Tether minted most USDT to just 2 firms – Alameda and Cumberland • Hacker News Board

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#201

Post by lamontcg » Fri, Aug 13, 2021, 6:13 AM UTC

jqpabc123 wrote: post #196

lamontcg wrote: post #195

Earlier quoted context omitted.

That comment was in the context of the assumption that the backing was real honest-to-god commercial paper being used in the real world. That would take actual tens of billions of dollars to produce that commercial paper. It would also get noticed in the marketplace. That isn't what the commercial paper is. And there isn't $65B in USD in the crypto space anywhere to have produced all that commercial paper in loans. T…

Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. But there is a method to maintain the pin --- cooperative collusion from the exchanges. You are assuming that the exchanges are honest, "free market" promoters like those found in regulated stock and currency markets. You have no way to know or verify this. They are accountable to noone but themselves.

No I'm not assuming their honest. I think the foundation of Tether is a pile of lies. But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. You're assuming counterparties which are deeply financially stupid.

Tether being collateralized loans against crypto actually offers a service that people would buy, and offers a mechanism to defend the pin by having the loans be dollar denominated. I don't assume they're honest, but I do assume they're out for(what they believe to be) their own self-interest.

It also explains why Tether is issued as bitcoin increases and not when it collapses. If Tether was just IOUs the demand for them would boom as bitcoin price fell and people sold bitcoin for Tether at the top. All the printing during the run up to $50k makes sense if it is collateralized crypto, it makes no sense if its IOUs that sops up excess bitcoin selling demand.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#202

Post by headmelted » Fri, Aug 13, 2021, 9:25 AM UTC

vmception wrote: post #161

headmelted wrote: post #157

Earlier quoted context omitted.

If you don’t care about it crashing 95% or more than I guess it’s moot. Although I don’t know why you’d hold something you expected to lose that much of it’s value.

I don't expect it to, and I rarely hold it. When I do hold it the risk is tolerable, as it has weathered much greater crisis of confidence before in a market where most assets have crashed over 90% in value before, while Tether has not. Knowing the answer doesn't make me a proponent of it. If you get caught holding the bag that's what happened. Congress won't step in. A stronger variant will emerge. Nobody wants a re…

"Get out the market if you can't handle that"

I realise this was just addressing the general "you", but I sold what little I had a couple of years ago for this exact reason.

I've only become more convinced it's a house of cards over time - although each to their own, I fully get that I'm one random on the internet and could be proven utterly wrong on this.

I just really wonder what the price is of any of these things? I don't think anyone knows. For anything else the free market is usually what decides the price, but this information undermines confidence even in that. How much of the money coming in was ever real? 50%? 5%? more? less?

On one hand I get that's why it's so volatile and some people have made a fortune on paper, but there's just so much that could go catastrophically wrong at any moment that I just don't have the stomach for. I also get very weary when people say they intend to keep buying and holding forever - that really is placing an all-or-nothing bet on this.

I get that stocks/real estate/whatever can crash too, but at least you have something of intrinsic value in each of those cases.

In any case this was a good back-and-forth and it was nice to hear a perspective on the other side of this without the non-stop acronyms and emojis on Reddit and Twitter :-)

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#203

Post by jqpabc123 » Fri, Aug 13, 2021, 2:13 PM UTC

lamontcg wrote: post #201

jqpabc123 wrote: post #196

Earlier quoted context omitted.

Then it wouldn't be stable and would have already collapsed, and there's no mechanism to maintain the pin. But there is a method to maintain the pin --- cooperative collusion from the exchanges. You are assuming that the exchanges are honest, "free market" promoters like those found in regulated stock and currency markets. You have no way to know or verify this. They are accountable to noone but themselves.

No I'm not assuming their honest. I think the foundation of Tether is a pile of lies. But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing. You're assuming counterparties which are deeply financially stupid. Tether being collateralized loans against crypto actually offers a service that people…

But I do think that the people involved have a visceral enough understanding of their own financial best interest that they wouldn't accept IOUs printed out of literally nothing.

Your thinking here is overly simplistic.

Minting new tethers cost them literally nothing, zero, nada.

What if they are just minting and giving away tethers to select individuals (aka "business associates") with the understanding that they (with their artificially "pegged" value of $1 USD) will be used to buy Bitcoin and inflate the price?

Knowing in advance that the price of Bitcoin will be going up gives them plenty of opportunity to make money.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#204

Post by jqpabc123 » Fri, Aug 13, 2021, 2:25 PM UTC

crazydoggers wrote: post #200

jqpabc123 wrote: post #187

Earlier quoted context omitted.

Still wouldn’t call it a scam. A scam is pretending something is true when it clearly is not --- for financial gain. The scam here is the fact that the exchanges cooperate to keep the price of USDT pegged at $1 USD --- even after Tether itself has admitted they do NOT have $1 USD for each USDT minted and they are NOT obligated to redeem 1 USDT for $1 USD.

What is being pretended as true? The link was published by Tether themselves! It’s not a scam if I can see that they’re backed by commercial paper. I can then make a decision if I want to use the service. The big miss with tether everyone makes is that it’s not an investment. It’s a tool to support liquidity. The average investor uses it then converts it, buys or sells. The companies holding it are the ones providing…

What is being pretended as true?

That 1 USDT is worth $1 USD.

The entire crypto market is a house of cards built around this fantasy.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#205

Post by lupire » Fri, Aug 13, 2021, 3:43 PM UTC

godot wrote: post #46

ceejayoz wrote: post #25

Earlier quoted context omitted.

If a bank offered me 8.88% APY for depositing USD, I'd be pretty suspicious of a catch.

Well, there's no FDIC, so there's no government making sure you get your money back if the organization holding your money shut down. There's a number of companies offering something similar, like Celsius and Blockfi and a few others. Do your own research, and no need to go near it if not comfortable with it. Things could go either way from here on out, perhaps crypto is the future and 8.88% interest for stablecoins…

The exact number "8.88%" kind of screams "scam targetted at Chinese culture".

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#206

Post by lupire » Fri, Aug 13, 2021, 3:44 PM UTC

backprop1993 wrote: post #35

ceejayoz wrote: post #25

Earlier quoted context omitted.

If a bank offered me 8.88% APY for depositing USD, I'd be pretty suspicious of a catch.

There is a catch, but you won't find out what it was until they loose all of the money they are holding. There is probably a 50/50% chance this is just a Ponzi, and if it isn't it is some complicated strategy which can not handle black or even grey swan events, and there is a 5% chance there is a bug in their code that allows for all the funds to be stolen. But in the mean time you can get an 8% return.

"50/50" is pure speculation.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#207

Post by lupire » Fri, Aug 13, 2021, 3:47 PM UTC

sprafa wrote: post #33

jqpabc123 wrote: post #32

Earlier quoted context omitted.

It doesn't end there. Slightly less obvious is the fact that Tether and other "Stable coins" are the only "stability" that exists in the crypto marketplace. More than half of all crypto trades involve stable coins. And exchanges play along (wittingly or not) with the ruse for their own benefit. So if Tether is a scam, so is bitcoin and the entire crypto marketplace.

USDC has been audited and it's solid. I know of people in large banks who are working with USDC and they've vouched for it being 100% ok.

The measure "100%" OK does not exist in legitimate finance.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#208

Post by godot » Fri, Aug 13, 2021, 4:31 PM UTC

lupire wrote: post #205

godot wrote: post #46

Earlier quoted context omitted.

Well, there's no FDIC, so there's no government making sure you get your money back if the organization holding your money shut down. There's a number of companies offering something similar, like Celsius and Blockfi and a few others. Do your own research, and no need to go near it if not comfortable with it. Things could go either way from here on out, perhaps crypto is the future and 8.88% interest for stablecoins…

The exact number "8.88%" kind of screams "scam targetted at Chinese culture".

That number varies, it's a weekly rate. I've been with Celsius for a while now and I know USDC interest rates used to be 10+% not too long ago (a couple months maybe?). Also, that's just their US rate for USDC and a few other assets. BTC interest rate is 6.2% right now. Internationally, the USDC interest rate is 11.21% with rewards in CEL.

Celsius is a British company and is also HQ'd in the US now.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#209

Post by themagician » Fri, Aug 13, 2021, 7:44 PM UTC

crazydoggers wrote: post #200

jqpabc123 wrote: post #187

Earlier quoted context omitted.

Still wouldn’t call it a scam. A scam is pretending something is true when it clearly is not --- for financial gain. The scam here is the fact that the exchanges cooperate to keep the price of USDT pegged at $1 USD --- even after Tether itself has admitted they do NOT have $1 USD for each USDT minted and they are NOT obligated to redeem 1 USDT for $1 USD.

What is being pretended as true? The link was published by Tether themselves! It’s not a scam if I can see that they’re backed by commercial paper. I can then make a decision if I want to use the service. The big miss with tether everyone makes is that it’s not an investment. It’s a tool to support liquidity. The average investor uses it then converts it, buys or sells. The companies holding it are the ones providing…

It's people that are holding it, on platforms like Nexo, so they can get their 12% interest.

Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. It's the same way that pyramid schemes call themselves "multi-level marketing" companies or say that they are "sales driven".

Be careful friend.

Re: Tether minted most USDT to just 2 firms – Alameda and Cumberland

#210

Post by crazydoggers » Fri, Aug 20, 2021, 7:15 AM UTC

themagician wrote: post #209

crazydoggers wrote: post #200

Earlier quoted context omitted.

What is being pretended as true? The link was published by Tether themselves! It’s not a scam if I can see that they’re backed by commercial paper. I can then make a decision if I want to use the service. The big miss with tether everyone makes is that it’s not an investment. It’s a tool to support liquidity. The average investor uses it then converts it, buys or sells. The companies holding it are the ones providing…

It's people that are holding it, on platforms like Nexo, so they can get their 12% interest. Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam. It's the same way that pyramid schemes call themselves "multi-level marketing" companies or say that they are "sales driven". Be careful friend.

> Whenever a crypto company uses the word "liquidity" that's a red flag that it's likely some kind of a scam.

That’s really not the case. If you deal with investments on any real scale the utility of liquidity becomes very clear.

If for any reason I decide I need to move a large sum of money (let’s say 100k), and god forbid I need to do that internationally, you’re going to have to wait. (too bad if it’s the weekend) Meaning your cash isn’t as liquid as it could be.

Tether and other stable coins primarily make moving sums of money within minutes internationally possible. If I see an investment opportunity and want to act, waiting on a wire might be a no go.

The vast majority of Tether and stable coin use is for that. People holding tether as some kind of investment is practically nil (it’s a horrible horrible investment even if it’s backing was physical dollar bills in a vault)

The reason services like Nexo provide 12% interest is not to hold, it’s to facilitate trade and moving in and out. If I want to have cash available for trading, moving it as USD is very hard. Moving it as stable coin is simply and allows trading quickly. The 12% is a bonus/hedge so you don’t feel like you have to immediately convert your liquid positions (dealing with taxes etc). With the interest, one can keep some stable coin on hand for trading and minimize losses. With Nexo, people are also taking out collateral loans. If you take that as USD, then tour waiting on banks to use it. Take it as stable coin you can use it immediately. The 12% also offsets the loan interest so you don’t need to pay it back immediately.

So maybe tether’s strength as a stable coin can be scrutinized, it could be more arable with better backing… but again the concept isn’t a scam, and certainly nothing to do with pyramid schemes etc.

Most people who talk about tether as a scam (or other stable coins) have no experience in using it.