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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#261

Post by LatteLazy »

jcranmer wrote: post #256
shadedtriangle wrote: post #218

Earlier quoted context omitted.

> All you need for a stable stablecoin is to save every dollar put in to it. That’s the issue right there. How does Tether save its dollars? We can see it in their transparency report[1]. Whether you believe them or not it’s not just cash in a bank account. * 0.41% Non-U.S. Treasury Bills * 55.53% U.S. Treasury Bills * 0.15% Reverse Repurchase Agreements * 5.81% Cash & Bank Deposits * 9.63% Money Market Funds * 28.47…

> What if the value of those assets is already below 1:1 because of recent market events? The statistics you're bringing up are as of March 31. Do note that 6% of reserves are in "Other Investments (including digital tokens)", and Bitcoin (as a proxy for all cryptocurrencies) is down ~30% since then, so that's at least 2% of their assets that have been wiped out by market conditions. Keep in mind that said report als…

They only need to have made 2% on those other investments and the 2% lost on crypto is irrelevant.

Also, if 2% of outstanding tether has been lost (forgotten wallet keys etc) then those can never be redeemed and again, tether wins.

Inflation is another factor worth considering here: tethers deposits are deminishing but it's investments are (or should be) shielded.

I think people fail to notice how similar a (non-fraud) tether model is to a traditional bank: you take short term deposits, you make long term loans, and you hope to have enough capital on hand to deal with any runs. Given the liquidity of modern capital markets, it's very rare for the fed to have to bail out small deposit banks. So it's reasonable to assume the same will apply to tether.

Re: Tether Withdrawals Top $10B

#262

Post by Barrera »

> Tether, the world’s largest stablecoin, has seen its circulating supply plunge from a record $84.2 billion on May 11 to around $73.3 billion as of Monday, according to data from CoinGecko. About $1 billion was withdrawn late Friday evening.

At first blush this looks bad. That's about 12% of Tether's market cap.

On the other hand, the exchange rate is at this moment is 0.999:1. So the drawdown did not "break the bank." This means that Tether had at least that much capital that it could cough up in the space of less than 30 days.

This may seem like a good thing for bulls because Tether is demonstrating resilience under stress.

Or it can be viewed as a bad thing for bulls because it means that Tether is getter closer to the limit of its (widely-ridiculed) reserve claims.

Given that Tether has every incentive to cheat and has demonstrated sleazy behavior, it's safe to assume they're cheating.

The question is not whether or not they're cheating, it's how much.

It will be very interesting indeed if Tether manages to keep its peg given another 10, 20, or 50% drawdown.

This essay [1], discussed on HN a few days ago, claims to have made some predictions about Tether worth preserving for posterity. Conspicuously absent from those predictions was the market capitalization at which Tether falls days-on-end below 90% of its 1:1 dollar peg.

For those who claim to know exactly what's happening behind the scenes at Tether, I think that's a prediction worth making.

[1] https://www.kalzumeus.com/2022/05/20/tether-required-recapit...

Re: Tether Withdrawals Top $10B

#263

Post by throwaway6734 »

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…

What's stopping them from just printing tethers without dollar backing and injecting them into the market?

Re: Tether Withdrawals Top $10B

#264

Post by [deleted] »

malfist wrote: post #206
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.

[deleted]

Re: Tether Withdrawals Top $10B

#265

Post by datalopers »

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…

They don't have the dollars. That's the catch.

Re: Tether Withdrawals Top $10B

#266

Post by charcircuit »

ATsch wrote: post #146
charcircuit wrote: post #116

Earlier quoted context omitted.

I'm not following your logic. $1 worth of debt is worth $1 no matter how risky it is. The risk is built into how much it is worth. Risky debt is high risk high reward. Since these funds are backing a stablecoin it doesn't make sense to go for high risk plays with that much money.

I'm not very well versed in how selling debt works, but the way I assume it works is the following: Say someone still owes me $1M over the next 10 years, but I think that there's now only a 50% chance of the debt being repaid. It would make sense for me to try and sell that debt for at least $500k to get a guaranteed immediate return, right? And then that person could say that they hold $1M dollars, even though it's…

>And then that person could say that they hold $1M dollars

You don't own $1M dollars, you own debt which is an asset. Considering you just bought it for $500k it sounds like the market price for that debt is $500k.

Re: Tether Withdrawals Top $10B

#267

Post by logifail »

datadata wrote: post #217
Majromax wrote: post #164

Earlier quoted context omitted.

> whenever the price of Tethers drops to $0.99, they buy tethers until the price is back up to $1. Buy Tethers with what? If the money is in fact saved in regulated banks or other such instruments, there's nothing liquid left to defend the peg on the exchange. Instead, the standard "backed stablecoin" approach is to make money with a small spread on redemptions/creation, while allowing others to do that hard work. Te…

> In theory, every single USDT in circulation could be redeemed at a moment's notice The easy way to protect against this is to not contractually promise instant redemption. I think this is what tether actually does, but I could not find a source. Regular savings account banks do typically do this, for example the bank has the right to ask for 7 days to honor a withdrawal. If you are tether and your asserts are in bo…

> Regular savings account banks do typically do this, for example the bank has the right to ask for 7 days to honor a withdrawal

Source?

I'm familiar with savings accounts described as "instant access" or "easy access" where you can get your money out whenever you feel like it.

Unless the bank actually markets an account as a "notice account", can they really ask for 7 days notice?

Re: Tether Withdrawals Top $10B

#268

Post by yuvadam »

datalopers wrote: post #265
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…

They don't have the dollars. That's the catch.

[citation needed]

Re: Tether Withdrawals Top $10B

#269

Post by dragontamer »

shadedtriangle wrote: post #218
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…

> All you need for a stable stablecoin is to save every dollar put in to it. That’s the issue right there. How does Tether save its dollars? We can see it in their transparency report[1]. Whether you believe them or not it’s not just cash in a bank account. * 0.41% Non-U.S. Treasury Bills * 55.53% U.S. Treasury Bills * 0.15% Reverse Repurchase Agreements * 5.81% Cash & Bank Deposits * 9.63% Money Market Funds * 28.47…

> What if the value of those assets is already below 1:1 because of recent market events?

My long-term treasuries are down well over 10% this YTD, in case anyone wants to know. So if Tether had say, $50-billion in 10-to-30Y treasuries at the start of the year, they only have $45-billion of that now.

There are serious market risks when you buy/sell Treasuries. Yes, they're among the safest instruments on the market, but rising interest rates and inflation are huge issues and absolutely wreck the value of long-term treasuries.

Re: Tether Withdrawals Top $10B

#270

Post by wing-_-nuts »

cowtools wrote: post #227
thematrixturtle wrote: post #51

Earlier quoted context omitted.

The big deal is that it's highly likely that Tether is backed up by way less than 83 billion in actual dollars. Let's say, for argument's sake, that they were 50% backed a week ago and had $40B in actual dollars. If $10B was pulled out, that was into actual US dollars or equivalent, meaning they now have $70B backed up by $30B. If another $10B drains in the next week, it'll be $60B vs $20B. This incentivizes other ho…

I don't know if it will necessarily cause crypto prices to crash

I'm a complete layperson when it comes to crypto, but from what I have heard a good bit of the recent bitcoin volume has been done via tether. if tether crashes, I don't know how this doesn't cause a crash when volume dries up?
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