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Tether Required Recapitalization in May 2022

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Re: Tether Required Recapitalization in May 2022

#101

Post by JumpCrisscross »

patio11 wrote: post #24
deweller wrote: post #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.

It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.

> now needs to redefine what being pegged means

Completely. For context, "the Reserve Primary Fund broke the buck when its net asset value (NAV) fell to $0.97 cents per share" [1].

[1] https://www.investopedia.com/articles/economics/09/money-mar...

Re: Tether Required Recapitalization in May 2022

#102

Post by TameAntelope »

rickreynoldssf wrote: post #27

I think Tether is the ultimate "Fake it till you make it" organization in crypto. Its kind of a joke now but everyone is in on the joke but it will probably end up being the defacto crypto parking place once things get real in crypto (e.g. you can buy a house with it) and the adults come in and shake out the current management.

Why wouldn't something like USDC be a better "crypto parking place"?

Re: Tether Required Recapitalization in May 2022

#103

Post by nradov »

lkrubner wrote: post #83
astoor wrote: post #71

Earlier quoted context omitted.

So Tether has become something like an international reserve cryptocurrency, which gives them an "exorbitant privilege"[0], meaning they can do pretty much whatever they want safe in the knowledge that everyone else will do everything they can to prevent them from failing because everyone else would have too much to lose if they did fail. That has kept it going for a long time, and might (or might not) keep it going…

The "exorbitant privilege" usually belongs to a government with a vast military, and/or substantial colonial possessions -- something that allows force to be used in an emergency. There is a reason why the US dollar, but not the Swiss franc, is an international reserve currency.

The UK Pound is still considered an international reserve currency by virtue of being incorporated into IMF special drawing rights, even though the UK no longer really has a vast military or substantial colonial possessions.

Re: Tether Required Recapitalization in May 2022

#104

Post by dboreham »

jandrese wrote: post #42
axg11 wrote: post #12

The 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.

As an outsider this reads like someone in 2006 saying that these risky looking mortgage based products are fine because they'll be propped up by Fannie Mae and Freddie Mac.

And they were pretty much correct. So probably not the same as that.

Re: Tether Required Recapitalization in May 2022

#105

Post by [deleted] »

SemanticStrengh wrote: post #8
chinathrow wrote: post #2

I cannot wait seeing it going down soon enough.

I'd wish too but honestly I believe there are powerful enough whales behind it to back it with a superior to dollar peg, there's no possible price crash mechanism like there was for UST if I understand correctly and it is backed at more than 70%

[deleted]

Re: Tether Required Recapitalization in May 2022

#106

Post by Finnucane »

onesafari wrote: post #17

What 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?

In real engineering, you try to figure out what might happen if your system fails. In ‘financial engineering’ you assume failure won’t happen, and get caught with your pants down when it does.

Re: Tether Required Recapitalization in May 2022

#107

Post by cycrutchfield »

thedstrat wrote: post #76

Its pretty frustrating that people are using these shady stablecoins where you can't see the code or assets backing them (eg USDT), when there are stablecoins that are fully open source and you can see the backing in real time (eg DAI)

Ask yourself why that might be, I think you might find the answer rather illuminating

Re: Tether Required Recapitalization in May 2022

#108

Post by hiq »

glerk wrote: post #80
winslett wrote: post #10

Earlier quoted context omitted.

Cryptocurrency has recreated the wild-cat banking crises of the late-1800s / early-1900s. Go read about the Knickerbocker Trust Company: https://en.wikipedia.org/wiki/Knickerbocker_Trust_Company These events ultimately lead to the creation of the Federal Reserve for banks to participate in a semi-cooperative system that didn't devolve into save-yourself during times of crises. The story here is that "unless there is…

The big crypto exchanges are currently acting as a sort of unofficial federal reserve. None of the big players has an interest in seeing USDT collapse and will step in to bail it out at the first signs of trouble. I'm not saying that Tether the company is not shady. They should definitely be more transparent about what assets they are holding and their collateralization, but I think the risks of total collapse are la…

> None of the big players has an interest in seeing USDT collapse and will step in to bail it out at the first signs of trouble.

As an exchange, if you keep some reserves in USDT and you think it might collapse soon, you might have an interest in dumping your positions before it completely loses value. Maybe exchanges would benefit from responding to such a situation collectively as you suggest, but I think it's likelier that they will just protect their own interests as individual entities.

Re: Tether Required Recapitalization in May 2022

#109

Post by zmgsabst »

mathgenius wrote: post #11

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.

No, 1-1 backing prevents this.

Let’s imagine that I have 1000 cans of beer in my warehouse and I give out 1000 tickets to exchange for a beer.

Let’s further imagine you have infinity dollars to “break the peg”. So you buy tickets, trade tickets, give them away for free after re-buying them… doesn’t matter. As many times as you want.

Everyone who has a ticket at the end can still visit my warehouse to claim a beer — no matter the financial manipulations you engaged in.

Re: Tether Required Recapitalization in May 2022

#110

Post by Grimburger »

patio11 wrote: post #24
deweller wrote: post #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.

It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.

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