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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#201

Post by ineptech »

MockObject wrote: post #175
ineptech wrote: post #154

Someone help me understand this. All you need for a stable stablecoin is to save every dollar put in to it. The people behind Tether sell tethers for $1, they save all of those dollars, and whenever the price of Tethers drops to $0.99, they buy tethers until the price is back up to $1. As long as they never spend anything from the reserve, this can't fail no matter how unpopular the currency is - they can back the cu…

> whenever the price of Tethers drops to $0.99 If the Tether is pegged to the USD, who would ever sell one for $0.99?

It's my understanding that the people behind Tether buy at some price slightly below a dollar, to allow some "play" (slight volatility) in the Tether market and to incentivize others to hold Tethers and provide liquidity in exchange for arbitrage. But since you bring it up, I don't know if that's true, I could be misremembering that.

I don't think it's super important to my question though.

Re: Tether Withdrawals Top $10B

#202

Post by lampshades »

TomSwirly wrote: post #101
askmike wrote: post #92

Earlier quoted context omitted.

USDT is the fuel that powers a lot the crypto ecosystem. Good luck trying to move USD around between different places in the crypto ecosystem (especially outside office hours). While possible it's complicated, slow and has terrible uptime. The biggest crypto markets in the world are quoted in tether.

Your answer is not false, but does not explain why someone would hold Tether instead of using it as an intermediate vehicle.

People hold Tether because it is away from the eyes of governments.

Re: Tether Withdrawals Top $10B

#203

Post by anm89 »

alasdair_ wrote: post #133
anm89 wrote: post #99

Earlier quoted context omitted.

And I assume you are substantially short these markets then given that you know this for a fact and it's trivially easy to become wealthy one you know this for a fact? I don't even disagree that there are potentially major issues here but stating this as a fact is just silly.

I wonder how easy it is to actually short Tether assuming the likely scenario where USDT goes the way of UST and trading is effectively halted. How does one cover their short when no trading is possible? In a regular exchange, there are rules about how to handle this but I'm not clear how it happens with crypto.

if tether crashes so will every other crypto. Just go short coinbase or another crypto proxy if you want to stay in your brokerage account.

Re: Tether Withdrawals Top $10B

#204

Post by pg_bot »

Havoc wrote: post #130

More importantly how is 70B still in it… Not opposed to crypto in general but tether always struck me as rather questionable even pre Luna Tera collapse

If you look at the timeline for tether it seems even more suspect. In late august of 2020 there are 10 billion tethers in circulation. They supposedly grew 8x in less than 2 years while being under investigation for bank fraud and a litany of other problems. They've never had an audit of their reserves, and the public behavior of their executives does not inspire confidence.

Here's how this plays out in the next few months. Tether had a first mover advantage, but now there are other competitors that are functionally equivalent but have better guarantees of their asset backing. So now anyone who holds tethers should prefer holding a purely superior product. Why would anyone take any additional risk without upside? So they now enter a death spiral, since there is no reason for them to exist. The best possible outcome is that all of their assets are liquidated and somehow everyone is paid in full. The more likely outcome is that we find out the extent of the fraud when they halt redemption of tethers to their customers.

Re: Tether Withdrawals Top $10B

#205

Post by xwolfi »

louloulou wrote: post #75

Quoted post unavailable.

Because shorting cost as much money as the duration for which the market stays irrational.

I think Tether will collapse, I m not gonna pay you a premium for 5 years barely sleeping before finally the entire crypto space become insolvent. I d rather just tell you to help me convince our representatives to regulate.

Re: Tether Withdrawals Top $10B

#206

Post by malfist »

swamp40 wrote: post #185

Eventually, the US will figure this out and make a USD crypto that will be used as THE stablecoin. It seems obvious to me that a stablecoin needs a solid governmental backing, since there is no profit in it and you need unlimited deep pockets in case of a run. The advantage is then that the USD remains the world's premier reserve currency, even into the digital age.

The US government already backs a stablecoin. It's called the dollar.

Re: Tether Withdrawals Top $10B

#207

Post by Majromax »

lupire wrote: post #160
droopyEyelids wrote: post #159

Earlier quoted context omitted.

Someone buys $10 tethers for $10 worth of bitcoin, then bitcoin loses value, then the original buyer wants to redeem 10 tether for $10 USD.

That's no problem at all. The person who bought the Bitcoin / sold the Tether loses , but that doesn't affect USDT.

Unless Tether itself is the entity on the other end of that transaction. From Tether's reserves report, it has $82.42bn of reserves against $82.26bn in liabilities ($82.19bn of which are the tokens), for a net equity position of about $160m. However, its reserves include $4.9bn of "other investments (including digital tokens)".

Suppose that's all bitcoin, which is valued at "cost less impairment" (i.e. the lowest price bitcoin reaches since the purchase), and bitcoin drops by 10%. That would wipe out about $490mn of equity, putting Tether underwater. The same could happen with a similar drawdown on $3.7bn in "corporate bonds, funds and precious metals," which are marked to market.

Re: Tether Withdrawals Top $10B

#208

Post by bpodgursky »

ProjectArcturis wrote: post #198
swamp40 wrote: post #185

Eventually, the US will figure this out and make a USD crypto that will be used as THE stablecoin. It seems obvious to me that a stablecoin needs a solid governmental backing, since there is no profit in it and you need unlimited deep pockets in case of a run. The advantage is then that the USD remains the world's premier reserve currency, even into the digital age.

What could you do with a USD stablecoin that you can't do with a regular old dollar? Other than let everyone see your transactions and account balances.

Exchange it for another coin in less than 3-5 business days

Re: Tether Withdrawals Top $10B

#209

Post by xwolfi »

alasdair_ wrote: post #134
louloulou wrote: post #75

Quoted post unavailable.

How, exactly? I know it seems simple to short Tether, but in practice there doesn't seem to be a safe way to do it such that if the value plummets to almost zero (and takes much of the crypto ecosystem with it, including some exchanges) you could actually guarantee you'd get paid in US dollars at the end of it all without a long lockup period. You could do something like buy Coinbase puts or something, but there is s…

In a short play you're paid immediately in USD. You sold the minute you acquired tether and now all you have is a Tether-denominated liability to pay back, which you assume will cost you 0 since you ll be able to get all those tether back at much less than you sold the initial loan.

Ofc, for servicing this liability in tether, you have to pay interests in USD, as long as the market stays irrational.

You need to find a large sleepy holder of Tether, fully bullish, who wants to make some easy premium money on your back while you make riskier short term downward bets on their back. A lawyer, a contract, a repayment schedule and hop, the matter is settled. We do that everyday in my investment bank in Hong Kong, with pension fund partners holding large inventories of stocks for their own clients and who dont know what to do with all that sleeping inventory.

You can contact us or our competitors if you have above 200k in cash to invest in the short and we'll find you counterparties for a fee. If you plan to short regularly a few millions a day, DM me.

Ofc, we d never touch a Tether short, we re not as insane as the crypto market. I d advise you to only short on short term bets, with full transparency with your counterparty so you avoid any sort of surprise. You should also pay a bit to hedge a catastrophic reversal, we have entire desks of people for that, so you can pay a bank for that service.

Re: Tether Withdrawals Top $10B

#210

Post by Bud »

ineptech wrote: post #154

Someone help me understand this. All you need for a stable stablecoin is to save every dollar put in to it. The people behind Tether sell tethers for $1, they save all of those dollars, and whenever the price of Tethers drops to $0.99, they buy tethers until the price is back up to $1. As long as they never spend anything from the reserve, this can't fail no matter how unpopular the currency is - they can back the cu…

The best rebuttal to this is the following quote from the article in question, which shows that not only is Tether NOT fully backed by cash, a lot of their supposed collateral sounds quite shady and they are also not letting anyone else audit what they are doing:

"Regulators and economists have long questioned whether Tether has enough assets in its reserves to justify its stablecoin’s purported peg to the dollar.

“USDT is, quite simply, fully backed by collateral,” Tether said in a statement Monday.

“It has maintained its peg because every USDT is redeemable for dollars via Tether, and as such any time the price goes below $1 investors can earn a profit by buying USDT for a discount and redeeming it with Tether.”

The company previously claimed tether was backed one-to-one by dollars in a bank account, but subsequently revealed it was using other assets including commercial paper — short-term corporate debt — and even digital tokens as collateral after a settlement with the New York attorney general.

Last week, Tether said it reduced the amount of commercial paper it owns and increased its holdings of U.S. Treasury bills. For the first time, the British Virgin Islands-based firm said it also holds some foreign government debt. Tether declined to comment further on the source of its funds, but said it is pursuing a more thorough audit of its reserves."

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