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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#61

Post by arcticbull »

tamrix wrote: post #52
po wrote: post #46

Earlier quoted context omitted.

All the people responding to you are missing the distinction too... They can create/destroy coins at will. They say that they only do this when customers receive/withdraw fiat but we all know that's not the case and they aren't truthful about it.

Quoted post unavailable.

This is honestly the most asinine remark.

Tethers are supposed to be backed by $1 in assets. You're complaining that dollars are created out of nothing - they're not, of course, but even if they were: When Tether holds less than $1 of backing assets for each $1 of USDT in circulation it's worth strictly less than the $1 you're deriding. It is this gap we're talking about. So your comment isn't just wrong, it's completely irrelevant and a distraction from a real problem.

Dollars enter circulation when they're borrowed. They leave circulation when the loan is repaid. The value of a dollar is derived from the obligation to repay the debt that created that dollar, and the legal system which enforces these contracts. Banks undergo rigorous audits so we know for a fact how this works and that this works.

Banks are backed by the FDIC which in turn is backed by the Fed, you cannot have a bank run anymore. It's not possible. As such fractional reserve isn't a meaningful risk to depositors.

Tether has no lender of last resort. $.80 of backing reserves for $1 of USDT doesn't mean each person gets $0.80. It means the first 80 people get $1, the last 20 people get $0. Tether has also never been audited.

Re: Tether Withdrawals Top $10B

#62

Post by reducesuffering »

1 month chart on Tether price pretty clearly shows that Tether is struggling to hold it's peg: https://coinmarketcap.com/currencies/tether/

Terra / Luna had $3b in reserves, either used to defend the peg, and/or laundered elsewhere (Do Kwon claims they only have $9m left, rest went to defend peg, with no verification. "we're checking if we can show we made these trades with a market maker." I'll let you be the judge if you think $3b got blasted into upward support of UST). The result was the same; a worthless stablecoin. Tether is no different here, just larger reserves. They will be depleted trying to hold the peg until they can't and/or they will be ran off with.

Re: Tether Withdrawals Top $10B

#63

Post by charcircuit »

cormacrelf wrote: post #47
bhouston wrote: post #33

Earlier quoted context omitted.

They likely have backing of more than 50% probably more than 80%. Although how much is liquid is unknown.

This exodus doesn't really prove anything about the composition of the assets, same way the money coming onto the books originally proved nothing. Tether admits that most of their assets are made up of commercial paper (aka bonds issued by companies). Suppose the minted USDT was given to the companies issuing those bonds themselves, then to reverse this, you don't need USD. You can simply cancel the debt and burn the…

>Tether admits that most of their assets are made up of commercial paper (aka bonds issued by companies)

No, at their attestation 2 months ago, "Commercial Paper and Certificates of Deposit" was 24.38% of their assets. This is much less than the "U.S. Treasury Bills" which was 47.56% of their assets.

Re: Tether Withdrawals Top $10B

#64

Post by drumhead »

We're in the get out while you still can phase. At some point they'll suspend conversion and holders will be stuck with something virtually worthless. It's like watching a landslide in its early stages, as soon as enough people realise what's going on it's going to be too late.

Re: Tether Withdrawals Top $10B

#65

Post by VGltZUNvbnN1 »

oblio wrote: post #22
sgammon wrote: post #5

glad to see hn isn’t buying it but retail investors may not be so lucky.

Crashes are ultimately almost always sad. Reality just is, it isn't fun or nice. It just exists.

Reality is that which, when you stop believing in it, doesn't go away. - Philip K. Dick

Re: Tether Withdrawals Top $10B

#66

Post by arcticbull »

stormbrew wrote: post #57
tamrix wrote: post #52

Earlier quoted context omitted.

Quoted post unavailable.

No one's being told otherwise with banks though. The current backup plan for 19th-century-style fiat bank runs is central bank insurance and money printing, not a rather bold claim that the banks are holding on to tens of billion of dollars in cash and not doing anything with it.

> The current backup plan for 19th-century-style fiat bank runs is central bank insurance and money printing...

It's the FDIC. The FDIC was created in the wake of the Great Depression to make sure bank runs stopped. And in the last ~100 years since it was created they've succeeded. [1]

Banks pay into the fund, which is used to make depositors whole in the event of insolvency. If the fund is exhausted, the FDIC also has a line of credit with the Fed. They have $125B of assets give or take, and a $100B line of credit.

That said, we haven't drawn on the fund yet, AFAIK. Even in 2008, when WaMu collapsed, the OTS took ownership of WaMu Bank and sold it to JPMorgan. [2]

[1] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

[2] https://en.wikipedia.org/wiki/Washington_Mutual

Re: Tether Withdrawals Top $10B

#67

Post by MichaelBurge »

arcticbull wrote: post #61
tamrix wrote: post #52

Earlier quoted context omitted.

Quoted post unavailable.

This is honestly the most asinine remark. Tethers are supposed to be backed by $1 in assets. You're complaining that dollars are created out of nothing - they're not, of course, but even if they were: When Tether holds less than $1 of backing assets for each $1 of USDT in circulation it's worth strictly less than the $1 you're deriding. It is this gap we're talking about. So your comment isn't just wrong, it's comple…

> you cannot have a bank run anymore. It's not possible. As such fractional reserve isn't a meaningful risk to depositors.

It's not possible for the "average person" to lose bank deposits. But if a cryptocurrency company is storing much more than FDIC limits in a single bank(because few banks are willing to deal with them), you could easily have a run on that bank.

So even having $1 of USD backing reserves for $1 of USDT, there could still be withdrawal limits, halts, etc. because the underlying bank lent the deposits out.

It needs to be paper cash in a safe to really protect against mass-withdrawals, and even then getting it "into the system" when people want it back could take a few days and lead to temporary halts.

Re: Tether Withdrawals Top $10B

#68

Post by cormacrelf »

charcircuit wrote: post #63
cormacrelf wrote: post #47

Earlier quoted context omitted.

This exodus doesn't really prove anything about the composition of the assets, same way the money coming onto the books originally proved nothing. Tether admits that most of their assets are made up of commercial paper (aka bonds issued by companies). Suppose the minted USDT was given to the companies issuing those bonds themselves, then to reverse this, you don't need USD. You can simply cancel the debt and burn the…

>Tether admits that most of their assets are made up of commercial paper (aka bonds issued by companies) No, at their attestation 2 months ago, "Commercial Paper and Certificates of Deposit" was 24.38% of their assets. This is much less than the "U.S. Treasury Bills" which was 47.56% of their assets.

Sure, maybe now it isn't, but in June 2021 that figure for commercial paper was 49%. Their most recent claim is a few days ago, during this big exodus of money off their books, and it involved a reduction of at least $4bn worth of commercial paper. So I think it's a very relevant thing to point out that this $10bn didn't necessarily mean they allowed for $10bn of cash withdrawals but rather some cash and some cancelling of debt denominated in USDT. Overall remember their reporting is not particularly trustworthy given how little (non-existent) outside scrutiny they allow it to receive. These are all just numbers they could be making up to explain the things we can see.

Re: Tether Withdrawals Top $10B

#69

Post by hermitdev »

arcticbull wrote: post #61
tamrix wrote: post #52

Earlier quoted context omitted.

Quoted post unavailable.

This is honestly the most asinine remark. Tethers are supposed to be backed by $1 in assets. You're complaining that dollars are created out of nothing - they're not, of course, but even if they were: When Tether holds less than $1 of backing assets for each $1 of USDT in circulation it's worth strictly less than the $1 you're deriding. It is this gap we're talking about. So your comment isn't just wrong, it's comple…

> Banks are backed by the FDIC which in turn is backed by the Fed, you cannot have a bank run anymore. It's not possible.

Yes, it is possible. FDIC doesn't insure all deposits. Typically you're capped at X thousands across all your accounts. I'm not sure what the current value of X is, 250?

That said, a bank run is improbable. Also, be careful with cash holdings at investment institutions. Those are typically not FDIC ensured, especially if your cash is held in a money market account.

Re: Tether Withdrawals Top $10B

#70

Post by kolinko »

stingraycharles wrote: post #28

Am I correct that it’s not necessarily $10B in withdrawals, as it is that the total market cap (valuation * total coins) dropped by $10B? Seems like an important distinction?

In tether’s case this is the same - withdrawals through it’s operator for fiat cash take tether off the market and lower it’s market cap.

A more accurate description would be „withdrawals minus deposits”, but it’s quite obvious that this is what is meant.

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