Are pixie fairies behind Bitcoin's latest bubble? • Hacker News Board

Re: Are pixie fairies behind Bitcoin's latest bubble?

#21

Post by howlgarnish » Mon, Nov 23, 2020, 1:44 AM UTC

rabf wrote: post #17

zaroth wrote: post #9

Earlier quoted context omitted.

I have the same question. The only answer I can think of, is people that want to get out of Bitcoin but aren’t able to sell for real USD because of AML / tax purposes. Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally. It still doesn’t really explain who is holding almost $20 billion of Tether though.

One large use for Tether is transferring value either for abitrage or to buy assets on another exchange not available on your current exchange. Sending real USD via the banking system could take weeks whereas sending Tether will take minutes. Also if Tether is trading below $1, Tether (the company) could buy them back and burn them for profit, assuming of course that each token is backed by one real USD.

But they are not backed by real USD, and Tether themselves have admitted as much: their FAQ now states simply that it's backed up by "Tether's reserves", which apparently consist of other cryptocurrencies.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#22

Post by howlgarnish » Mon, Nov 23, 2020, 1:46 AM UTC

olalonde wrote: post #20

> And no tethers, to anyone’s knowledge, have ever been redeemed—except for when Tether burned 500 million tethers in October 2018, following the seizure of $850 million from its payment processor Crypto Capital. They can be redeemed on https://tether.to but the minimum is 100K$ if I recall correctly.

Last I checked there's no actual evidence anybody has ever managed to redeem USDT for cash.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#23

Post by raziel2701 » Mon, Nov 23, 2020, 1:51 AM UTC

seppel wrote: post #2

I don't really get it (as always if tether is involved). If someone is printing tether to buy bitcoin, then who is selling bitcoin for tether and keeps the tether? I mean, if I had substantial bitcoin, I'd not sell it for tether. Maybe I'd use tether as some intermediate currency, but in the end I'd either buy stocks or real estate or yachts. Or I would keep the BTC. But I would never sell BTC and keep tether. Who do…

My understanding is that tether is printed (by Tether the company) and used to buy btc at just a couple exchanges (one is bitfinex, I forget the others) who are in on it.

This initial purchase drives btc-usdt up, arbitrage bots then buy btc-usd so that it matches btc-usdt. The media and people notice the price increase and jump into btc-usd because it's going up, narratives are created to justify why the price went up (paypal, fidelity, rich investor), btc-usd further increases, and now Tether (the company) sells its btc for dollars, so that they make a profit, and also to cover whomever else wants to redeem tether for usd, thus maintaining the illusion that tether is fully backed by dollars. Tether then decides to start the cycle again after a certain amount of time.

So, if the above is true then yes this is a scam and there's gonna be a lot of bagholders if/when tether is kaput (they are under investigation by NY AG).

Note, that since March 2020 Tether has printed $13 billion in tether. Is this really a result of organic growth/demand? (https://imgur.com/i78BTXg)

Most of the tether is in storage at the exchanges: https://i.imgur.com/eIKDzJl.png

So it looks to me that they know it's worthless.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#24

Post by rabf » Mon, Nov 23, 2020, 1:52 AM UTC

howlgarnish wrote: post #21

rabf wrote: post #17

Earlier quoted context omitted.

One large use for Tether is transferring value either for abitrage or to buy assets on another exchange not available on your current exchange. Sending real USD via the banking system could take weeks whereas sending Tether will take minutes. Also if Tether is trading below $1, Tether (the company) could buy them back and burn them for profit, assuming of course that each token is backed by one real USD.

But they are not backed by real USD, and Tether themselves have admitted as much: their FAQ now states simply that it's backed up by "Tether's reserves", which apparently consist of other cryptocurrencies.

Please link your sources, their reserves as I understand may in some part consist of unspecified collateral, even if they are crypto which I seriously doubt due to its volatility the fact remains that Tether is trusted enough to be supported by the majority of major exchanges. The imminent demise of tether has been predicted for many years now. You can short tether at Kraken or choose to use one of the many other USD stable coins.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#25

Post by raziel2701 » Mon, Nov 23, 2020, 1:57 AM UTC

seppel wrote: post #10

amycastor wrote: post #6

Earlier quoted context omitted.

Print tether, buy bitcoin, sell bitcoin for real money. Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.

> Print tether, buy bitcoin, sell bitcoin for real money. But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether? > Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars. But day traders close their positions at the end of the day (or at leas…

A number of exchanges like bitfinex are in on the scam and are just holding the tether in cold storage: https://i.imgur.com/eIKDzJl.png

The exchanges will make money if btc goes up and more people buy it through them. By accepting tether for bitcoin they help pump up the price. Holding useless tether is fine as long as more retail comes in to them for bitcoin with USD.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#26

Post by marcell » Mon, Nov 23, 2020, 1:58 AM UTC

It's not really important to withdraw USDT directly into my bank account. I can simply move USDT to Binance, convert it to USDC, and then withdraw USDC using my Coinbase account.

USDC and USDT trade at basically 1:1, as you can see here: https://www.binance.com/en/trade/USDC_USDT

FUD around Tether (like this article) is noise.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#27

Post by raziel2701 » Mon, Nov 23, 2020, 2:01 AM UTC

paulgb wrote: post #7

amycastor wrote: post #6

Earlier quoted context omitted.

Print tether, buy bitcoin, sell bitcoin for real money. Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.

This doesn't create any net demand for Bitcoin, though, right? It's in one end and out the other. Or is the theory that Tether is actually backed by Bitcoin, in a sort of circular way that is sustainable as long as the Bitcoin price goes up but would unravel disastrously if the price were to come down?

Print tether for bitcoin, so the btc-usdT price goes up. Arbitrage bots buy btc in dollars so that btc-usd reaches parity with btc-usdt. The media and people notice that btc has gone up, euphoria is borne, they jump in, further driving the price up, narratives like paypal are used to explain the pump.

The people that printed tether now sell their btc for a profit and can now cover their tether obligations to keep the illusion going that tether is 1:1 backed with usd. They can now repeat the tether printing cycle.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#28

Post by alexmingoia » Mon, Nov 23, 2020, 2:03 AM UTC

Ah yes, Tether is bad because it’s printed money used to push up asset prices. Good thing none of the world’s currencies are printed money.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#29

Post by Nursie » Mon, Nov 23, 2020, 2:08 AM UTC

alexmingoia wrote: post #28

Ah yes, Tether is bad because it’s printed money used to push up asset prices. Good thing none of the world’s currencies are printed money.

The point it it's not supposed to be. You know, because people wanted to opt out of that sort of system, where governments can manipulate money supply, into a peer-to-peer system that was free of manipulation and that sort of money printing?

Instead they've opted into a system where a small group operate the printer for their own ends, with no oversight.

Re: Are pixie fairies behind Bitcoin's latest bubble?

#30

Post by smabie » Mon, Nov 23, 2020, 2:09 AM UTC

seppel wrote: post #10

amycastor wrote: post #6

Earlier quoted context omitted.

Print tether, buy bitcoin, sell bitcoin for real money. Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.

> Print tether, buy bitcoin, sell bitcoin for real money. But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether? > Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars. But day traders close their positions at the end of the day (or at leas…

What, no? Tether is used as collateral for crypto futures positions. No day trader is buying spot, they are buying swaps (perp futures) or regular futures. And it's better to hold the collateral in tether or some other stable coin than in btc so you don't have to hedge as much exposure by writing futures.