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Tether Required Recapitalization in May 2022

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Re: Tether Required Recapitalization in May 2022

#131

Post by Grimburger »

JumpCrisscross wrote: post #115
Grimburger wrote: post #110

Earlier quoted context omitted.

Quoted post unavailable.

> We take the 00:00Z price each day for 365 days and then average it Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke. > holds its price above a $0.98 average When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in…

Suggest a better methodology crisscross, I'm happy to listen. The problem with $1 flat is that anyone can sign up and manipulate it over time, holding it a fraction of a cent under isn't hard for a moment each day. Constantly maintaining a few cents under each day is much, much harder, feel free to go look through historic charts of what it costs to sell tether for USD over the last few years.

All it takes is a few days of near zero in the next year to win the wager. Isn't that what patio11 has said would happen for what 4 years now?

I'm offering a chance to capitalise on such deep knowledge, surely that's a no-brainer choice for someone so convinced that Tether is done for?

Re: Tether Required Recapitalization in May 2022

#133

Post by bogomipz »

The post states:

>"It is well-understood in the cryptocurrency community that Tether’s reserves are a polite fiction. If pushed on this, clueful members of the community, such as their co-conspirators, will (quietly) admit that Tether depends on a de facto guarantee of support from members of its consolidated group, such as Bitfinex, which can inject more equity at will.?

Can someone say what is meant but "its consolidated group"? Is this a loose alliance or something more formal?

Re: Tether Required Recapitalization in May 2022

#134

Post by Animats »

Are there verifiable numbers available on whether Tether has a net outflow of fiat? That's the real question. If they're under-reserved, and there's an ongoing net outflow, they will at some point run out of money.

There's definitely outflow. Tether's reported market cap peaked at $83 billion in early May, and now it's down to $74 billion. So at least 10% of Tether has already been redeemed. There are other major stablecoins now, so nobody has to use Tether.

This is one of those things that will look fine, until it doesn't. As has now been demonstrated several times, stablecoins have only two stable points: 1 and 0.

Re: Tether Required Recapitalization in May 2022

#135

Post by rurp »

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…

A big issue with this type of support is that the risks are correlated. Sure there are multiple big supporters of Tether right now, but if the sky starts falling and one of them decides to rush for the exit the others will likely make the same decision around the same time.

Re: Tether Required Recapitalization in May 2022

#136

Post by rglullis »

lupire wrote: post #62
rglullis wrote: post #34

Earlier quoted context omitted.

It's not a matter of being a joke. It's a matter of being criminals . Besides, Coinbase/Circle is already miles ahead in this race for institutional credibility.

Coinbase, the company that freezes accounts whenever the market gets more volatile?

Almost. Circle is more than just Coinbase.

And anyway, your cheap jab at Coinbase has no comparison with Tether. Circuit breakers are not an invention from crypto exchanges. Besides, they also are one of the investors in Uniswap, which lets you trade without any middlemen.

Re: Tether Required Recapitalization in May 2022

#137

Post by mateuszf »

avalys wrote: post #37
winslett wrote: post #28

Earlier quoted context omitted.

It is one step closer to shutting the doors on Bitcoin as an isolated financial ecosystem. Bitcoin-to-actual-USD is a trackable / taxable event. Whales avoid it like the plague. By moving to a pseudo-dollar like Tether, market makers can hang out while they wait for a suspect better buy-in price in the future. Should pseudo-dollars go way, they actual-Dollar transactions get a taxable haircut. Additionally, the frict…

Aren't sales of Bitcoin for Tether taxable anyway?

> Aren't sales of Bitcoin for Tether taxable anyway?

Maybe in US, but not everywhere. For example in Poland where I live crypto to crypto transactions are not taxable.

Re: Tether Required Recapitalization in May 2022

#138

Post by onlyrealcuzzo »

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.

Why hasn't anyone pegged a stable coin to $0.99 before?

The $0.99 Only Store could do stable coin. You could even redeem your coins for items in the store!

Re: Tether Required Recapitalization in May 2022

#139

Post by JumpCrisscross »

Grimburger wrote: post #131
JumpCrisscross wrote: post #115

Earlier quoted context omitted.

> We take the 00:00Z price each day for 365 days and then average it Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke. > holds its price above a $0.98 average When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in…

Suggest a better methodology crisscross, I'm happy to listen. The problem with $1 flat is that anyone can sign up and manipulate it over time, holding it a fraction of a cent under isn't hard for a moment each day. Constantly maintaining a few cents under each day is much, much harder, feel free to go look through historic charts of what it costs to sell tether for USD over the last few years. All it takes is a few d…

> holding it a fraction of a cent under isn't hard for a moment each day

It shouldn't be. Not for a dollar-pegged asset. Fractions of a cent on billions of dollars, dollars easily lent and borrowed every day, every minute, is millions of dollars a year for an arbitrageur [1].

Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.

> what patio11 has said would happen for what 4 years now?

Four years isn't long. At the first sign of tight markets, the damn thing fell apart to the tune of 5%.

> that's a no-brainer choice for someone so convinced that Tether is done for?

People are shorting Tether [2].

The problem is counterparty risk. When Tether busts, you want someone on the other side who isn't all in on crypto. That's not easy.

[1] Coinmarketcap shows $0.9989 for 1 Tether, an 11 bp spread. Call money is 2.75% [1], or around 75 bps per day; too expensive. But the repo rate is 80 bps [2]; less than a basis point a day. Borrow a billion against collateral, buy one billion Tether, redeem it for one dollar each and pay back the loan. You'll make, round trip, a $1mm profit [c]. In one day. Unless we're arguing there would be $1mm transaction costs for this trade, one must ask why nobody is doing it.

[a] https://www.bankrate.com/rates/interest-rates/call-money/

[b] https://www.newyorkfed.org/markets/reference-rates/tgcr

[c] [$1bn - $1bn * 0.9989] - [$1bn * (0.8% / 365)]

[2] https://www.wsj.com/articles/short-sellers-bet-tether-crypto...

Re: Tether Required Recapitalization in May 2022

#140

Post by NovemberWhiskey »

JumpCrisscross wrote: post #129
zionic wrote: post #122

Earlier quoted context omitted.

>This is true for every pile of toxic crap that's ever been financially engineered. I have a radical idea that I'm fairly sure would get me killed if I ever stood a chance of implementing it: A complete ban on all non-productive financial schemes. We have an entire parasite class that grown unfathomably wealthy while providing no real value to the rest of society. The "futures trader" extracting value from the system…

> complete ban on all non-productive financial schemes I surprised myself by how sympathetic I am to this proposal, given I've made a career in finance. The problem, however, is separating productive from unproductive schemes ex ante . > "futures trader" extracting value from the system buying/selling futures has done no "real" work, their profit comes exclusively from making others pay more Great example. In 1958, t…

Right. I used to sit on a trading floor next to a commodities sales desk. If the GP's mental model is that people who are involved in futures are, by definition, involved in speculation, then that is a wrong model: a lot of "real economy" manufacturers hedge their exposure to price changes for their inputs or outputs through the futures market.
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