Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
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Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#2Honestly, 74% is a much higher number than I was expecting.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#3Honestly, 74% is a much higher number than I was expecting.
Conveniently enough, it works out that they're about $740 million short of their obligations. That's a lot of money.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#4My bank only needs to keep 10% of its deposits backed by cash, securities. [0]
[0] https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#5Yet the Tether price of BTC is only 6% below the USD price:
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#6My bank only needs to keep 10% of its deposits backed by cash, securities. [0] [0] https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
> My bank only needs to keep 10% of its deposits backed by cash, securities.
True, but your FIAT is FDIC insured to an extend. Neither Tether nor any of these funny moneys are.
Furthermore, I'm pretty sure non accredited banks cannot run fractional reserves legally.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#7My bank only needs to keep 10% of its deposits backed by cash, securities. [0] [0] https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
You are misunderstanding fractional reserve banking. Fractional reserve banking means that the bank only has to keep enough cash on hand to meet their expected reasonable obligations.
Banks still need their books to balance. That means that their liabilities can not exceed their assets. A bank can be solvent on paper but if there was a rush to withdraw by their customers, they may not be able to pay cash for all withdrawals because that cash would be tied up in loans.
In the Tether case it isn't that they loaned out the money they took in, rather their liabilities exceed their assets. Thus Tether is bankrupt on paper. And if everyone tried to withdraw their assets, they would also not be able to pay everyone back.
Thus banks may be illiquid with a balance sheet that ultimately balances (e.g. not bankrupt), but tether is both bankrupt and likely also illiquid because of the 850M loan fiasco.
I swear tether is like Wiley Coyote who has run off a cliff but hasn't yet looked down. I question my sanity a little bit because I do not understand why tether isn't completely disreputable at this point, I must be missing something.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#8I was expecting something more like 1%.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#9My bank only needs to keep 10% of its deposits backed by cash, securities. [0] [0] https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
You are misunderstanding fractional reserve banking. Fractional reserve banking means that the bank only has to keep enough cash on hand to meet their expected reasonable obligations. Banks still need their books to balance. That means that their liabilities can not exceed their assets. A bank can be solvent on paper but if there was a rush to withdraw by their customers, they may not be able to pay cash for all with…
I tend to agree with your Wiley Coyote comment and it made me laugh. Thanks.
Re: Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
#10Yet the Tether price of BTC is only 6% below the USD price: http://www.untether.space/
The market can remain irrational...