Tether starting to lose its peg too, after Terra did • Hacker News Board

Re: Tether starting to lose its peg too, after Terra did

#331

Post by wikfwikf » Thu, May 12, 2022, 9:36 AM UTC

randomsearch wrote: post #288

FeepingCreature wrote: post #210

Earlier quoted context omitted.

You just mint Luna at will. The problem occurs when the amount of Luna that trades for $1 becomes undefined because nobody is willing to do the trade anymore.

Eh, but minting Luna increases the supply of Luna and thus devalues it, therefore a run means that the price of Luna increasingly drops as you mint more, meaning you have to mint more Luna, it heads to zero, you're dead. It's the opposite of stable, because a run actually accelerates itself. What am I missing here?

You're not missing anything, that is literally how it works and the reason it is now failing.

Re: Tether starting to lose its peg too, after Terra did

#332

Post by rswail » Thu, May 12, 2022, 9:36 AM UTC

bspammer wrote: post #132

xmprt wrote: post #125

Earlier quoted context omitted.

Can someone explain stablecoins to me? Most online explanations talk about how the currencies are "pegged" to various assets/real world currencies/physical objects/algorithms/cryptocurrencies, however they never explain how the pegging is done. What is happening right now that is causing the price to fall, what prevented it from falling over the last few years, and why isn't that thing preventing it from falling now?

Tether the company guarantees it will buy all tether for $1 each. The drop in price reflects people suddenly realizing they can’t do that if everyone tries to turn in their tether at once.

gee, that sounds like... a bank run.

Re: Tether starting to lose its peg too, after Terra did

#333

Post by exactlythat » Thu, May 12, 2022, 9:36 AM UTC

pjc50 wrote: post #320

someotherperson wrote: post #62

Earlier quoted context omitted.

> If you've been honestly working on the assumption that it is, then you deserve to lose your (real) money to some crypto VCs on an island somewhere This is victim blaming. Nobody deserves to be exploited, robbed or otherwise for any reason.

If you say "don't go there, you'll be robbed" to someone, they insult you in return, and then get robbed, you're entitled to a bit of schadenfreude.

You’re entitled to quite a lot. It is those delightful moments, enjoyed quietly and within one’s own head out of common courtesy, that make all of life’s problems worth it. There are few feelings as remotely good as that one, and we’d all feel better admitting it to ourselves. Doesn’t speak to caring.

They’ll listen to you next time, won’t they?

Re: Tether starting to lose its peg too, after Terra did

#334

Post by unmole » Thu, May 12, 2022, 9:36 AM UTC

lozenge wrote: post #53

jallen_dot_dev wrote: post #4

If Tether is backed, then Bitfinex could buy currently-discounted tethers off the market and redeem them for face value, pocketing the difference. The fact this is not happening means they really don't have the money, do they?

"Elsewhere on the website, there’s a letter from an accounting firm stating that Tether has the reserves to back its coins, along with a pie chart showing that about $30 billion of its dollar holdings are invested in commercial paper—short-term loans to corporations. That would make Tether the seventh-largest holder of such debt, right up there with Charles Schwab and Vanguard Group." Commercial paper is not dollars,…

> Commercial paper is not dollars, so tether effectively admits it is not backed.

What do you think backs bank deposits?

Re: Tether starting to lose its peg too, after Terra did

#335

Post by 7952 » Thu, May 12, 2022, 9:37 AM UTC

tluyben2 wrote: post #112

sshine wrote: post #71

Earlier quoted context omitted.

> many poorer and financially illeterate people have been tricked I’m sorry, but it’s worse than that. Whenever I’ve said “Tether is a scam waiting to blow up, and the evidence is obvious”, none of my smart peers had anything to say, either. The BTC price is hells high by this fake USD money printer. At least people are collectively waking up. Brrrr.

The religious (for a lack of better word as it is a religion to believe that cryptocurrencies are inherently better than other assets (outside NFTs) but they do believe that if you read twitter/reddit) people are hodling but all the 'saner' people I know went out in december. There was enough writing on the wall to know that 2022 would not be a good year for some assets (and it's just beginning). Only the real believ…

I think religion is exactly the right word. Humans build story's and meaning around otherwise innocuous things. And that didn't just stop with the rise of the secular world.

Re: Tether starting to lose its peg too, after Terra did

#336

Post by ckastner » Thu, May 12, 2022, 9:39 AM UTC

pjc50 wrote: post #323

davidweatherall wrote: post #189

Earlier quoted context omitted.

I don't understand how you bodge a stable coin startup. Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk investments (some form of treasury bonds), and then take the 0.5-1% interest per year as your revenue. Tether currently has $81b marketcap so you could be making $400-800m per year doing basically nothing?

> Surely you just mint the tokens in exchange for dollars Step 1: find someone willing to give you dollars in exchange for a token that's guaranteed to be worth something between 0 and 1 dollars. Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.

> Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.

This was the biggest red flag behind Tether to me, where we are talking about not millions but billions of pseudo-dollars.

The risk profile is beyond anything reasonable that a bank could or would accept. Tether minting $2bn in a week means $2bn cash inflows from mostly people that the bank probably doesn't know, all for what can only be a negligible fee.

Re: Tether starting to lose its peg too, after Terra did

#337

Post by dgellow » Thu, May 12, 2022, 9:39 AM UTC

pyinstallwoes wrote: post #318

Slartie wrote: post #276

Earlier quoted context omitted.

There is nothing "instant" in the process of buying millions of USDT, then sending them over to Tether for redemption against USD. The redemption process of such sums is a manual process which takes at least some days, even if it works out in the end (assuming Tether is liquid).

It’s instant given it’s guaranteed. If that doesn’t follow then it topples under its own promise.

It’s not guaranteed at all. Tether made it abundantly clear they give no guarantees they will redeem your USDT. It also isn’t instant.

This is public knowledge and has been well documented for years. Tether is likely to be the least trustworthy actor in the entire industry.

Re: Tether starting to lose its peg too, after Terra did

#338

Post by tomerv » Thu, May 12, 2022, 9:39 AM UTC

ryanSrich wrote: post #108

5350-uiop-1130 wrote: post #44

Load ze tether fud. I'm no fan of USDT, and don't hold it but the same thing happened in the May 2021 crash. I think it's just the high volume of people selling right now cause it to depeg. I think if it goes too far below you will see the major exchanges go into "maintenance mode" since they're all deeply invested into keeping it alive.

Right. It’s fairly trivial for the exchanges to disallow a sell order for a stable below a certain price. That’s an obvious thing they would do if things start to really spiral here.

That's exactly the kind of thing that would cause everyone to lose confidence in a coin.

Re: Tether starting to lose its peg too, after Terra did

#339

Post by andy81 » Thu, May 12, 2022, 9:39 AM UTC

stevekemp wrote: post #186

outside1234 wrote: post #135

Earlier quoted context omitted.

We have been saying it - but have been dismissed as being "anti-crypto"

Yeah it's a tricky one. It seems obvious that "digital money" is going to be very useful in a lot of ways, and in the future is almost certain to appear. There was a very brief period when bitcoin might have been the start of such a thing. When companies were adding support for it, and people were spending 200+ bitcoin on pizza, actually doing useful things like transferring money internationally, etc. But these days…

Monero still tries to fit in this niche.

The only thing it's useful for is financial crime though - if your problem is just making a payment you can do it in dollars relatively easily and safely.

Re: Tether starting to lose its peg too, after Terra did

#340

Post by wikfwikf » Thu, May 12, 2022, 9:41 AM UTC

turtledove wrote: post #59

rtpg wrote: post #32

Earlier quoted context omitted.

You need to show up with $100k to do the redemption. Granted if you did the round trip with only $10k you’re looking at peanuts in arbitrage but it _is_ a way for them to prevent real arbitrage that feeds into itself. I bet the fact that people wanting to short don’t believe they have the funds doesn’t help. But hey if you are a millionaire short tether might be worth setting up the recurring trade out!

So wait, assuming I had a hundred k, and they were willing and able to pay out, I could buy 97k of tether and redeem it for 100k? Just an instant 3% return? This seems like there's no way they are opening themselves up to arbitrage like this.

Once you figure out the practicalities of buying $100K worth of Bitcoin for cash, securing it, exchanging it for Tether, requesting the redemption, getting paid out to a bank account, etc, you will see that it's not particularly free money.

People who are already set up with crypto accounts, exchange accounts, bank accounts which won't be closed down or frozen, will do this trade all day for 3%. For a regular punter it's not a no-brainer at that level.