Tether starting to lose its peg too, after Terra did • Hacker News Board

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

#671

Post by px43 » Thu, May 12, 2022, 1:41 PM UTC

rwmj wrote: post #342

pjc50 wrote: post #325

Earlier quoted context omitted.

> redeem at Tether for $1 Is the redemption window really open? That's something people have been extremely skeptical of.

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.

What people here don't seem to understand is that the people who actually hold significant amounts of Tether basically all know each other. It really is more of a social contract than anything else. It was an early stablecoin, and it only exists so major exchanges could interoperate without having to rely on banks.

This is what killed MtGox, their over-reliance on banks to hold the collateral needed to make them solvent. Carl Mark Force IV was a DEA agent who was basically blackmailing MagicalTux, forcing him to invest in fake crypto projects, and if he didn't play along, Karl would use his DEA powers to freeze MtGox's bank accounts. This prevented people from cashing out, which was a problem. Major exchanges learned that touching actual US dollars in bank accounts is poison, and something that major exchanges can't really do without devoting massive (crippling amounts) of resources to legal and compliance teams.

Better stablecoins exist now, from a US regulatory standpoint (USDC) and from an algorithmic pegging standpoint (DAI), but the people who run exchanges still like using Tether between themselves for historical reasons, which is fine. I will never hold Tether, and probably every person who reads this should never hold Tether, but not because it's necessarily bad, but because it's not for you. It has a very specific utility to certain crowds, and IMO that's fine.

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

#672

Post by onlyrealcuzzo » Thu, May 12, 2022, 1:41 PM UTC

ulzeraj wrote: post #564

onlyrealcuzzo wrote: post #492

Earlier quoted context omitted.

> Unless your bank kicks you out by some reason (incompetent compliance). Unless foreign bank refuses your transaction because the bank doesn’t like the color of your passport. Unless somehow banking system wants to cut extra from your transaction (2.5-4% for transaction) because of double currency conversion you didn’t ask for, because you didn’t specify correct correspondent bank and your bank didn’t tell you about…

Nothing you wrote makes any sense. We are talking about stable coins. Where does speculations fits here? Also could you make an argument without making accusations?

1. Stable coins make no sense for anyone outside of a handful of small, poor countries.

2. Stable coins make no sense for anyone who has meaningful wealth even in those countries because they have other, better options available.

3. The amount of money in Stable coins is >$100Bn - this is far more than what would go in to resolve any of these problems. Mentioning these problems is noise / a distraction.

4. The primary purpose of stable coins is for people to get in and out of / time trades in cryptocurrency (speculation).

Do you honestly believe people collectively parked >$80Bn in a shady company using it purely as a bank account - because that was really their best option? If not - then these talking points aren't really worth talking about. My whole point.

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

#673

Post by whimsicalism » Thu, May 12, 2022, 1:41 PM UTC

dmichulke wrote: post #488

jmyeet wrote: post #470

Earlier quoted context omitted.

Here's a question for tether "investors": why are you investing in something whose stated goal is to maintain a peg to the USD instead of, you know, just holding money in US dollars? You're adding a bunch of risk for literally no upside. The only thing you gain is to to trade that on the blockchain, which is really a response to the oracle problem. So you've greatly increased your risk with no upside to slightly incr…

As a US citizen try to send dollars to a Hong Kong or Singapore registered exchange. I think the "investing" in tether is really only the best match to "Let me see, where can I park my money in the least volatile way on this crypto exchange". EDIT: Interestingly, if tether breaks, then USDC is the last man standing and will have to work hard to maintain the peg. Under such circumstances it's quite possible that BTC i…

Dai? Why does everyone always forget Dai?

Unlike Tether and USDC, I can actually verify that Dai is overcollateralized.

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

#674

Post by mrep » Thu, May 12, 2022, 1:42 PM UTC

pjc50 wrote: post #373

jiggawatts wrote: post #361

Earlier quoted context omitted.

From what I heard, Tether had invested heavily in "emerging markets" instead of the established US markets, which explains why nobody at Goldman Sachs has dealt with them.

Emerging markets? Which of course means that even if they started with $X of collateral a year ago, they're exposed to the wider market crash which is happening and therefore have much less.

Not to mention currency risk. I heard they were invested in china which if they were their yuan are now worth 6% less to get the same amount of USD which customers are expecting USDT to be in.

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

#675

Post by kurisufag » Thu, May 12, 2022, 1:43 PM UTC

SkeuomorphicBee wrote: post #590

alexb_ wrote: post #386

The entire concept of a "stablecoin" reminds me a lot of something from SIGBOVIK 2014. Keep in mind, this was written in 2014, before any stablecoins actually existed, and that SIGBOVIK is supposed to be a joke conference where people present extremely silly ideas as if they were real breakthroughs. > DollarCoin: We propose skipping the middleman and providing direct proof-of-dollar with a blockchain that consists of…

DollarCoin is the best summary of proof-of-work that I've ever seen. Just replace "burning US $1 notes" with "burning [x] Watts-hour of electricity" and it describes Bitcoin to a T.

that isn't actually at all the function or purpose of PoW though. in the example, the burning of "real" dollars represents the validity of a single "DollarCoin" existing. the "burning" of electricity for bitcoin is the result of finding a schema that promotes verification of the network by awarding coins by consensus. PoW is a /validation/ pattern, and while burning dollars on video and linking the hashes together can comprise a blockchain, there is no actual decentralized validation going on.

it's alright as a snarky line, but outright saying "the best summary of proof-of-work that I've ever seen" is misleading to people that didn't actually know, and now have a completely incorrect idea of what it is.

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

#676

Post by whimsicalism » Thu, May 12, 2022, 1:43 PM UTC

hbbio wrote: post #396

alexb_ wrote: post #386

The entire concept of a "stablecoin" reminds me a lot of something from SIGBOVIK 2014. Keep in mind, this was written in 2014, before any stablecoins actually existed, and that SIGBOVIK is supposed to be a joke conference where people present extremely silly ideas as if they were real breakthroughs. > DollarCoin: We propose skipping the middleman and providing direct proof-of-dollar with a blockchain that consists of…

Mind that... it actually was a good idea. Until people started cheating with it, exactly as you say. Tokenized dollars allow to benefit from the tech (smart contracts), which is itself great and opens a lot of possibilities. What's not is: Ponzi schemes (Terra), crooks (Tether?). Edit: There are valid stablecoins like USDC (they hold sufficient reserves) and even valid algorithmic stablecoins e.g. LUSD, backed by Eth…

Dai? Not a ponzi scheme. USDC is the same thing as Tether.

It's too bad Terra ever existed. I took one look over their plan to keep their coin stable and noped out of there.

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

#677

Post by afavour » Thu, May 12, 2022, 1:43 PM UTC

bratwurst3000 wrote: post #595

dagw wrote: post #576

Earlier quoted context omitted.

Is it the casino foult that their customers loose money Casinos are very strictly regulated and must post the exact rules and probability of winning for all their games. If the casino lies about the rules of the game or your chances of winning, then yes it is absolutely their fault and they will be held liable.

Yes and everyone warned everyone investing in crypto that it could go from hero to zero instantly. I cant believe anyone didnt know this risk.

There was no such warning in all the high profile ads that drew people in.

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

#678

Post by pirate787 » Thu, May 12, 2022, 1:45 PM UTC

greyhair wrote: post #520

yread wrote: post #145

Earlier quoted context omitted.

Assholes need to be jailed and we can feel for the greedy people losing their money. On the other hand they wouldn't have shared their gains with us if it went well so they can't expect us to bail them out when it goes bad

This. Exactly this. In some ways, this mirrors the current student debt crisis. Only 13% of the US population holds student debt, and 80% of student debt is held by earners in the upper 20% of income. But suddenly, we are supposed to cancel all that debt. ????? Same thing with the market crash in 2008. Oh, we have to bail out all those banks because otherwise pension funds will lose value. Not close completely, but l…

Agree. The median student loan burden is very manageable-- less than a new car -- and the issue is manufactured for political purposes on the left to turn out younger voters.

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

#679

Post by gitgud » Thu, May 12, 2022, 1:45 PM UTC

norswap wrote: post #539

The speculation in this thread is silly. While Tether is certainly opaque (you could say shady), it's incredibly doubtful that it's unbacked to a significant extent. Even if it's only backed at 50% (which would be really shocking to me), it would take 39B$ to flow through the system to actually cause a depeg. That's very unlikely, and just the logistics of it means it would leave a lot of time to Tether to clear the…

> Even if it's only backed at 50% (which would be really shocking to me)

Is it shocking? Aren't traditional banks only backed by a tiny fraction of what they give out?

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

#680

Post by mrep » Thu, May 12, 2022, 1:46 PM UTC

phire wrote: post #364

thkim wrote: post #259

Earlier quoted context omitted.

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…

All that Tether really need is for enough people to believe that they probably have enough collateral to handle any potential bank run. Those people will buy up discounted tether and prevent the bank run from even happening. Though, the mess with TerraUSD has clearly knocked a bunch of people's confidence in Tether. I wouldn't be entirely surprised to see it crash.

Isn't that what the banks said before their first bank run and then the government had to step in to back peoples deposits to ease their worries. The government isn't backing these deposits.