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Tether Required Recapitalization in May 2022

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Re: Tether Required Recapitalization in May 2022

#181

Post by JumpCrisscross »

makomk wrote: post #142
JumpCrisscross wrote: post #101

Earlier quoted context omitted.

> 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...

That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, wh…

> money market funds are meant to be safe interest bearing investments

Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)

Re: Tether Required Recapitalization in May 2022

#182

Post by thebean11 »

kasey_junk wrote: post #118
thebean11 wrote: post #87

Earlier quoted context omitted.

Or is being 0.1% below peg causing large redemptions? People buying USDT at a discount and redeeming at face value.

Thats why breaking the peg is so bad. Its a visious cycle so both are correct.

No it's not..people buying in order to redeem brings the price closer to the peg, not further away.

Re: Tether Required Recapitalization in May 2022

#183

Post by throwaway0x7E6 »

zionic wrote: post #122
JumpCrisscross wrote: post #50

Earlier quoted context omitted.

> 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…

why stop there? lets ban all activity that doesn't produce tangible goods. the number of parasites, i.e. people who consume tangible goods but don't produce them, is probably higher than the number of people who do

fields, mines and factories. we don't need anything else

Re: Tether Required Recapitalization in May 2022

#184

Post by ClumsyPilot »

jeffdn wrote: post #150
nradov wrote: post #103

Earlier quoted context omitted.

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.

They still have the ability to put nuclear warheads anywhere on the globe, by virtue of their ballistic missile submarines and the nuclear warheads those ballistic missiles carry. The Trident D5 missiles have a range of more than 7,500 miles, and the submarines move. That, in and of itself, is worth a lot -- potentially even more than having a large military.

'They still have the ability to put nuclear warheads anywhere on the globe'

I think most of UK public would consider that a prime minister that plans using nukes in offensive capacity belong in a padded cell.

Re: Tether Required Recapitalization in May 2022

#185

Post by dpierce9 »

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.

“that want to prop up Tether” AND are able to do so.

Crypto risks are highly correlated. The ability to bail out Tether is not a given.

Re: Tether Required Recapitalization in May 2022

#186

Post by nradov »

davidgay wrote: post #153
nradov wrote: post #103

Earlier quoted context omitted.

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.

> ... even though the UK no longer really has a vast military https://worldpopulationreview.com/country-rankings/military-... At #5 world-wide by expenditure this may be a bit over-stated. Or else "vast military" is just a standin for "US or China".

Expenditures don't mean much. Look at purchasing power parity, and actual capabilities. The UK military lost the ability to conduct large-scale independent operations without US support decades ago. Capabilities are minimal in many crucial areas including logistics, aerial refueling, strategic bombing, amphibious lift, ballistic missile defense, and space dominance. Even their nuclear deterrent is completely dependent on the US military-industrial complex.

Re: Tether Required Recapitalization in May 2022

#187

Post by alasdair_ »

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?

>whereas Tether is mostly backed

I've not seem credible proof that Tether has even 50% backing, especially 50% backing in uncorrelated assets (since if the holdings are in other crypto, those holdings will likely all take a dive when Tether does).

Re: Tether Required Recapitalization in May 2022

#188

Post by georgeecollins »

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?

Isn't tether a way to redeem crypto that evades KYC (know your customer)? So if I am shady person getting paid in bitcoin, I can essentially bank in crypto and avoid the volatility of crypto assets without the institution I work with needing to check me out. It tether goes away (and presumably all other stable coins with them) wouldn't the utility of crypto be reduced for anyone avoiding the traditional banking system?

I don't pretend to know. I am asking if that might be the case.

Re: Tether Required Recapitalization in May 2022

#189

Post by zmgsabst »

danachow wrote: post #180
zmgsabst wrote: post #109

Earlier quoted context omitted.

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 — n…

For a USD backed stablecoin what are “tickets” vs what are dollars in your analogy?

Tickets are crypto tokens; beers are USD.

If I start with 1000 tokens I distribute and 1000 dollars in my vault, no matter what you do with the tokens, I can exchange a token for a dollar — because your manipulation of the tokens doesn’t remove dollars from the vault. Those only change when: 1. I receive a new dollar, so issue a token; or 2. I destroy a token and release a dollar.

“Shorting” doesn’t impact that: if you borrow someone’s ticket, then sell it for $0.85, that doesn’t create a new ticket — there is still one ticket and one beer… and one IOU. What happens to the original owner is either the borrower buys a ticket back and returns that (canceling out the IOU) or else that original owner no longer has a ticket — they’re owed the value of a ticket by the borrower.

In the case of tokens/dollars, that value is easy to assess: the person borrowing your stable coin token who fails to return it owes you $1… but that doesn’t come out of my vault, because you don’t own a token. You’ll have to get that $1 by suing the borrower over failure to deliver.

Re: Tether Required Recapitalization in May 2022

#190

Post by anotheracctfo »

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.

Yeah that's the whole point behind fractional banking. The government regulates how much money you need to hold to satisfy demand.

Oh wait, I'm just getting word that Tether isn't a bank. I wonder what ratio you can have if you aren't a bank?

Weird to think about because I thought that it was very illegal to have an unregulated bank. Oh well, I'm sure nothing bad ever happened before bank regulation.

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