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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#331

Post by User23 »

lottin wrote: post #321
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.

The risk-free rate of return is generally greater than 0%, so with a large enough issuance I imagine it could be done safely. But "don't get greedy" is a commonly ignored principle.

Re: Tether Withdrawals Top $10B

#332

Post by randomhodler84 »

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.

Actually they most certainly can and have. The ERC20 contract for USDT has a blacklist function and the administrator can block transfers for arbitrary addresses, rendering it worthless. Same with USDC.

Re: Tether Withdrawals Top $10B

#333

Post by ericpauley »

pg_bot wrote: post #295
eldenwrong wrote: post #277

Earlier quoted context omitted.

How much liquidity entered the financial markets since 2020....?

About 265 billion USD entered circulation during that same time period. https://fred.stlouisfed.org/series/CURRCIR

This is just the total paper/coin in physical circulation. Actual money supply (M1) grew far more: https://fred.stlouisfed.org/series/M1SL

Re: Tether Withdrawals Top $10B

#334

Post by User23 »

Majromax wrote: post #164
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…

> 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…

A Tether is an IOU for a dollar right? So long as you have one USD per Tether issued you can always redeem your outstanding IOUs.

I acknowledge the complexities of investing that collateral in more or less liquid instruments, but in principle the notion appears sound. I'd be happy to give you an interest free IOU in any amount you like if you provide me cash money for that nominal value in exchange.

Re: Tether Withdrawals Top $10B

#335

Post by User23 »

logifail wrote: post #267
datadata wrote: post #217

Earlier quoted context omitted.

> 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…

> Regular savings account banks do typically do this, for example the bank has the right to ask for 7 days to honor a withdrawal Source? I'm familiar with savings accounts described as "instant access" or "easy access" where you can get your money out whenever you feel like it. Unless the bank actually markets an account as a "notice account", can they really ask for 7 days notice?

Of course. A depositor might walk in and ask to withdraw more money than the bank has cash on hand. The seven days gives the bank time to get the requisite notes (or call the appropriate law enforcement agency).

Re: Tether Withdrawals Top $10B

#336

Post by ChrisLomont »

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.

First, MMMFs target $1/share, they do not promise it nor are they legally beholden to honor it. It's a goal, not a promise.

It also works because the US dollar has been remarkably stable and most of their holdings are USD. No crypto is so stable, with a bunch of them being about the most volatile assets you can lose money with.

Re: Tether Withdrawals Top $10B

#337

Post by SilasX »

User23 wrote: post #329
SilasX wrote: post #302

Earlier quoted context omitted.

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.

Right, I’m familiar with an alternate expression for what I just described. Were you disputing that it’s rare, or…?

Re: Tether Withdrawals Top $10B

#338

Post by darcys22 »

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…

See this is just low quality FUD,

They have 39B in US Treasury Bills, how much do you think these will drop if they sell? The truth is next to nothing. and a 39B moat for sell offs seems very reasonable

Re: Tether Withdrawals Top $10B

#339

Post by logifail »

Symbiote wrote: post #305
logifail wrote: post #294

Earlier quoted context omitted.

> 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...

Sure, I understand the general principle of locking up your investment for longer and [perhaps] getting better conditions, but the notice periods on those accounts aren't government-mandated, though?

Re: Tether Withdrawals Top $10B

#340

Post by cuteboy19 »

rglullis wrote: post #330
cuteboy19 wrote: post #319

Earlier quoted context omitted.

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.

>DAI has multiple assets,

And so did Terra. They held AVAX, BTC, LUNA and a little bit of USDC.

>150% at a minimum

And for Terra this was 100% at a minimum. It makes 0 difference.

>independent from one another

Cryptocurrency are extremely correlated.

>it managed to recover

UST itself had recovered from a previous depeg event

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