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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#301

Post by worik »

NortySpock wrote: post #244
agumonkey wrote: post #236

Earlier quoted context omitted.

So the financial system is mostly reluctance ?

Well, friction in transactions, arbitrage, and collective belief in the value of an asset.

>....and collective belief in the value of an asset.

Among other things the financial system is a web of trust.

IMO one of the fundamental things that crypto gets wrong is replacing trust with algorithms. I do not think that can be done. Trust is about people.

Time will tell if an algorithm that can automate trust can be found. I do not expect it will

Re: Tether Withdrawals Top $10B

#302

Post by SilasX »

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…

Everything you’ve just said would apply equally well to money market mutual funds (which hold the same kinds of assets), and yet they very rarely have problems honoring redemptions or keeping $1/share peg.

Re: Tether Withdrawals Top $10B

#303

Post by TrackerFF »

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.

Oh they have dollars, but the question is: How much of their non-USD assets are very liquid, and not too sensitive to market conditions?

Say they have 50% in cash, 30% in other easily convertible assets, and the last 20% in more speculative instruments.

What if they figured - hey, let's put those 20% on the market. Any returns, we keep, no-one needs to know. The rest we can use as reserve to keep the 1:1 ratio. Hell, investing 20% of xx billions on any fund or security that beats inflation is going to make you filthy rich - especially when there's only a handful of employees.

The disaster, of course, happens if/when any of the markets they're exposed to takes a nosedive, and they either can't prop it up fast enough, or get problems with paying.

Probably just the cynic in me, but I wouldn't be surprised if that's how things play out internally. Without any solid audits, it's hard to say. For all I know they have a very high % of USD reserves, or they could be Bernie Madoff reincarnated.

Re: Tether Withdrawals Top $10B

#304

Post by adhesive_wombat »

jules-jules wrote: post #104
retube wrote: post #78

Earlier quoted context omitted.

well it's not due to price changes, 1 USDT = 1$, so yes there are less coins in circulation. Poster below says Tether can create and destroy coins at will. They can certainly create them, not sure they can destroy them if in others wallets (and doing so would be a huge adverse news event). If they have destroyed coins can only be their own (in their own wallets) but I suspect that would also be transparent. My feelin…

They most certainly can't destroy USDT sitting in other people's wallets.

They can mint a quadrillion Tether today and that would do the job pretty well. The Tether would still be in the wallets, but at that point it would be quicker to just read from /dev/urandom if you wanted some random-ish bits.

Re: Tether Withdrawals Top $10B

#305

Post by Symbiote »

logifail wrote: post #294
datadata wrote: post #272

Earlier quoted context omitted.

Here is an example: https://www.capitalone.com/bank/disclosures/savings-accounts... > Advance Notice of Withdrawal: Under federal law, we must reserve the right to require you to give us at least 7 days written notice before you take money out of your 360 Savings. (This hardly ever happens but legally we have to say it!)

> Here is an example [..] Interesting, and this appears to be federally-mandated. Wow. Are there other jurisdictions where this kind of rule exists?

I used to have savings accounts with similar terms in the UK. They have a higher interest rate.

https://www.moneysavingexpert.com/savings/savings-accounts-b...

Re: Tether Withdrawals Top $10B

#306

Post by oneoff786 »

MockObject wrote: post #191
oneoff786 wrote: post #190

Earlier quoted context omitted.

Tether is not willing to do this

So their idea of pegging is just a forcefully worded request?

More of a vague promise to buy. They have a lot of dollars. If tether skips to 99 cents will they buy it from people to push the price up? Maybe.

It’s been sitting at 99.9 for several days now.

Re: Tether Withdrawals Top $10B

#307

Post by hanniabu »

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.

Well for one you can give the government full control to freeze your funds whenever they want

Re: Tether Withdrawals Top $10B

#308

Post by leokennis »

I know it’s probably too simplistic, but this interview really resonated with me:

https://www.currentaffairs.org/2022/05/why-this-computer-sci...

In all honesty I can see people being enthusiastic about crypto as a “get rich quick” scheme (at the expense of less fortunate people but soit) - but how people can see crypto as the future of money with a worldwide ~10 TPS throughput and every transaction on a public blockchain is beyond me.

Re: Tether Withdrawals Top $10B

#309

Post by woeirua »

horsecabletruck wrote: post #251
robonerd wrote: post #234

Earlier quoted context omitted.

Most of these are just "do a thing you can already do with money, but shittier"

Quoted post unavailable.

Decentralization is not a goal of the modern financial system. Indeed for many reasons, decentralization is not desirable, as crypto-bros are about to find out when Tether blows up and takes out 3/4 of the market.

Re: Tether Withdrawals Top $10B

#310

Post by jcranmer »

LatteLazy wrote: post #261
jcranmer wrote: post #256

Earlier quoted context omitted.

> 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-frau…

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

A quarter of their investments are commercial paper, which hasn't averaged as high as 2% yield since a brief period in March 2020. Actual cash of course has 0% yield. US Treasuries (sub 1-year), which make up nearly half their assets, also hasn't hit 2% yield any time recently. So no, they aren't recouping their loss on cryptocurrency.

> 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.

One of the reasons why banks rarely have to be bailed out is because there are stringent regulations on bank holdings. For example, a minimum tier 1 capital ratio, the amount of equity that needs to be held to cover unexpected asset shortfalls. This requirement is I believe 10%, and based on the evidence Tether has produced, Tether's tier 1 capital ratio is... 0%. It should also be noted that Tether is perilously close to insolvent, with (claimed) assets about 100-101% of total liabilities; most financial institutions prefer to be at least ~110-115% of total liabilities.

Compare Tether to banks if you want to, just be aware that it just makes Tether's financials look even worse in comparison.

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