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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#321

Post by lottin »

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…

A stablecoin that was fully backed with dollar reserves would be fail-proof. The problem is such a stablecoin would also be unprofitable, because the issuer would have expenses but no revenue. The way they generate revenue is by investing part or all of their reserves in assets that generate a return. However, as soon as they do that, the stablecoin is no longer fail-proof because these investments are not risk-free.

Re: Tether Withdrawals Top $10B

#322

Post by ineptech »

WinstonSmith84 wrote: post #278
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…

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…

> Crash happens, like we have seen, but everyone cashing out their USDT is not a scenario going to happen.

This seems wildly optimistic. All it would take is for users to adopt some new FOTM stablecoin faster than Tether backers can liquidate their reserves. It needn't be rational, either; it could be catalyzed by, let's say, a *ism scandal involving someone connected to Tether.

Re: Tether Withdrawals Top $10B

#323

Post by jameshart »

Geee wrote: post #180
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…

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.

The problem with trying to park $80bn in a bank account is not the risk that the bank might invest it. That is what banks do. You can find a legitimate bank who will be willing to hold your $80bn with reasonable terms for how fast you can access it, backed by insured guarantees and as secure as you would like.

But such a bank, when you show up with your $80bn, in order to protect their ability to reliably offer those kinds of terms, will want to ask you a few questions about where you came by that cash.

And if you can only say ‘I have no idea’, and when they then ask ‘how much of it belongs to sanctioned individuals or is criminal proceeds?’ Your best guess is ‘not none of it’, then the legitimate banks are going to walk away from that conversation.

So then, yes: where are you going to keep that $80bn?

Re: Tether Withdrawals Top $10B

#324

Post by parkingrift »

everfree wrote: post #178
parkingrift wrote: post #138

Earlier quoted context omitted.

There is no way to short Tether from outside the crypto ecosystem. Shorting Tether with another stable coin is a fools errand.

> Shorting Tether with another stable coin is a fools errand. Why? There are plenty of US-based, regulated and audited stablecoins out there. You could use them as collateral to short Tether.

Ha. This would be the equivalent of betting against the US dollar by buying treasury bonds. I doubt the solvency of any single exchange or crypto institution if there is a true run on Tether. No one who believes that Tether is a scam would risk making that bit by leveraging another loosely regulated stable coin.

Re: Tether Withdrawals Top $10B

#325

Post by pcj-github »

Every article I read about this says something like "Unlike tether, UST wasn’t backed by fiat currency held in a reserve".

Which assumes tether is actually backed by enough real value to cover its calls in the case of a selloff, which it absolutely is not.

If I had any money in crypto (I don't), I would get the hell out of tether ASAP.

Re: Tether Withdrawals Top $10B

#326

Post by wmf »

pcj-github wrote: post #325

Every article I read about this says something like "Unlike tether, UST wasn’t backed by fiat currency held in a reserve". Which assumes tether is actually backed by enough real value to cover its calls in the case of a selloff, which it absolutely is not. If I had any money in crypto (I don't), I would get the hell out of tether ASAP.

I think it's worth distinguishing between "they say it's not backed and it's definitely not backed" vs. "they say it's backed but it's probably not". These are different problems.

Re: Tether Withdrawals Top $10B

#327

Post by randomhodler84 »

missedthecue wrote: post #288
X6S1x6Okd1st wrote: post #273

Earlier quoted context omitted.

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.

The counter party is a smart contract AMM like curve or aave. Your only issue is liquidity and chain reliability.

Re: Tether Withdrawals Top $10B

#328

Post by randomhodler84 »

robonerd wrote: post #234
horsecabletruck wrote: post #213

Earlier quoted context omitted.

Many things. A stablecoin that implements ERC20 interface can be used across Ethereum ecosystem and it’s smart contracts. You could even program your own smart contracts around the token, such as to setup a time lock or auction. Examples: converting it to another token on a decentralized exchange, purchasing an NFT, holding the token in a non-custodial wallet, holding the token in a multi-signatory wallet, participat…

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

“But without permission”. Shittier might be acceptable if you do not wish to seek permission. Which is the whole point.

Re: Tether Withdrawals Top $10B

#329

Post by User23 »

SilasX wrote: post #302
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…

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.

https://www.investopedia.com/terms/b/breaking-the-buck.asp

Edit: Just providing context for those who may be interested.

Re: Tether Withdrawals Top $10B

#330

Post by rglullis »

cuteboy19 wrote: post #319
rglullis wrote: post #312

Earlier quoted context omitted.

No. I wouldn't. Never used Terra, and I already said here that I never understood these "algostables" with no collateral. As for "proof", you should've learned already that there is no such thing as "proof" with any of them. It's all about risk. For the fiat backed, the risk could be measured by the trustworthiness of the institution behind it and how they are managing the real fiat they have in hand. I'll risk them…

But Terra did have collateral. Luna equal to 1 USD was burnt (more like locked) once a UST was minted. The whole conceit of DAI is that instead of burning luna at a rate of $1 they would burn it at a rate of $1.5 , The mechanism is exactly the same! And it will fail in exactly the same way.

DAI has multiple assets, the vaults are at 150% at a minimum and independent from one another and, most importantly, there is no one offering 20% APR on staked DAI. It already went through worse crashes than UST did and it managed to recover.

It's far from perfect, but it is certainly more resilient and has shown to be able to pass the Lindy test.

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