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What's Happening with Bitcoin Prices

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Re: What's Happening with Bitcoin Prices

#101

Post by samsonradu »

tehlike wrote: post #99
samsonradu wrote: post #98

Earlier quoted context omitted.

That s the thing I don’t get, how do they “issue” tether? Because if one says they peg it to the dollar then it must follow the dollar’s inflation. Otherwise somebody is at a loss because there s more tether value than usd or viceversa, even if they were fully transparent and fair. Edit Unless of course tether is not a store of value in any way and just a fancy name for a dollar.

The way it works is, i go to exchange a, and tell them hey i have this cryptocurrency and i have enough cash to back it up. People can withdraw money from me using these. If you do not verify my claims, you think this is a great idea, because now you can transact with usd(t). Formally these exchanges only used cross-coin exchanges. Now this is not a problem as long as you have _enough_ money to support withdrawals on…

But why do I want tether in the first place? Why bother switching back and forth at all? I don’t see why would I want to hold tether.

Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?

Re: What's Happening with Bitcoin Prices

#102

Post by tehlike »

samsonradu wrote: post #101
tehlike wrote: post #99

Earlier quoted context omitted.

The way it works is, i go to exchange a, and tell them hey i have this cryptocurrency and i have enough cash to back it up. People can withdraw money from me using these. If you do not verify my claims, you think this is a great idea, because now you can transact with usd(t). Formally these exchanges only used cross-coin exchanges. Now this is not a problem as long as you have _enough_ money to support withdrawals on…

But why do I want tether in the first place? Why bother switching back and forth at all? I don’t see why would I want to hold tether. Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?

You mean, instead of USD? Because most exchanges cannot and does not support withdrawals - they are virtual.

Re: What's Happening with Bitcoin Prices

#104

Post by samsonradu »

tehlike wrote: post #102
samsonradu wrote: post #101

Earlier quoted context omitted.

But why do I want tether in the first place? Why bother switching back and forth at all? I don’t see why would I want to hold tether. Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?

You mean, instead of USD? Because most exchanges cannot and does not support withdrawals - they are virtual.

But every tether "issued" is basically a dollar printed out of thin air if we're to trust Tether that it has the same value isn't it?

> Because most exchanges cannot and does not support withdrawals - they are virtual.

Can you elaborate? I'm not familiar with these exchanges, really curious. You mean exchanges accept cash for coins and don't allow withdrawals? :)

Re: What's Happening with Bitcoin Prices

#105

Post by gt_ »

kristopolous wrote: post #92
gt_ wrote: post #78

Earlier quoted context omitted.

OK. Thanks for clarifying. You mean to say it’s not smart investing . You are judging intelligence based on purely selfish outcomes. I understand now.

"smart" and "dumb" money are technical terms in investment. It's just a label placed on a class of investments when talking about the market. You can call them whatever you want and they aren't intended to be anything more than a purely functional way to differentiate two classes of things.

Noted. Thanks for sharing this comprehension.

Re: What's Happening with Bitcoin Prices

#106

Post by samsonradu »

antonvs wrote: post #87
samsonradu wrote: post #56

Earlier quoted context omitted.

Failing to understand how you could peg Tether to the USD and have people believe you. I was under the impression that pegging to a currency is something only a very big player, with close to unlimited resources can achieve, see People's Bank of China, Swiss Bank etc. Among others, you have to defend the currency against speculators and that requires a lot of capital. Even the Bank of England failed to maintain the p…

> Failing to understand how you could peg Tether to the USD and have people believe you. In principle, it's simple: people pay you USD for Tether, you charge them a small percentage fee, put the remaining USD in a reserve account, and issue the buyer a corresponding amount of Tether. You do the reverse to buy Tether back from people. For the trust issue, you get a reputable company to audit your reserves and Tether/U…

> Tether is just supposed to be a proxy for USD.

That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.

Re: What's Happening with Bitcoin Prices

#107

Post by samsonradu »

samsonradu wrote: post #106
antonvs wrote: post #87

Earlier quoted context omitted.

> Failing to understand how you could peg Tether to the USD and have people believe you. In principle, it's simple: people pay you USD for Tether, you charge them a small percentage fee, put the remaining USD in a reserve account, and issue the buyer a corresponding amount of Tether. You do the reverse to buy Tether back from people. For the trust issue, you get a reputable company to audit your reserves and Tether/U…

> Tether is just supposed to be a proxy for USD. That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.

Too late to edit.

Now that I think of it this would make sense for the FED to actually use the blockchain tech to manage its currency supply. Instead of the printing press they issue cryptodollars which supposedly are better than paper because they can be easily and fastly moved around or whatever. But not for a 3rd party to just say: This is a dollar, but called differently, trust us, we issued it.

Re: What's Happening with Bitcoin Prices

#108

Post by antonvs »

samsonradu wrote: post #107
samsonradu wrote: post #106

Earlier quoted context omitted.

> Tether is just supposed to be a proxy for USD. That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.

Too late to edit. Now that I think of it this would make sense for the FED to actually use the blockchain tech to manage its currency supply. Instead of the printing press they issue cryptodollars which supposedly are better than paper because they can be easily and fastly moved around or whatever. But not for a 3rd party to just say: This is a dollar, but called differently, trust us, we issued it.

> That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation.

Correct.

> Otherwise they're printing money isn’t it?

Correct.

> Even if true, saying that they back it up is not enough.

Right. The original idea was that they would provided audited statements proving they held the necessary reserves. They did start out doing something like this, as described here:

https://medium.com/@bitfinexed/the-so-called-tether-audit-th...

See the screenshot of their "previous release" which showed reserves of $44 million across seven banks.

However, for various reasons, including avoiding regulations which would make running this kind of business much more difficult, subsequent releases were less specific and suffer from a host of issues described in the above article. Nevertheless, the latest release mentioned in the article did show $442 million of reserves backing Tethers.

You're correct that the Fed could certainly use a blockchain. However, there's nothing wrong in principle with the idea of a 3rd party issuing a token representing a dollar, if they provide appropriate auditing and comply with regulations in a respectable jurisdiction. No-one is currently doing that.

Re: What's Happening with Bitcoin Prices

#109

Post by antonvs »

samsonradu wrote: post #104
tehlike wrote: post #102

Earlier quoted context omitted.

You mean, instead of USD? Because most exchanges cannot and does not support withdrawals - they are virtual.

But every tether "issued" is basically a dollar printed out of thin air if we're to trust Tether that it has the same value isn't it? > Because most exchanges cannot and does not support withdrawals - they are virtual. Can you elaborate? I'm not familiar with these exchanges, really curious. You mean exchanges accept cash for coins and don't allow withdrawals? :)

He means they don't support withdrawals of fiat currencies like USD or EUR. Many crypto exchanges only support withdrawal of crypto currencies.

To allow deposit or withdrawal of fiat, exchanges tend to have to comply with international banking regulations, which requires a great deal of paperwork. As a result, only a few exchanges offer this - examples are Coinbase, Bitstamp, Bitfinex, Kraken.

Before Tether existed, you couldn't buy or sell dollars or Euros on a pure crypto exchange. That's a big limitation.

Among other things, Tether allows you to trade in USD on these crypto-only exchanges.

Basically, one problem Tethers solve is allowing exchanges to operate more completely without regulatory oversight. As such, the limitations in their transparency may be acceptable to many users, who know that they're not operating in a regulated market and are willing to accept some risk for doing that.

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