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Tether minted most USDT to just 2 firms – Alameda and Cumberland

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Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#11

Post by chroem- »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

Stablecoins have instant transfers between exchanges because they're not dependent on the legacy banking system. Their primary purpose is moving money around. There are also algorithmic stablecoins which maintain their price by adjusting supply rather than being backed by reserves.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#12

Post by themodelplumber »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

Seems like an intra-market advantage.

> having USDT (as opposed to the U.S. dollar) removes transaction costs and delays that impair trade execution within the crypto market.

https://www.investopedia.com/terms/t/tether-usdt.asp

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#14

Post by freeAgent »

AlexandrB wrote: post #10
IncRnd wrote: post #2

If Tether is redeemable for USD on demand, then Tether sounds suspiciously like some sort of a bond that is evading regulation. Maybe my terms are laymenesque, but I think my point still stands.

Luckily their TOS says: > "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money." Edit: Oops this has been updated to: > Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves th…

It amazes me that more people don't read the Tether ToS and run away.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#15

Post by purple_ferret »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

Pretty straightforward:

You can currently get 8.88% APY return on lending stablecoins on Celsius[0]. It's also much easier to borrow and use in incredibly risky contracts, yield farming, etc

Stablecoins let you engage in much more risk than USD without the volatility of crypto prices.

[0]https://celsius.network/earn-rewards-on-your-crypto

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#17

Post by X6S1x6Okd1st »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

Many trades on exchanges happen against stablecoins instead of USD directly.

All trades on DeFi that go from 'fiat' to crypto go through stablecoins.

If you want a cut of the fees paid by speculators then you are probably interested in stablecoins because that's how you market make in these markets.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#18

Post by JayStavis »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

Nobody invests purely in a stablecoin if it's value is pegged to fiat. All else equal it's actually worse than holding dollars in a bank account which has a nominal interest rate.

The point of stable coins is to have a working capital system that is compatible with the rest of the crypto ecosystem. The reason is that most services in crypto aren't natively compatible with fiat due to fragmented legal & regulatory environments. Stablecoins are instant transfers to anywhere in the world. It's why a lot of countries are trying to build regulatory frameworks for stablecoins.

Two caveats: (1) USDC actually can earn a lot more in a coinbase earn account or vault than your dollars in your bank account, so lot's of people are saving with stable coins via higher interest rates -- I just wouldn't call it "investing".

(2) Some stable coins are pegged to a value that isn't real fiat money. Some good thoughts here: https://twitter.com/balajis/status/1422993084002934788

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#19

Post by ptero »

NickM wrote: post #3

There are a lot of areas of crypto where I feel like I have a pretty good understanding, but I genuinely don't understand why anyone would "invest" in a stablecoin. What advantage does holding something like USDT offer over simply putting dollars in a bank account?

I can come up with a bunch of possibilities (not sure how important they are for different people), but they revolve around using crypto for transfer, not price hedging, long term investment or short term speculation.

An example often cited for El Salvador, where a US worker A sends money to a family member B at home. If A uses banks and dollars, B may need to travel to a bank (long trip on a bus through areas not very friendly to strangers), pay sizeable cross-border commission, evade gangs looking for people withdrawing money, etc. With crypto, they could receive it at home. Businesses buying and selling things that accept crypto need to have significant amount in crypto to handle transactions. Neither of those parties wants BTC with its wild swings; they just want a "crypto dollar" that they can exchange, if and when needed, for a real one, so they build a position in it. My 2c.

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