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Thats breaking the peg though! Tether says its 1 to 1 with the pegged fiat currency. It doesn’t say its .98-1.01. There are pegs that do this sort of range based pegging but Tether is not claiming that.
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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...
The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.
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> 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 This is true for every pile of toxic crap that's ever been financially engineered. The problem is the entangled financial health of the backer (in this case, Bitfinex and other crypto exchanges) with the backee (Tether). If creditors…
>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…
If I am a farmer and I want to lock in a price for my crops right now, who am I supposed to sell that future to?
Sure, a small percentage of the time, I can sell to someone who knows that they need my crops on exactly that date of delivery, but a lot of the time there simply won't be anyone who knows at that exact moment that they need exactly what I am selling.
Having traders in the system means that I always have a buyer when I want to sell (and similarly when a user of the item wants to buy).
>They love to use the "making the market more efficient" and "price discovery" BS, but I believe they know what they're doing is solely about enriching themselves.
So what? If, through the trader solely enriching themselves, we get something useful from it, why does their motivation matter?
A baker bakes solely to enrich themselves as well - this is the nature of capitalism. The end result is what I care about.
> 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.
This non-linear relationship is literally programmatically hard coded in the case of money markets such as curve.fi
Currently the largest money market pool (https://curve.fi/3pool) it has a 5:1 USDT:USDC imbalance. In dollar amounts, the pool contains $1b USDT and $0.2b USDC.
This 5:1 imbalance only gives way to a 0.1% de-pegg.
In the past the balance used to be perfectly 1:1 USDT:USDC. The fact that a multi-million dollar arbitrage opportunity still exist is worrisome.
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.
https://www.cnbc.com/2022/05/02/greenwich-mansion-for-sale-w...
Legally though, the transaction still has to be recorded and taxed in USD.
Your casino chips are fine until the casino blows up https://en.wikipedia.org/wiki/Harvey%27s_Resort_Hotel_bombin...
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> 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 This is true for every pile of toxic crap that's ever been financially engineered. The problem is the entangled financial health of the backer (in this case, Bitfinex and other crypto exchanges) with the backee (Tether). If creditors…
>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…
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>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…
For example, bank prop trading bans went into effect but really how does one differentiate prop from “customer facilitation” or heding. Its a sliding scale of grays.
So instead of Citi having a trader going “I think I’ll buy some S&P calls today and bet on the index” he instead can only do that if 1) a client wants to sell some & he takes the other side, or 2) there is some other exposures accumulated do to customer facilitation such that he can justify buying S&P as a hedge.
The same risk is being put on, but for different reasons. Or you could say the only thing that is changed is who has initiated the risk - customer, instead of bank.
Futures of course exist for very good, historical reasons. How do people think their home heating oil company offers you fixed price contracts for the season, etc?
Reducing the number of players in a market usually only increases volatility, transaction costs and illiquidity.
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.
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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.
That, in and of itself, is worth a lot -- potentially even more than having a large military.