It recently occurred to me, with the whole LUNA fiasco, that any "stablecoin" that is 1-1 backed by fiat can come under attack from leveraged traders, and get de-pegged. So it really doesn't matter what backing tether has, although more is obviously better. When the music stops it's anyone's guess what will happen.
Tether Required Recapitalization in May 2022
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Re: Tether Required Recapitalization in May 2022
#12The most important point in this article is that whether Tether is fully collateralized ultimately doesn't matter. As long as there are well-capitalized parties (Bitfinex, other exchanges) that want to prop up Tether, it will be fine. Nobody should be under the illusion that Tether is decentralized or anything other than a bet on Bitfinex.
Re: Tether Required Recapitalization in May 2022
#13So Tether is doing something akin to fractional reserve banking? From what I understand, this shouldn’t cause a problem unless there is a massive run (everyone trying to convert their USDT into dollars at the same time). Since most of the USDT is owned by big exchanges who need it to provide liquidity and have no interest in crashing the crypto market, I don’t think this is likely to happen.
No they are not. That rationale is a coping strategy at best and deliberately misleading at worst.
Tether is NOT a bank. They are not regulated and have no guarantee that depositors will be paid back. They promise a 1-1 backing and instead of people holding them to their promise their supporters desperately try to compare it to moderns banks.
No. Tether is not a bank. It is not doing fractional reserve banking. It is committing fraud. It’s that simple.
Re: Tether Required Recapitalization in May 2022
#14Bitcoin is the real stable coin. Everything else is fluctuating in price discovery until hyperbitcoinization completes.
The Dollar is the real stable coin, thanks to its unbreakable peg to the dollar.
Re: Tether Required Recapitalization in May 2022
#15It recently occurred to me, with the whole LUNA fiasco, that any "stablecoin" that is 1-1 backed by fiat can come under attack from leveraged traders, and get de-pegged. So it really doesn't matter what backing tether has, although more is obviously better. When the music stops it's anyone's guess what will happen.
Any stablecoin that is NOT backed 1-1 by fiat, correct? I.e., algorithmic stables. If you're 100% collateralized by USD in your bank account, how can it get de-pegged?
Re: Tether Required Recapitalization in May 2022
#16It recently occurred to me, with the whole LUNA fiasco, that any "stablecoin" that is 1-1 backed by fiat can come under attack from leveraged traders, and get de-pegged. So it really doesn't matter what backing tether has, although more is obviously better. When the music stops it's anyone's guess what will happen.
You mean any stable coin that is _not_ 1-1 backed?
Re: Tether Required Recapitalization in May 2022
#17What happens if Tether fails, realistically?
There's a lot of doomsaying around it, but after seeing the crypto market shrug off the loss of Terra Luna without contagion or bailout ala GFC crisis, the fear may be overblown. Terra was backed entirely by hot air, whereas Tether is mostly backed. Wouldn't the net loss be similar or even less?
Re: Tether Required Recapitalization in May 2022
#18The most important point in this article is that whether Tether is fully collateralized ultimately doesn't matter. As long as there are well-capitalized parties (Bitfinex, other exchanges) that want to prop up Tether, it will be fine. Nobody should be under the illusion that Tether is decentralized or anything other than a bet on Bitfinex.
You have to predict what those well-capitalized parties will do during a market panic. Decision making seems to change quickly when half the money has just disappeared, to focus on salvaging as much as possible.
Re: Tether Required Recapitalization in May 2022
#19> As of this writing, on May 20th, it has yet to regain the peg
This is misleading. Tether has consistently traded between $0.998 and $0.999 between May 13th and May 20th. See https://coinmarketcap.com/currencies/tether/
Is it trading at 0.1% lower than it was before the Terra USD collapse? Yes. Has it "lost its peg"? No.
Re: Tether Required Recapitalization in May 2022
#20So Tether is doing something akin to fractional reserve banking? From what I understand, this shouldn’t cause a problem unless there is a massive run (everyone trying to convert their USDT into dollars at the same time). Since most of the USDT is owned by big exchanges who need it to provide liquidity and have no interest in crashing the crypto market, I don’t think this is likely to happen.
I assume that the USDT holding of the big exchanges are on behalf of their customers. I those customer begin asking to convert their USDT to USD, that could be a massive run.