swap $1 USDT to USD on tether.io despite some exchanges listing it as low as $0.95 (note that others also list it as high as $1.06 at the same time). Exchange prices are poor indicators for this kind of stuff.

But, others you have mentioned, like UST, which are algorithmic and not collateralized can (and very concretely has) lose their pegs :)

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

#224

Post by Jarmsy »

FatalLogic wrote: post #79

That looks bad. The worst previous fall of Tether/USDT was down to about $0.90 in mid-2017, during which it was substantially below $1.00 for over a month

Isn't the difference now though that Tether is much more entwined with the whole crypto system than it was 5 years ago? So as one falls each pulls the other down with it.

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

#225

Post by usednet »

gadnuk wrote: post #192
ryanSrich wrote: post #169

Earlier quoted context omitted.

You give me a dollar, I give you a digital currency equivalent. When you need your real USD back, you tell me and I give it to you. That means in an ideal world, you have your stable coins backed 1:1 with real USD. Of course, this isn’t always the case, and with Tether, there has been much scrutiny over the years that they do not have the USD collateral to back their stablecoin. Ok, but let’s assume Tether has the US…

This is an amazing explanation. Thank you!

That explanation is not correct. Algorithmic stablecoins rely on a pairing with another crypto, in UST’s case LUNA. 1 UST can always be swapped to $1 US dollar of LUNA. It is interchangable, so $1 US dollar’s worth of LUNA can also be swapped for 1 UST. Hence, the “algorithmic” in the name. This way traders are always incentivized to keep the price of UST at $1.

There is no collateral requirement. In UST/LUNA’s case they had collateral, mostly in Bitcoin, in the Luna Reserve Guard but their collateral proved insufficient. Some algorithmic stablecoins are entirely uncollateralized.

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

#226

Post by white_dragon88 »

mytailorisrich wrote: post #154
someotherperson wrote: post #62

Earlier quoted context omitted.

> If you've been honestly working on the assumption that it is, then you deserve to lose your (real) money to some crypto VCs on an island somewhere This is victim blaming. Nobody deserves to be exploited, robbed or otherwise for any reason.

If you put your money in some risky 'investment' that you don't fully understand and lose you made a bad decision, you are not a victim. It's like if you burn your money in a Las Vegas casino.

Gambling is an addiction, and doesn’t just come down to poor judgement. There’s a short circuiting that occurs in the pleasure centre that we simply haven’t evolved to handle properly. It’s why even if you’re the most seasoned, calm, financially secure and stoic of people, if I told you that you suddenly won $100M with clear proof, you’d almost shit yourself in excitement, your heart would race. None of us are immune to the physiological effects of winning money, by chance or skill.

I’m not saying people getting suckered aren’t ultimately responsible for their actions, but at the same time just like a drug addiction, an objective and problem solving perspective is more productive than just judging that person for simply being weak, stupid, gullible, greedy etc.

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

#227

Post by vinaychandranp »

xmprt wrote: post #97
qbasic_forever wrote: post #38

Earlier quoted context omitted.

There's probably still some value in it for darknet activities like sales of illicit goods, ransom payments, etc.

I think what the poster is asking, is why wouldn't communities/darknet activites deal with other cryptocurrencies which are objectively better than Bitcoin in terms of functionality although they have a smaller community and network at the moment.

I believe most markets already encourage the use of other privacy oriented tokens like XMR.

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

#228

Post by beefield »

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

It would not be that difficult to guarantee Tether price if tether actually did what they originally claimed. Take usd in, store that in diversified bank accounts/liquid treasuries, and if there ever is downward pressure on the Tether price, use your high quality liquid reserves to buy Tether back (while making profit!). And of course, if you are open and audited on your operations, there is very little reason for a downward pressure for the price.

Now, of course, if you decided to _not_ be open and _not_ hold your reserves in safe assets but instead decided to invest the reserves to speculative gambling tokens or shady commercial papers, then it really is difficult to keep the guarantee if the gambling token loses value.

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

#229

Post by usednet »

ryanSrich wrote: post #169
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?

You give me a dollar, I give you a digital currency equivalent. When you need your real USD back, you tell me and I give it to you. That means in an ideal world, you have your stable coins backed 1:1 with real USD. Of course, this isn’t always the case, and with Tether, there has been much scrutiny over the years that they do not have the USD collateral to back their stablecoin. Ok, but let’s assume Tether has the US…

Your explanation is incorrect, please see my reply to the comment under yours. You should edit it so people aren’t misinformed.

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

#230

Post by sdgdfgsfdfgsdfg »

Animats wrote: post #180

Tether 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…

The high buy volume at $0.98 is due to arbitrage. This is to be expected before the final crash.

People are using the opportunity to net an instant 2% return. Buy $10M USDT at $0.98, redeem at Tether for $1, take home $200K of profit instantly.

Thing is, this will only last until Tether runs out of liquidity. Then all bets are off.

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