Tether Required Recapitalization in May 2022 • Hacker News Board

Re: Tether Required Recapitalization in May 2022

#331

Post by mbg721 » Sun, May 22, 2022, 3:05 AM UTC

jazzyjackson wrote: post #330

PKop wrote: post #302

Earlier quoted context omitted.

Interest on lending, and trading fees from liquidity pools. During a bear market in crypto certainly these yields will decline. The 2 sources I mentioned above are essentially flows that accrue during the bull markets. It's not magic, when people want to long assets they borrow stables. If you lend into these markets you'll get the yield. With liquidity pools you can get some transaction fees even during market volat…

Am I to believe people are paying > 20% interest to borrow crypto ?

I hope not, or else I'm missing out on a lucrative counter-position.

Re: Tether Required Recapitalization in May 2022

#332

Post by giaour » Sun, May 22, 2022, 4:07 PM UTC

s1artibartfast wrote: post #319

giaour wrote: post #237

Earlier quoted context omitted.

I'm pretty sure the man will stick it back to you if you follow this advice.

It's not illegal afaik

It depends on your jurisdiction, of course, but I (as an American) wouldn't feel confident in the legality of buying Venezuelan government securities given https://www.state.gov/venezuela-related-sanctions/

Even if buying a bond issued by an unfriendly nation isn't illegal at a given moment, you might find yourself forced to divest if relations between your country and the issuer sour. I'm sure a few people who held Russian sovereign bonds lost their shirts when sanctions were levied and they had no choice but to dump their assets.

In the absolute worst case (e.g., if you held Japanese sovereign debt in December 1941 or Afghan sovereign debt in 2001), holding a bond might be grounds for you to be charged with treason or sponsoring terrorism.

Re: Tether Required Recapitalization in May 2022

#333

Post by graeme » Sun, May 22, 2022, 8:29 PM UTC

drexlspivey wrote: post #326

graeme wrote: post #325

Earlier quoted context omitted.

By claiming certain entities can redeem 1:1. No one has ever documented a Tether redemption. They have a very tiny number of clients and the terms say they don’t have to redeem at all.

> No one has ever documented a Tether redemption Are you just making stuff up? There were $10B worth of redemptions only last week.

No there was a $10 billion market cap reduction. The exchange rate on Tether’s owned exchange, Bitfinex was $1 most of the past week where it was less elsewhere. Likely Tether was using open market operations to trade dollars for Tethers and keep the rate up.

Documenting a redemption would involve using the official redemption mechanism where you redeem $100,000+ at a time, pay a $100-$1000 fee, get a wire transfer from Tether etc. If you can find anyone ever documenting having done that, let me know

Re: Tether Required Recapitalization in May 2022

#334

Post by drexlspivey » Fri, May 27, 2022, 10:53 PM UTC

graeme wrote: post #333

drexlspivey wrote: post #326

Earlier quoted context omitted.

> No one has ever documented a Tether redemption Are you just making stuff up? There were $10B worth of redemptions only last week.

No there was a $10 billion market cap reduction. The exchange rate on Tether’s owned exchange, Bitfinex was $1 most of the past week where it was less elsewhere. Likely Tether was using open market operations to trade dollars for Tethers and keep the rate up. Documenting a redemption would involve using the official redemption mechanism where you redeem $100,000+ at a time, pay a $100-$1000 fee, get a wire transfer f…

How about the CEO of FTX who says they are doing it every day ? https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-...

Re: Tether Required Recapitalization in May 2022

#335

Post by graeme » Sat, May 28, 2022, 11:23 PM UTC

drexlspivey wrote: post #334

graeme wrote: post #333

Earlier quoted context omitted.

No there was a $10 billion market cap reduction. The exchange rate on Tether’s owned exchange, Bitfinex was $1 most of the past week where it was less elsewhere. Likely Tether was using open market operations to trade dollars for Tethers and keep the rate up. Documenting a redemption would involve using the official redemption mechanism where you redeem $100,000+ at a time, pay a $100-$1000 fee, get a wire transfer f…

How about the CEO of FTX who says they are doing it every day ? https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-...

Sam Bankman Fried would be among those most likely to be co-defendants in a trial.

But, what I said was it’s never been documented.

* Does he buy Tether at par or at a discount?

* Can he redeem when he wants, in any quantity, or do they have arrangements?

* Is he redeeming for dollars or in kind? Terms allow for latter

* Does he buy with dollars or with commercial paper?

I do not believe he has shown material which would let us answer any of these questions

Re: Tether Required Recapitalization in May 2022

#336

Post by glerk » Thu, Jun 02, 2022, 2:25 AM UTC

blihp wrote: post #35

glerk wrote: post #5

So Tether is doing something akin to fractional reserve banking? From what I understand, this shouldn’t cause a problem unless there is a massive run (everyone trying to convert their USDT into dollars at the same time). Since most of the USDT is owned by big exchanges who need it to provide liquidity and have no interest in crashing the crypto market, I don’t think this is likely to happen.

The problem is that 'unless there is a massive run' is nearly assured over a long enough time horizon. The fact that the major players know that they are reasonably safe unless there's a run is the thing that will cause a run in a panic. Also, if some well-capitalized hedge fund figures out how to attack it, they might also light the match on a run if there's money to be made in killing it.

These are very good points - in the long run the probability of a massive run is 100%, and the risks of it happening sooner rather than later are higher because of the incentive of attacking the peg intentionally. This can be said about a lot of financial products.

I think that at this point, these risks are priced in by the market (Tether is selling at a discount from USDC). If you disagree with the market, it is your speculation, and also an opportunity to get rich if you are right. For example, the FTX exchange offers Tether put options as well as the ability of shorting Tether, and there are many other similar products.