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Tether Required Recapitalization in May 2022

kalzumeus.com

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Re: Tether Required Recapitalization in May 2022

#201

Post by throwaway92394 »

Tao332 wrote: post #99
lupire wrote: post #68

Earlier quoted context omitted.

People need tether to avoid going all the way off chain when they sell.

Genuinely curious: why do people need that?

De-fi doesn't _technically_ need it but it's highly preferable.

Let's say you want to actively trade ETH against the USD. If you think ETH will go down the you want to sell it. Now if it's in a non-custodial wallet that you control, you would need to send it to an exchange, sell it, then hold USD on the exchange (were you have no control of it and they can seize it for fraud investigations, etc. - basically your money is held by a 3rd party).

Instead you can "sell" your ETH by trading it for a stablecoin pegged to the dollar. This way the only risk is the contract for the trade (which can be publically audited) and your money stays in your control.

Or if you wanted to accept cryptocurrency as payment but still only wanted the USD because of it's stability - you could accept that (this isn't very common as gas fees are rather high).

tl;dr - With exchanges a 3rd party has your money and a IOU. Coinbase has already said user crypto could be at risk in the case of bankrupcy. De-Fi removes this risk while still allowing you to trade against the USD.

disclaimer - Whether you want to do this might be a different question, just giving the reason for wanting a stablecoin.

edit: For those saying taxes - the US IRS still counts this as a sale and it's still taxed the same as an exchange trade - other countries might differ. Given the KYC/AML requirements and lack of general public knowledge about anonymity of crypto - I think sooner then later we'll see a crackdown.

Re: Tether Required Recapitalization in May 2022

#202

Post by jfk13 »

PKop wrote: post #59
lacker wrote: post #54

Earlier quoted context omitted.

It's such a weird "bet", though. Pay $1, get back $1 if you win, get back $0 if you lose.

If you just sit in Tether sure, but the ecosystem of stablecoins gives you access to DeFi yield opportunities with much better "passive" interest than bank deposits or treasuries, so the bet is a little more sophisticated than dollar for dollar.

> ecosystem of stablecoins

"stable" coins... yes, that's been an interesting ecosystem lately.

> access to DeFi yield opportunities with much better "passive" interest than bank deposits or treasuries

Not to mention much greater risk of losing everything.

Re: Tether Required Recapitalization in May 2022

#203

Post by retcon »

zionic wrote: post #124
patio11 wrote: post #24

Earlier quoted context omitted.

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.

On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable". I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".

This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.

Re: Tether Required Recapitalization in May 2022

#204

Post by Grimburger »

patio11 wrote: post #166
Grimburger wrote: post #132

Earlier quoted context omitted.

1:1

Given that the other crypto people offering “keep me honest” bets are offering 5:1, 10:1, and 25:1, on better terms, no, that’s not interesting, but I’ll write you a free option to laugh about me over the Internet if it turns you you’re right.

It's not the money, it's the principle. I'm over listening to Tether stuff after all these years on this website, personally don't think much of the people behind finex but am more than certain the peg will hold up just fine this decade.

You're American, I'm Australian, there really shouldn't be any problem here with finding a 3rd party intermediary, though I'm not sure about US laws on these sorts of p2p wagers.

You truly want to get $125,000 in return for my $5000 bet on tether maintaining the peg? Surely that says something about your faith in them asking 25:1 that they go under in the next year? I'm sort of tempted at the offer of 1/5th of that, as unfair as it seems.

Happy to do it if we each donate to the charity of the other's choice? 1:1? You can keep the tax benefit.

Re: Tether Required Recapitalization in May 2022

#205

Post by JumpCrisscross »

nradov wrote: post #103
lkrubner wrote: post #83

Earlier quoted context omitted.

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.

> the UK no longer really has a vast military

Beyond the nukes another comment mentioned, the UK is also a permanent UN Security Council member, a founding NATO member and a productive member of the Five Eyes and AUKUS [1]. And it still has the world's fifth most powerful navy [2].

> substantial colonial possessions

No, but they have overseas military installations in Gibraltar and on Cyprus, the Falkland Islands and Diego Garcia. Smaller installations at Ascension Island, in Singapore and Brunei "provide important staging posts and logistical support facilities for British and allied forces passing nearby" [3]. In terms of practical force projection radius, they're in a very small club of nations.

[1] https://en.wikipedia.org/wiki/British_Armed_Forces#cite_note...

[2] https://worldpopulationreview.com/country-rankings/largest-n...

[3] https://www.europarl.europa.eu/meetdocs/2004_2009/documents/...

Re: Tether Required Recapitalization in May 2022

#206

Post by retcon »

SilasX wrote: post #155
zionic wrote: post #124

Earlier quoted context omitted.

On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable". I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".

That’s the point. Dai goes below and above $1. Tether has stuck below $1. That’s an important difference. Longer comment: https://news.ycombinator.com/item?id=31449400

This might be fine in a open regulated market. See my above comment.

Re: Tether Required Recapitalization in May 2022

#207

Post by dogecoinbase »

TameAntelope wrote: post #29

Is this what the earlier "hash drop" tweet [0] was about? [0] https://twitter.com/patio11/status/1527616238586716160

Hah, good catch. Kind of can't believe he's still doing that after the last time [0]

0: The tweet: https://twitter.com/patio11/status/1241551327743770624

The, ah, assertion: https://twitter.com/patio11/status/1241553311024603140

> I am materially wrong about the most consequential thing I've had to have a view on in 15 years. You should probably degrade your estimate of my ability to think through complex problems.

The prediction: https://twitter.com/patio11/status/1252584289486565377

which is a link to https://www.kalzumeus.com/2020/04/21/japan-coronavirus/ , which states, on April 4 2020:

> Japan will face a national health crisis within a month.

Of course, he then edited it with a framing in which he claims:

> The core result was correct.

> ...

> This prediction was correct.

So not only was he wrong, he refuses to acknowledge or understand how and why he was wrong. And continues to tweet hashes as though we should give anything he says any merit whatsoever.

Re: Tether Required Recapitalization in May 2022

#208

Post by DebtDeflation »

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.

>whether Tether is fully collateralized ultimately doesn't matter

There's a nuance here.

If Tether IS full collateralized, then it does not matter since a run on Tether is by definition impossible.

If Tether IS NOT fully collateralized then it may or may not matter depending on the size of the run and the ability of Bitfinex etc. to contribute capital.

Re: Tether Required Recapitalization in May 2022

#209

Post by retcon »

Grimburger wrote: post #110
patio11 wrote: post #24

Earlier quoted context omitted.

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.

Quoted post unavailable.

> I will bet you $5,000 that [...]

Sure, buddy...

Course in a good market you'd lay that risk on the order book not come fishing for suckers here...

Re: Tether Required Recapitalization in May 2022

#210

Post by anm89 »

I have nothing but respect for Patrick, and he has done great investigative Journalism (or at least curation of other peoples journalism) but I still feel like he is cherry picking facts (that there certainly is some shady stuff going on around Tether) here to support a predetermined conclusion(Tether is bad because crypto is bad because crypto's primary use case is money laundering) which seems to be an undercurrent of all of his writing on the topic.

If we held the industry that Patrick works in to the standards that Patrick wants to hold the crypto world to we would call all of them "scams". Basically every international bank has a long history of money laundering. Every single large bank is doing much more complicated and riskier things with their balance sheet than Tether.

I don't think they are scams but I don't think Tether is either.

In many ways this is just the crypto world leveling down to the level of sketchiness that the average large bank exists at. Which is really not a defense, I dislike those banks and I dislike and distrust Tether.

But I don't think the risks of some kind crypto solvency contagion event are even as high as what's going on in the traditional banking world right now and that is given that traditional banks balance sheets at least on the surface are in the best shape they've been in in a decade.

Any way tldr: I think Patrick is technically correct but framing the large picture according to a big double standard.

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