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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

#231

Post by tluyben2 »

arcticbull wrote: post #218
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…

> 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) ... Outside NFTs? C'mon. Signed JSON blobs with a URL you pay for? All equally worthless. Let's not "my god is better than your god" this.

That's not what I meant; I meant 'they' believe cryptocurrencies are better than other assets (outside NFTs) as in; they ALSO believe those are better than other assets. I wasn't saying NFTs are better; I was actually saying (well meant to say) they are equally superior in 'their' belief.

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

#232

Post by hnaccount_rng »

eudoxus wrote: post #163
adhesive_wombat wrote: post #65

Earlier quoted context omitted.

Yes, sorry that wasn't clear, and I said Tether when I meant stablecoin in general. I meant that they didn't have the reserves they needed ("substantial" isn't good enough) and now Tether has an even bigger incentive to run uncollateralized because of who they are.

"stablecoins in general" doesn't really apply here since the two in question work radically different. Collateralized vs Algorithmic. Theoretically the Terra UST stable coin didn't need reserves to keep the peg at $1, unlike Tether USDT, which does.

how do algorithmic stable coins work?

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

#233

Post by hhmc »

eudoxus wrote: post #187
ezzaf wrote: post #99

Earlier quoted context omitted.

The whole point of a stablecoin however is that it is supposed to be... stable. From tether.to: "Tether tokens are referred to as stablecoins because they offer price stability as they are pegged to a fiat currency. This offers traders, merchants and funds a low volatility solution when exiting positions in the market. All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 USD₮ = 1 USD)" $0.95…

"when exiting positions in the market" this statement applies only if you exit using tether.io. You can always (if they have the cash on hand) swap 1 USDT for 1 USD. They can't make that guarantee for . The reason it stays "mostly" at $1 on exchanges is because arbitragers are incentivized to do so. But again, 1USDT is ALWAYS 1USD on tether.io. So yes, the statement you quoted is accurate.

> But again, 1USDT is ALWAYS 1USD on tether.io.

Until you can't redeem and 1USDT is 0USD on tether.io. The price on a 'random orderbook' is reflecting this risk.

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

#234

Post by logifail »

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.

...and if you run ads for your risky investment scheme in which you falsely claim it's not risky, you get into trouble.

Aren't there some fairly good reasons for finance to be highly regulated?

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

#235

Post by zelag »

22c wrote: post #220
nmfisher wrote: post #199

Earlier quoted context omitted.

I just saw that on Twitter and have absolutely no idea what it means. Can anyone explain it?

It essentially means they were moving large amounts of USDT supply around. Presumably there was not enough liquidity on Ethereum and Avalanche mainnets. Imagine you have multiple games of monopoly in progress but all the monopoly money is managed by a single monopoly money bank. Two monopoly games (Ethereum and Avalanche) both needed more monopoly money for the game to go on smoothly, so the banker transferred some m…

I'm curious: why does the banker use Tron as their main bank?

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

#236

Post by ThePhysicist »

vishnugupta wrote: post #165
fastball wrote: post #35

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

Note that while it's a good proxy this isn't same as going to the issuer ( https://tether.to ) and getting 1USD in exchange for 1USDT. Tether is still honouring 1-1 conversion for a minimum of $100K.

In my understanding that process takes several days at least and the reimbursement is done at the leisure of Tether, so I'd wager a lot of panicked investors won't take the official redemption route (that only works for large sums as well) and try to sell on the market instead.

Hard to say if Tether will still honor the redemption if the price falls below 0.50 USD, as they likely don't have enough reserves on hand and from their transparency report is seems that more than 50 % of their reserves are tied up in commercial paper (Chinese real estate some speculate), which should be quite hard to liquidate in the current market environment.

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

#237

Post by neilwilson »

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.

Luna gets the returns from the assets the 'real money' was invested in. Terra doesn't.

The people using Terra give up their returns to Luna holders for the convenience of a universally acceptable exchange medium that is pegged to something else of value that isn't universally acceptable.

As with all leveraged investments to problems occur when the underlying real assets fail to perform as expected. Or at worst don't exist at all.

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

#238

Post by arcticbull »

tluyben2 wrote: post #231
arcticbull wrote: post #218

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) ... Outside NFTs? C'mon. Signed JSON blobs with a URL you pay for? All equally worthless. Let's not "my god is better than your god" this.

That's not what I meant; I meant 'they' believe cryptocurrencies are better than other assets (outside NFTs) as in; they ALSO believe those are better than other assets. I wasn't saying NFTs are better; I was actually saying (well meant to say) they are equally superior in 'their' belief.

Ahhh I misread that, I apologize. Thanks for the clarification.

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

#239

Post by closedloop129 »

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?

A slightly better strategy:

You do exactly this, but you don't proof it to anybody. Then there is constant doubt and the price can fall down a bit, e.g. to 0.97.

Then, you buy back your stable coins and you make an additional nice profit.

As long as there is no other more trusted stable coin demand will increase again and you will regain your market share.

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

#240

Post by benjaminwootton »

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…

How does the sell pressure play out? Is this other people willing to sell for 99 cents, 98 cents on exchanges because Tether can’t fulfil orders fast enough? I assume they are always willing to buy at $1 else it all collapses?
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