Bitcoin is the real stable coin. Everything else is fluctuating in price discovery until hyperbitcoinization completes.
1 BTC = 1 BTC, just like 1 Monopoly dollar = 1 Monopoly dollar. Too bad I can't trade either for most goods/services/taxes.
Tether Required Recapitalization in May 2022
21–30 of 336 posts
Re: Tether Required Recapitalization in May 2022
#22> 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.
Anything less than 1.00 might as well be 0.
Re: Tether Required Recapitalization in May 2022
#23What 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?
When a market panics and people “sell” their crypto on most exchanges, what they are actually doing is trading them for tethers. If the tether then collapses they are entirely wiped out.
Re: Tether Required Recapitalization in May 2022
#24> 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.
Re: Tether Required Recapitalization in May 2022
#25> 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.
Eh, that just comes down to the arbitrary definition of how much of a discount you consider "losing the peg".
Sidestepping the definitional issue, I certainly worry when a pegged asset trades at a persistent discount, even a small one, when it didn't before. A stablecoin should generally trade at a premium just as often as it trades at a discount. When one goes long periods without ever being above, that is a strong signal. And when everyone panics, that's exactly when it's too late to get out. You have to beat the rush.
Remember, even up until the morning of May 9th, the day of the real TerraUSD depeg, people made that exact objection. "Oh come, on being 0.1% off is normal for stablecoin." Indeed it is -- but not in a persistent fashion!
Disclaimer: I closed out my Tether longs last week.
Re: Tether Required Recapitalization in May 2022
#26What 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?
Tether is the de facto dollar. Hopefully most exchanges move off of it or at least have alternatives. I’m also wondering if it wouldn’t be the kind of catastrophe people were saying before
Re: Tether Required Recapitalization in May 2022
#27I 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.
Re: Tether Required Recapitalization in May 2022
#28What 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?
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 friction of going from actual-Dollar to Bitcoin increases.
Tether is effectively behaving as a crypto-clearing house with their pseudo-dollar.
Re: Tether Required Recapitalization in May 2022
#29Is this what the earlier "hash drop" tweet [0] was about?
Re: Tether Required Recapitalization in May 2022
#30The 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 long as there are well-capitalized parties that want to prop up Tether
That's been my personal conclusion as well but it led me to the next question of what # is the breaking point for these well-capitalized parties?
I tried looking at the size of other well-known collapses like Enron, LTCM, Lehman Bros, etc. LB reportedly had $700B in assets and liabilities before the underlying asset devaluation precipitated their cave in. Tether survived the recent de-peg due to trading shops like Alameda absorbing the free 1-5% with their cash flow, which I believe is also responsible for the recent 11% drawdown in Market Cap (I assume due to redemptions). That said I'm not really experienced enough to know how these backroom overnight liquidity issues get resolved.
My hunch is given the true global reach of the crypto market Tether could easily get to $nnnB or $nT before we experience a black swan event that results in a liquidity crisis. Assuming they survive these short-term recessionary pressures, my long-term prediction is we're just setting ourselves up for another roaring '20s again, with crypto eventually learning all the same fundamental financial lessons we did back then.