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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

#941

Post by eru »

unyttigfjelltol wrote: post #831
eru wrote: post #621

Earlier quoted context omitted.

There are only two ways to hold USD: physical cash and database entries at the Fed. The former is really inconvenient, especially if you want to transfer money. The latter is only available to a select few companies. Everything is else at most assets denominated in (= pegged to) USD. Does your critique apply to all these other categories as well? Why or why not?

Pegs fail at the worst possible time. You can transfer or store value via oak tokens flown by trained pigeons, because that might be convenient (to you) and doesn't involve the Fed. But if someone tells you the token/pigeon method has the same attributes as a bank-to-bank USD wire, that person would be mistaken. The methods would be no closer to equivalence if one were to stamp "USD" on the oaken rounds and train the…

As long as the guys who issue the token have sufficient assets to redeem them, and regularly redeem them to any comer, I don't see much of a problem.

If there's oak and pigeons involved, that doesn't change much---apart from being might inconvenient.

The problem algorithmic stable coins is that the backing is either non-existent or at best really suspect.

Tether is a bit better in that they at least claim to have real world backing, but they don't tell you what it is, so you can't trust it.

Btw, the backing for a token denominated in USD doesn't have to be USD.

Eg most banks back their deposits with all kinds of assets and bonds, not just physical cash (or balanced at the Fed).

Having a few reserves in USD on hand is important, but in the longer run it's more important that the worth of your backing assets is reliably higher than your liabilities. The difference between the two is your equity cushion.

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

#942

Post by eru »

andrewla wrote: post #782
eru wrote: post #379

Earlier quoted context omitted.

Currency pegs and currency boards can work quite well. You just need sufficient assets to cover them. See https://en.wikipedia.org/wiki/Currency_board Btw, not only sovereign nations have these issues. Your bank also tries to maintain a peg between one dollar in its account books and one dollar in government money. Similar (but more roundabout) for things like Amazon gift cards. For a country without an established,…

> You just need sufficient assets to cover them Oh, is that all? To have a zero-risk peg you need to have as much reserve currency as you have issued currency; if you issue 1e6 fun-bucks that are pegged at 1:1 with the USD, you need 1e6 dollars. If your country has banks, and you allow those banks to engage in fractional reserve banking, and you make guarantees to depositors that you will make them whole no matter ho…

You are making a lot of assumptions here..

Yes, I am suggesting that fractional reserve banking is a good thing. You hold reserves for short-term convenience, so that in the normal course of business, you can redeem immediately on demand. You hold the rest of your balance sheet in different assets, so you can earn a return. (And you make contractual arrangements with your token holders that you have the option of taking your time to redeem, in return for a prohibitive interest rate. At least that's what happened historically in eg Scotland. This was called the 'option clause'.)

You are right that if your liabilities are in thing A, and your assets are in thing B, there's always a non-zero risks that the value of B might drop below the value of A. Even if at the moment, B is much more valuable than A.

You can make that risk pretty small. Small enough that it's comparable to eg the risk of all your computers being hacked, the risk of your CEO running away with bags of cash, the risk of the government just seizing your business, the risk of an asteroid impact hitting your cash vault, etc.

What makes you think this particular risk is special? It's just one of the risks holders of your liabilities take. I don't see how this particular risk should make banks more aggressive?

Btw, commercial banks (and other companies) in most countries are allowed to have liabilities in foreign currencies. Or liabilities in assets that are not currencies at all.

> If you choose to issue sovereign debt in your pegged currency, or support pension funds for your citizens, or anything like that, then ... don't peg your currency. Issue your own sovereign currency and get yourself some nuclear weapons.

Many countries get lower interest rates when issuing debt in a currency they don't control. The creditors weigh both default risk and inflation risk. It's not obvious to me why eliminating all default risk in favour of inflation risk would be an unambiguously good thing?

Before the USD became a full fiat currency (but was instead pegged to gold, silver or a combination of the two at various times), the US issued debt just fine.

Also keep in mind that even if a sovereign issues debt in a pegged currency or a foreign currency they don't control, they can just decide not to pay anyway. That's what Argentina did a few times.

Of course, your creditors won't like that. But they won't like excessive inflation either. Six of one, half a dozen of the other.

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

#943

Post by shkkmo »

vmception wrote: post #907
shkkmo wrote: post #890

Earlier quoted context omitted.

I'm curious why you feel the need to try to distort and spin stuff to benefit a company like Tether? They don't deserve your loyalty and they help give the crypto community a bad name.

It was actually my understanding of the situation, I feel I gave a balanced view. Not everything bad, not everything good. Like most things: somewhere in the middle and everyone is too emotional to look. It was new information to me that NYAG simply didn't investigate prior years at all, that's not the impression I got when I was reading that case. I think its an interesting way of reading it, like I said, a perspect…

> It was actually my understanding of the situation, I feel I gave a balanced view. Not everything bad, not everything good. Like most things: somewhere in the middle and everyone is too emotional to look..

In what way was it balanced? It completely misrepresented the findings of the NYAG in the best possible light for Tether. If you were acurately representating your understanding of the situation, you need to seriously re-asses your sources.

> It was new information to me that NYAG simply didn't investigate prior years at all, that's not the impression I got when I was reading that case.

I never said that. What I said is that not bringing charges isn't evidence that Tether wasn't lying about their backing during those years.

> You're grasping just because I'm not auto-admonishing them. That's not necessary. It mostly works because its mostly dollars, the western-retail trader fud is not matched by western institutional sentiment[0], and is definitely not matched by eastern retail or eastern institutional sentiment.

The concern isn't that the peg can't be held through large downturns, with the assets that Tether has, it would take an extremely large down turn to _force_ them to break their peg. What the question comes down to is trustworthiness because there is nothing stopping the people running Tether from walking away with all the backing assets if they don't think it is worth it to hold the peg anymore.

Thus I think it is extremely important to not whitewash Tether's previous shady behavior since their trustworthiness is the prime concern.

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

#944

Post by alexb_ »

ttul wrote: post #780
whimsicalism wrote: post #676

Earlier quoted context omitted.

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.

Tether is unaudited. USDC has at least been audited by a global tier-1 accounting firm. That’s a huge difference.

And as we all know from 2008, large accounting firms would never lie about the quality of other companies for their own benefit.

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

#945

Post by md_ »

GVIrish wrote: post #914
md_ wrote: post #904

Earlier quoted context omitted.

I mean, yeah, but wash trades aren't wizardry. Like, you go on eBay, it's always possible sale prices are someone selling to themselves and just paying the transaction fee. I hope/assume that's fairly widely understood. The Luna "automatic peg" stuff is genuinely clever, but with genuinely surprising implications (at least for me, a casual observer/layperson) for dynamic instability.

Yeah I mean wash trading isn't that sophisticated, but it is wizardry to the people gettinf fooled by it. The algorithmic peg and other stablecoin shenanigans aren't necessarily that sophisticated either, and yet...

Fair point.

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

#946

Post by vishnugupta »

tsimionescu wrote: post #561
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.

Per another comment in this thread, that is only accessible to "verified Tether customers", which means you payed them directly for the USDT. If you bought it off Coinbase for some ETH, you don't have any right to recoup it from them (though presumably Coinbase or whoever sold it to them does). Also, they reserve the right to delay fulfilling your order indefinitely, so they don't actually guarantee anything even if…

> you don't have any right to recoup it from them

You can transfer it from exchange to your own Wallet and then sell it back to Tether. Though you need at least $100K worth of USDT and you need to pay transfer fee to the exchange. It's bit of a hassle (and costs money) but can be done.

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

#947

Post by iso1210 »

eric_cc wrote: post #802
DebtDeflation wrote: post #404

Earlier quoted context omitted.

We will almost certainly see pre-2017 prices at some point.

Won't happen because USD buying power has gone down considerably since 2017 due to The Fed printing money out of thin air like there is no tomorrow.

In 2017 $100 would buy you about €90, ¥11000, CHF99, £80 (plus/minus about 5% during the year).

Today it will buy you €96, ¥13000, CHF100, £82

Not a great deal of movement

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

#948

Post by iso1210 »

kgwgk wrote: post #271
iso1210 wrote: post #258

Earlier quoted context omitted.

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?

Yahoo finance says its 30,279.67 at the moment after a collapse in everything over the last week or so.

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

#949

Post by LightG »

themaninthedark wrote: post #896
LightG wrote: post #570

Earlier quoted context omitted.

Back in the 50's maybe! Now everyone are just 'temporarily impoverished billionaires', which is why the whole scam continues to hold itself up.

>'temporarily impoverished billionaires' The Steinbeck that your are (mis)quoting is from the 30's. Misquote because Steinbeck was talking about how the majority of the ""socialists"" at the time were "most of the so-called Communists I met were middle-class, middle-aged people playing a game of dreams. I remember a woman in easy circumstances saying to another even more affluent: 'After the revolution even we will h…

I'm actually repeating/quoting my rejig of Steinbecks quote. I assumed the original quote is so well known as for that to be clear.

Hence, thanks, but looking back to the 30's isn't relevant here.

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

#950

Post by hnbad »

Mordisquitos wrote: post #246
hnbad wrote: post #170

Earlier quoted context omitted.

> convince yourself that 20% interest is a safe investment So what you're saying is people shouldn't expect to be able to massively multiply their wealth, but that directly contradicts the narrative that "anyone can make it" instead of the wealth and opportunities you're born into determining the likely upper limit of what you can hope for. I'm not disagreeing, but it's absurd to condemn people for falling for "get r…

> that directly contradicts the narrative that "anyone can make it" instead of the wealth and opportunities you're born into determining the likely upper limit of what you can hope for. It depends on what we understand by "anyone can make it". I would argue that, if understood in terms of "anyone can [become orders of magnitude richer just by picking the right investments] " then that indeed is a narrative that is ha…

I'm not disagreeing, I'm just saying the far more nuanced "anyone should be able to live comfortably if they put in the work" (along with the realization that this may not currently be possible for some people as "living comfortably" still requires a magnitudal improvement of their current situation because there is a very high floor thanks to the costs of living including healthcare) directly contradicts the popular narrative that considers systemic problems irrelevant to individual success (e.g. the usual talk about guaranteeing "equal opportunities not equal outcomes" falls apart if the opportunities simply can not be equal under the current systems).
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