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$1M bounty for details on Tether’s backing

hindenburgresearch.com

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Re: $1M bounty for details on Tether’s backing

#221

Post by 323 »

hmate9 wrote: post #48
paulpauper wrote: post #30

There has been nothing but Tether doom and gloom since 2017 and yet here it is still at 1.0000 If anyone thinks this will drop, now is the opportunity to short, I suppose.

Shorting Tether is a great play. Either everyone loses faith and nobody trusts them anymore or.... it stays at $1. You are not going to lose. You just have to pay funding fees for your short which on FTX is around 4% a year. Do you think there is a great chance that Tether is a massive scam and will find its doom within the next 25 years? My answer to that is yes.

> Shorting Tether is a great play. ... You just have to pay funding fees for your short which on FTX is around 4% a year.

That's what people shorting the Russian ruble said in 2014. Then funding spiked to 17% a year and a lot of speculators got burned.

Re: $1M bounty for details on Tether’s backing

#222

Post by paulpan »

PKop wrote: post #138
omgwtfbyobbq wrote: post #28

Earlier quoted context omitted.

Why do you think it would tank the equity market?

It's all tied together. If one asset class is crashing people sell others to grab cash. Another way, according to Janet Yellen, that Tether and other stables can destabalize markets, is that they have large portions of reserves in corporate debt, a crisis in these coins would cause a fire sale of billions of corporate debt they hold, itself probably cascading into all risk markets.

+1 and my thought exactly. Spillover effect could be fairly significant given that more investors now hold crypto.

Re: $1M bounty for details on Tether’s backing

#223

Post by arcticbull »

NelsonMinar wrote: post #218

For anyone looking for context on Tether's finances: "With estimated leverage of 383-to-1, Tether would be unable to honour all its tokens after losses of just 0.26%—a safety cushion that regulators would never allow at a bank." https://www.economist.com/leaders/2021/08/07/why-regulators-...

Banks usually allow depositors to withdraw.

Tether's terms and conditions state that they:

(1) do not ever have to honor redemptions for US persons

(2) do not have to honor redemptions except to authorized customers

(3) only they decide who authorized customers are

(4) even for them they can delay withdrawals indefinitely, arbitrarily

(5) and even then they can offer whatever they happen to have in reserves in lieu

So there's bigger issues than their composition, like the fact they can just sail off and keep the backing, and they don't have to honor withdrawals for anyone ever.

You give them $1 (maybe, someone does, probably, honestly its not clear) and you get 1 USDT. That's it. Hope its worth $1 to you because you're not entitled to ever see that dollar again. All this hand wringing over backing doesn't mean much if you're not entitled to it you know?

[edit] You don't really need a $1M bounty this is all in their T&Cs, it's just that it is difficult to get a man to understand something when his salary depends upon his not understanding it.

[1] tether.to/legal

Re: $1M bounty for details on Tether’s backing

#224

Post by jfrunyon »

Dma54rhs wrote: post #93
perl4ever wrote: post #35

Earlier quoted context omitted.

When people say "hey, Tether is no worse than the existing financial system" I wonder if they don't understand the difference between holding a fraction of deposited money as reserves, and only having a fraction of deposited money as assets, period. As far as I know, when the latter happens in a real bank, they get shut down, shareholders lose their money, and only the FDIC saves the depositors. Just because that's t…

I've never held any coin but why can't it be true? The money is imaginary anyway and while you can talk about backing dollars with tanks and bomb at the end of the day is there are believers there is a market snd one market can outlive another. Saving depositors in regular banking is pure belief as well.

Why can't what be true? Do you truly think that Monopoly money is as valuable as real money backed by all the money, power, influence, and force of a major world government?

Re: $1M bounty for details on Tether’s backing

#225

Post by jfrunyon »

dsjegkl wrote: post #188
perl4ever wrote: post #35

Earlier quoted context omitted.

When people say "hey, Tether is no worse than the existing financial system" I wonder if they don't understand the difference between holding a fraction of deposited money as reserves, and only having a fraction of deposited money as assets, period. As far as I know, when the latter happens in a real bank, they get shut down, shareholders lose their money, and only the FDIC saves the depositors. Just because that's t…

>...holding a fraction of deposited money as reserves... US banks haven't had reserve requirements since March 2020. https://www.federalreserve.gov/monetarypolicy/reservereq.htm

And yet their assets:liabilities ratio is still approximately "#DIV/0!" times that of Tether.

Re: $1M bounty for details on Tether’s backing

#226

Post by jfrunyon »

sumedh wrote: post #199
jcranmer wrote: post #142

Earlier quoted context omitted.

If a bank makes a loan to somebody else, the value of that loan is recorded as an asset. Customer deposits at a bank are recorded as liabilities. Even when banks loan out money to other people, they are careful to make sure that their assets exceed liabilities--and not by a small amount, but by something like 10%. Now, not all loans are repaid, and when that happens, the bank will take a write-off of that asset, redu…

> a 5% drop in the price of Bitcoin would make Tether literally insolvent. Didnt BTC go down to 30K from 60K just recently?

Your point being?

There are many, many ways for businesses to hide their insolvency, for years[1], or even decades[2].

[1] https://en.wikipedia.org/wiki/Wirecard#Scandal_and_insolvenc...

[2] https://en.wikipedia.org/wiki/Madoff_investment_scandal

Re: $1M bounty for details on Tether’s backing

#228

Post by jfrunyon »

PKop wrote: post #103
xur17 wrote: post #16

Earlier quoted context omitted.

> Even if the origin, operation of Tether is highly suspicious: if it functions, is widely adopted and does what is expected … may last longer than people think. I think you're right about this point, and I've been trying to imagine what might cause Tether to collapse - you really need a run on the bank situation triggered by something causing them to become insolvent.

A crash in the corporate paper they hold, which would destroy the rest of the economy even more. Tether would be a footnote to that event.

What corporate paper?

People always bring this up as though they've ever actually proven to hold reserves as they say. Even though it's been repeatedly proven that they DON'T.

Re: $1M bounty for details on Tether’s backing

#229

Post by JoshuaDavid »

paulpauper wrote: post #30

There has been nothing but Tether doom and gloom since 2017 and yet here it is still at 1.0000 If anyone thinks this will drop, now is the opportunity to short, I suppose.

Is there a way to short tether without either significant counterparty risk or absurd interest rates? Looking at Kraken, if I'm reading the chart correctly, it would cost 0.01% / 4 hours to short tether, works out to be a positive-sum bet if you think there's more than a 20% / year chance that tether will go to zero, and you think the counterparty risk is minimal.

However, I'm not sure how likely Kraken is to take the money and run in the event that tether collapses and I have a short position. It also looks like you can do [mumble mumble borrow tether on Aave collateralized by other crypto somehow] which currently costs about a 12% / year, but if I'm understanding correctly that cost is not fixed and would likely go up significantly if tether looked likely to crash.

Can someone who knows more about the topic confirm whether the cost is actually between 12 and 20% per year and the counterparty risk is minimal, and whether or not there are non-obvious footguns with either of the above approaches to shorting tether?

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