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

291–300 of 976 posts

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

#291

Post by irjustin »

charcircuit wrote: post #221
irjustin wrote: post #166

Earlier quoted context omitted.

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 th…

Ah so in theory I should be able to ask the USDT foundation for a dollar and they should be able to give it to me?

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

#292

Post by alangibson »

FeepingCreature wrote: post #203
stevekemp wrote: post #186

Earlier quoted context omitted.

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.

This. Bitcoin is essentially the USD + US stock market in 1922. Hard money and unregulated securities markets already broke the world once. The crypto wizards somehow managed to forget a century of hard won lessons.

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

#293

Post by ThePhysicist »

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.

Redeeming Tether via the official route takes several days as I understand (in the current situation probably more like several weeks?). So if you're a large investor you have the choice of either trusting Tether to be able to make good on the promised redemption, not knowing if it will be the case for days or weeks, or you can just go to the market and sell your Tether there at a 2 % loss. As an investor I'd always go for the second route as there's large downside risk and almost no upside potential when redeeming via tether.to. No sane investor would risk losing 100 % of their assets to escape a 2 % haircut.

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

#294

Post by usednet »

benjaminwootton wrote: post #273
usednet wrote: post #225

Earlier quoted context omitted.

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?

Ponzis can be very profitable. I think algorithmic stablecoins are stupid too.

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

#295

Post by [deleted] »

thkim wrote: post #259
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 think Tether can get away with less than 100% collateralization. At the current market cap of 82bn, even if they are only 20% collateralized, it takes 16.4bn one way movement to deplete their reserve. Is that likely event? Guess it depends, but I think market makers would be more willing to backstop them than UST shitshow. UST has "death spiral" structure that makes MMs less willing to backstop them once it goes on…

[deleted]

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

#296

Post by robocat »

ezzaf wrote: post #148
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…

An important distinction between Terra (what is being described there) and Tether (what this thread is discussing), is that Tether claims to be backed by real assets.

There is no strong distinction in backing: USDT just has a slightly more believable story.

Also the price of a stablecoin can shift from it's peg, even if it has 100% backing, when there is latency/congestion/spread/volume for the arbitrage trade.

That said, there is a whole heap of plenty of evidence that USDT is not backed by dollars 1:1.

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

#297

Post by lolegreg »

hluska wrote: post #138
EGreg wrote: post #73

Earlier quoted context omitted.

A year ago I advocated this “riskless” strategy on HN… if anyone actually listened to me, would you be up 1,000,000% right now? https://news.ycombinator.com/item?id=26106281

If that is meant to be a joke, it’s actually quite funny. Good job. If you meant that seriously, it’s extremely poor quality advice. Leverage is neither free nor cheap. And taking 100% leverage is obscenely risky. Your characterization of it as ‘risk free’ is the most dangerous part. At 100% leverage, small swings could lead to calls you simply cannot afford.

You’re misreading. That comment is a powerful, personal realization he’s had and shared with us and a really, really interesting thing to watch happen. I’m serious. You’re explaining to him what he’s just realized so hard that I can taste the holy-shit bile through his comment. Welcome him back to the fold. Don’t lecture him.

I never thought I’d see it actually happen, and I’m kind of blown away I’m in the same thread. It’s actually possible for the hardcore believers to snap out of it, and that’s the unquestionably greatest thing I’ve heard in three long years. There is hope. I was genuinely starting to wonder.

Note that this isn’t personal and I had no idea who he was until five minutes ago. I just type some shit in the username box every time I sign up.

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

#298

Post by Panzer04 »

ThePhysicist wrote: post #236
vishnugupta wrote: post #165

Earlier quoted context omitted.

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 an…

If the price continues to fall and they can keep arbitraging, they could easily do quite well out of this (assuming they have a reasonable amount of reserves).

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

#300

Post by tome »

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…

It's a stablecoin. It's not supposed to move at all!
Post reply on HN