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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

#271

Post by kgwgk »

iso1210 wrote: post #258
Cthulhu_ wrote: post #144

Earlier quoted context omitted.

> none of my smart peers had anything to say, either. It's because they know. I think everybody knows that crypto is a bubble. I think everybody believes everyone else that buys into it is dumb, financially illiterate, whatever. The crypto market has been propped up and boosted by an influx of people like that, each one knowing it's a bubble, believing everyone else is an idiot... but still wanting a slice of the pie…

It's the greater fool theory. I lauched at friends of my fatherinlaw back in 2018 when they were buying bitcoin at 15k. Obviously it popped. Today it's down 50% on ATH, but it's still more than double it's 2018 bubble level.

It's not more than double 15k, is it?

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

#272

Post by t_mann »

The one thing that I can't wrap my head around with Tether is: where did it all go? Tether must have been paid tens of billions in fiat dollars, and not even their bankers can say where those are. There's only so many hundred millions you can put into villas, cars, yachts and parties before it's inconceivable that it wouldn't get noticed.

When it comes to crypto overall, my impression is that it needs to get bad before it can get good. There are benefits to being able to make binding promises to strangers using open source software, but I see that more as a public benefit than as something to become ultra rich on. BTC, and with it all crypto, MCAP grew massively on the back of largely non-existent funds (Tether), and that's the part that needs to go.

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

#273

Post by benjaminwootton »

usednet wrote: post #225
gadnuk wrote: post #192

Earlier quoted context omitted.

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…

I still don’t follow why the second currency is required?

They will always swap a UST for $1 of LUNA so a UST is implicitly worth $1.

LUNA itself doesn’t have anything behind it though apart from concidence. So we have a stablecoin manufactured from a volatile unbacked asset where the market cap can fall arbitrarily low.

I know it failed, but it’s not quite clicking for me what they were even trying?

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

#274

Post by BbzzbB »

dropnerd wrote: post #267
mwill wrote: post #191

Earlier quoted context omitted.

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…

there are some markets you can't participate in without holding usdt, so for some, it's a calculated risk why anyone would keep usdt if not actively trading is beyond me

"Yield farming" (covered puts) is why.

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

#275

Post by bulbosaur123 »

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…

It wouldn't be a big deal, because people would just switch to USDC.

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

#276

Post by Slartie »

pyinstallwoes wrote: post #263
Slartie wrote: post #216

Earlier quoted context omitted.

There is an upside of holding USDT (although not a monetary one): it serves as a "stable" store of value on non-USD-banked exchanges when trading other cryptos. Especially right now, with the market going down rapidly, a lot of people probably sold coins on the way down with the intention of buying back into the market at a later point in time. A substantial number of these traders temporarily hold their value in USD…

That’s instant 0.024 profit… Easily crash by loading 10,000,000 arbitrage for free $200k grab sums. This is a domino effect.

There is nothing "instant" in the process of buying millions of USDT, then sending them over to Tether for redemption against USD. The redemption process of such sums is a manual process which takes at least some days, even if it works out in the end (assuming Tether is liquid).

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

#277

Post by londons_explore »

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…

Financially literate people see that tether might be backed by thin air. They're pretty clear on their homepage that "Every Tether token is 100% backed by our reserves, which includes traditional currency and cash equivalents, and may include other assets and receivables from loans made by Tether to third parties.".

"receivables from loans" can be worth nothing if it's a loan to someone with no assets.

I believe the whole thing is intended to be sufficiently backed to not collapse easily, but is by no means 100% backed with actual cash.

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

#278

Post by outsomnia »

sdgdfgsfdfgsdfg wrote: post #230
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.

If I understand it, this is similar to the UK / ERM 1992 "Black Wednesday"

https://en.wikipedia.org/wiki/Black_Wednesday

There were more people wanting to sell the pound for Euros at the rate mandated by the ERM than resources the UK had to maintain the arbitrary exchange rate and "it did not end well".

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

#279

Post by mhitza »

fastball wrote: post #35

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

Pretty cool website. Fun to watch in realtime how the market slowly chipped away a 10 mil Tether buy order at 0.983. And now another order of the same size at 0.982.

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

#280

Post by irjustin »

imron wrote: post #156

I'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…

While the graphs are different, it really comes down to sentiment and trust. Effectively something that was not supposed to happen is starting to happen.

TerraUSD's de-peg wasn't supposed to happen and combined with Luna, it was dragged it way down fast. Knock on effect being USDT which basically sold as too big and too collateralized to fail has shown weakness in the armor.

If there's a run on USDT, you would expect it to go to BTC, ETH. Then if people start saying they want their money out all together then the run on BTC, ETH would decimate the market as a whole.

USDT will be a lot harder to take down - conversely if it falls, it'll take so much more with it.

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