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Tether Required Recapitalization in May 2022

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Re: Tether Required Recapitalization in May 2022

#241

Post by zmgsabst »

hathym wrote: post #229
zmgsabst wrote: post #109

Earlier quoted context omitted.

No, 1-1 backing prevents this. Let’s imagine that I have 1000 cans of beer in my warehouse and I give out 1000 tickets to exchange for a beer. Let’s further imagine you have infinity dollars to “break the peg”. So you buy tickets, trade tickets, give them away for free after re-buying them… doesn’t matter. As many times as you want. Everyone who has a ticket at the end can still visit my warehouse to claim a beer — n…

you can't make a profit like that. banks (and tether) make profit by miniting news tickets out of thin air, lending the newly minted tickets at a certain rate, once the credit is reimbursed they usually destroy the minted tickets and keep the profit.

That’s one approach to profit, called “fractional reserve”.

Typically, people who want a 1-1 backed coin are uncomfortable with that model… so you instead take profit on the issuance: you charge $1.05 to issue $1 in tokens (while keeping $1 in the vault) — a process called seigniorage.

https://en.wikipedia.org/wiki/Seigniorage

Re: Tether Required Recapitalization in May 2022

#242

Post by tlb »

lacker wrote: post #54
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.

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

You can make 30% interest on deposits. It's better than picking up pennies in front of the proverbial steamroller. More like quarters.

Re: Tether Required Recapitalization in May 2022

#243

Post by Grimburger »

houston_Euler wrote: post #126
Grimburger wrote: post #110

Earlier quoted context omitted.

Quoted post unavailable.

I'll take that bet. But you need to put up the $5,000 first. So you don't think you're just losing money, I'll issue you $5,000 worth of my personal stablecoin that you can redeem 1:1. If you win, I'll give you another $5,000 of my personal stablecoin to pay the bet. You can redeem them whenever you want, I'll be good for it. /s

No post body was provided.

Re: Tether Required Recapitalization in May 2022

#244

Post by lottin »

DebtDeflation wrote: post #208
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.

Full collateralisation isn't enough to rule out a run on USDT, since the value of the collateral can vary depending on market conditions. We can be certain that one USDT will always be redeemable for one USD, as long as USDT is fully backed with USD, but we already know from the attestations this is not the case.

Re: Tether Required Recapitalization in May 2022

#245

Post by rglullis »

Grimburger wrote: post #204
patio11 wrote: post #166

Earlier quoted context omitted.

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…

If it's about the principle, shouldn't you be rallying against a company that has not been able to prove that has the reserves that it claims to have?

Keeping the peg is the least of the problems. If they somehow showed up tomorrow and said "Listen, we finally ran an audit and we found out that we really have only $0.90 for every minted USDT. But given that the small print says that we are allowed to return whatever we want, whenever you want, we decided that everyone will get a 10% haircut, ok?", you would bet that the market would shake for a week or two, but most of them would just scream Finally! and continue gambling what was left on the next project.

The real problem is that all that comes with that lack of transparency: the market manipulation, the cop-out to become a unregulated central bank, the inability for others to make a true assessment of the health of the market.

Tether basically took all the work from the cypherpunks and turned into a Casino that can't even be properly audited. They can manage to keep the peg for 20 more years for all I care, but each day they are still around is another day wasted that could be used for more meaningful things.

Re: Tether Required Recapitalization in May 2022

#246

Post by eis »

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.

Asking for 5, 10 or 25 to 1 odds in your favor means you are expecting at least 20%, 10% or 4% chance that you are right.

The fact that you don't want to engage in 1:1 odds means you are less sure of your own position than he is. Just sayin' :)

Re: Tether Required Recapitalization in May 2022

#247

Post by Grimburger »

avalys wrote: post #37
winslett wrote: post #28

Earlier quoted context omitted.

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 frict…

Aren't sales of Bitcoin for Tether taxable anyway?

Can't speak for other countries but for Australians, yes, it's a taxable capital gains event.

Re: Tether Required Recapitalization in May 2022

#248

Post by meowkit »

fshbbdssbbgdd wrote: post #167
thedstrat wrote: post #76

Its pretty frustrating that people are using these shady stablecoins where you can't see the code or assets backing them (eg USDT), when there are stablecoins that are fully open source and you can see the backing in real time (eg DAI)

DAI is to Ether as Terra was to Luna?

Not quite.

Dai is an ERC20 token on top of Ethereum. It might be more accurate to say Dai is a stablecoin coupled to MKR (MakerDAO), a governance token. Dai is over-collaterlized.

https://makerdao.com/en/ https://developer.makerdao.com/dai/1/

Terra is a coin with ticker LUNA, and is coupled to a stablecoin UST. As I understand, LUNA/UST was under-collateralized and could not handle what was essentially a virtual bank run.

Tether is a centralized stablecoin that is also reported to be under-collateralized, but it has bridges and industry connections to the wider crypto market which has kept it from crashing and burning so far.

Re: Tether Required Recapitalization in May 2022

#249

Post by not2b »

yxhuvud wrote: post #160
JumpCrisscross wrote: post #50

Earlier quoted context omitted.

> 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 This is true for every pile of toxic crap that's ever been financially engineered. The problem is the entangled financial health of the backer (in this case, Bitfinex and other crypto exchanges) with the backee (Tether). If creditors…

Or potentially like putting money into British Pounds or Swedish Crowns in early nineties - just waiting for someone with a bigger wallet to come around and break the capitalization by shorting.

Not the same at all: those currencies went down a little, they didn't completely collapse.

Re: Tether Required Recapitalization in May 2022

#250

Post by ntoskrnl »

hiq wrote: post #231
ntoskrnl wrote: post #128

Earlier quoted context omitted.

Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tam…

On https://coinmarketcap.com/currencies/tether/historical-data/ you can see that all the highs for the past 7 days have been strictly under $1, has this ever happened before?

If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course.

Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.

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