We're in the get out while you still can phase. At some point they'll suspend conversion and holders will be stuck with something virtually worthless. It's like watching a landslide in its early stages, as soon as enough people realise what's going on it's going to be too late.
It is specially relevant to get out as there is no upside or very minimal upside... Why ever hold tether... If real money is an option.
Real money isn’t an option, at least not globally. USDT is how much of the developing world buys crypto.
> 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, b…
> 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.
They don't. As stated at the link:
> U.S. treasury bills comprises U.S. treasury bills with a maturity of less than 120 days.
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 problem is that it's not that simple to just park $80b on a bank account. The bank will use the money to buy bonds or give it out in mortgages to get interest on it. It's akin to kicking the can to the bank, and getting the money out might fail or be too slow. It's probably better to manage the reserve yourself, to be able to manage risk and liquidity properly, rather than outsource it to a bank.
It would seem like the banks would be much better equipped to handle $80 billions because they have experience with companies that need to move cash around. If push comes to shoves and Tether needs that $80 billions immediately, the bank could always get an overnight loan from the interbank system or the Federal Reserve.
> 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…
Tether, or rather Finex is a famous MM. Don't worry too much about their "other investments", they are up a lot no matter BTC price. Tip of the iceberg https://bitinfocharts.com/bitcoin/wallet/Bitfinex-coldwallet Also, you're going with the assumption they shall be able to redeem 100%. Crash happens, like we have seen, but everyone cashing out their USDT is not a scenario going to happen. Or if you want to account fo…
> but everyone cashing out their USDT is not a scenario going to happen
> 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…
> If you are tether and your asserts are in bonds that mature in under N days, then you could just promise redemption within N days to eliminate bank run risk.
I don't think that's reasonable for Tether, at least not with a bulletproof N. I can't quickly find any specific redemption guarantee, but their March reserves report notes that their US Treasuries (the largest single claimed category) can have maturities up to 120 days. The commercial paper category claims an average duration of 44 days.
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…
There is another, more legitimate way to create a stablecoin. DAI is the dramaless version of a USD stablecoin and is decentralized, secured by 150% reserve automatically, run entirely by smart contracts.
It does not perfectly track USD but stays within a couple percentage points. Arbitrage traders automatically stabilize the coin thanks to the way the smart contracts are arranged.
> 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? That's not a safe bet. https://en.wikipedia.org/wiki/Michael_Burry , which the film "The Big Short" is based off, correctly predicted the 2007-2009 collapse of the housing market, but nearly lost everything waiting for it to occur . > During his paym…
borrow APY variable for USDT on aave on Ethereum is currently 3% apy. If you can stomach the various risks involved (e.g. smart contract risk, exposure to ethereum 51% attack or something) then acquire any asset that AAVE has (e.g. USDC, Dai, ETH, BTC), deposit it, withdrawal USDT & sell the USDT thereby naked shorting USDT for 3% APY at current rates. Those rates are low enough that it just doesn't seem like the mar…
Way too much counterparty risk in crypto markets. If there is an epic tether crash, I can't be confident that I'll get my payout. Compare this to established markets. I could log into my Charles Schwab account, make a short bet that Charles Schwab will go bankrupt overnight, and if I'm right, I know I'll get my payout.
It sounds like the only way to do this is to create your own bank which directly integrates with the federal reserve.
> It sounds like the only way to do this is to create your own bank which directly integrates with the federal reserve ...but isn't the whole point of Tether to stay as far away from the traditional banking system as they can? This of course includes avoiding - as much as possible - all the KYC/AML legislation that traditional banks are obliged to follow?
There is tension between being as far away from the banking system as possible and having the ability to cash out your USDT to USD.
The only way I can think of a stablecoin being totally independent of banks is to store their reserves as bank notes, and when someone wants to cash out USDT to USD they have to go pick up the bank notes. This glosses over the obvious challenges of storing billions of dollars in bank notes and distributing those notes during a cash out. The bank notes are also worth less than face value because you have to physically store and secure them.
What’s the concern here? Seems like Tether actually did have the money to fulfill the withdrawals, so this seems like a nothingburger.
Well they had the first $10B, but Lehman also probably had the first $10B when things moved south.
It's the final $10B that really matters here. They may have burned their real currency reserves first to avoid really sparking a panic, and are just standing naked hoping the crypto meltdown subsides before they have to start selling their less liquid/valuable reserves.