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

411–420 of 976 posts

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

#411

Post by FabHK »

irjustin wrote: post #287
cheeseface wrote: post #172

Earlier quoted context omitted.

The promise of a stablecoin, in this case Tether, is that you can always change 1 USDT into $1. When people buy Tether, they pay then $1 and believe the promise that they will get $1 when they want to.

Right but how... where does physical money come into play? How can I or anyone get 1 physical dollar from selling USDT? All I've ever done is exchange some coin => USDT and vice versa. So if no one is actually asking for a physical dollar, why does it need to be backed by a physical dollar?

There are exchanges (such as FTX) where you can trade USDT/USD. The basic premise is that USDT/USD will always be around 1, because Tether (the organisation) stands ready (always) to give you

a) 1 USDT for a USD, and

b) 1 USD for a USDT.

Any USDT/USD deviation from 1 thus gives rise to arbitrage opportunities. Tether can guarantee

a) because they can issue an unlimited amount of USDT, so when you give them 1 USD, they can definitely give you 1 USDT, and b) because

b1) they do not issue USDT without someone giving them the equivalent amount of USD, and

b2) they keep those USD safe in cash, deposits, or equivalent, without price, credit, and FX risk.

a) is undisputed. b) is the tricky part, both

b1) - they could just issue USDT without having received USD. Who's checking?

b2) - they could just take the USD they've received and buy a yacht, or put it in shares (price risk!) or commercial paper (credit risk!) or Chinese Yuan (FX risk!) or anything else. Who's checking?

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

#412

Post by WA »

jiggawatts wrote: post #377
rwmj wrote: post #342

Earlier quoted context omitted.

Apparently you have to bring a minimum of $100K of USDT to get it redeemed into real money. I would say this is an incredibly stupid trade to try because you're relying on Tether actually paying out as promised.

Statements like this blow my mind . The entire point of Tether is that you can absolutely trust them with $100K, $1M, $10M, or whatever . It's backed, it's robust, it's tethered , and they guarantee payout. The promise is essentially the AAA security of the crypto world, the equivalent to US Treasury bonds or whatever. Meanwhile, the sentiment I keep hearing is yours: "You'd have to be absolutely nuts to trust these…

It’s perceived as AAA until it’s not. Easy as that. Like WireCard that was a "good business", which turned out to be a fraud and the stock price crashing 70% in one day and 99% within a week.

So what is your point actually?

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

#413

Post by [deleted] »

ForHackernews wrote: post #354
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…

> Somebody is pouring cash into Tether to support the price Is that true? Where is this price coming from? Unregulated exchanges can display whatever numbers they want on their ticker, right?

[deleted]

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

#414

Post by FabHK »

hnaccount_rng wrote: post #232
eudoxus wrote: post #163

Earlier quoted context omitted.

"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?

Read any of the recent Matt Levine Money Stuff columns on Bloomberg that has "Stablecoin" in the title (rather than Musk/Twiter...)

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

#415

Post by alexb_ »

irjustin wrote: post #287
cheeseface wrote: post #172

Earlier quoted context omitted.

The promise of a stablecoin, in this case Tether, is that you can always change 1 USDT into $1. When people buy Tether, they pay then $1 and believe the promise that they will get $1 when they want to.

Right but how... where does physical money come into play? How can I or anyone get 1 physical dollar from selling USDT? All I've ever done is exchange some coin => USDT and vice versa. So if no one is actually asking for a physical dollar, why does it need to be backed by a physical dollar?

Idk, try paying your rent or buying lunch with Tether and see how that goes for you.

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

#416

Post by sgt101 »

londons_explore wrote: post #277
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…

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…

The thing is that someone will know, if someone does know what the level of backing is then they can figure out what the point of collapse would be and that will allow the construction of a scheme to make it collapse. If they can do that then there is a bunch of money to be made.

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

#417

Post by FabHK »

meltedcapacitor wrote: post #182
dragontamer wrote: post #15

Earlier quoted context omitted.

In the short term, they have the reserves for sure. In the short term, this is more of a classic bank-run. The Terra-coin + Luna scared a lot of cryptocoin holders, and now they're running away from another stablecoin. Even if Bitfinex had the money, the amount of traders leaving USDT has to be a colossal amount. The amount of money Bitfinex can transfer at any given time is limited, so the peg will bend and buckle.…

UST had like 10 cents of reserves in other cryptos for every UST. Is that substantial?

No. It means that they could fix things if the price dropped to 0.90, but not if the price dropped to 0.80.

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

#418

Post by throwawaymaths »

shafyy wrote: post #55
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…

> 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. The sad reality is that many poorer and financially illeterate people have been tricked by VCs and other grifters into this with billions of dollars spent in advertising. So, no, they don't deserve to lose their money to these assholes. These assholes need to be prosecu…

>> And this doesn't only apply to crypto, look at how many countries with currency pegs can maintain that when their economy turns down

> These assholes need to be prosecuted, fined and put to jail if necessary

Who gets put in jail when assholes running a country swindle their people's currency and the peg slips or otherwise they steal from the social wealth of the nation?

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

#419

Post by baobabKoodaa »

Cthulhu_ wrote: post #144
sshine wrote: post #71

Earlier quoted context omitted.

> many poorer and financially illeterate people have been tricked I’m sorry, but it’s worse than that. Whenever I’ve said “Tether is a scam waiting to blow up, and the evidence is obvious”, none of my smart peers had anything to say, either. The BTC price is hells high by this fake USD money printer. At least people are collectively waking up. Brrrr.

> 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…

> > none of my smart peers had anything to say, either.

> It's because they know. I think everybody knows that crypto is a bubble.

You're conflating 2 different things. Your parent poster was talking about Tether specificly and why it's a scam. Whether the whole asset class is in a bubble or not is a whole different discussion.

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

#420

Post by [deleted] »

tluyben2 wrote: post #112
sshine wrote: post #71

Earlier quoted context omitted.

> many poorer and financially illeterate people have been tricked I’m sorry, but it’s worse than that. Whenever I’ve said “Tether is a scam waiting to blow up, and the evidence is obvious”, none of my smart peers had anything to say, either. The BTC price is hells high by this fake USD money printer. At least people are collectively waking up. Brrrr.

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…

[deleted]
Post reply on HN