Tether Withdrawals Top $10B • Hacker News Board

Re: Tether Withdrawals Top $10B

#361

Post by hihihihi1234 » Tue, May 24, 2022, 10:03 PM UTC

rglullis wrote: post #121

askmike wrote: post #92

Earlier quoted context omitted.

USDT is the fuel that powers a lot the crypto ecosystem. Good luck trying to move USD around between different places in the crypto ecosystem (especially outside office hours). While possible it's complicated, slow and has terrible uptime. The biggest crypto markets in the world are quoted in tether.

Fiat-backed, collaterized stable coins that are better than USDT - USDC (Circle USD) - GUSD (Gemini USD) - BUSD (Binance USD) - EURS (Stasis EUR) Crypto backed (overcollaterized) stable coins that are soft-pegged and better than USDT - DAI (MakerDAO) - sUSD (Synthetix USD) - sEUR (Synthetix EUR) No one needs USDT anymore. The fact that even Binance gets more credibility than Tether should tell you how scammy the peop…

I don't follow crypto stuff closely, so maybe this question has a laughably obvious answer, but: what's wrong with Binance?

Re: Tether Withdrawals Top $10B

#362

Post by drc500free » Tue, May 24, 2022, 10:06 PM UTC

jonahbenton wrote: post #299

sgammon wrote: post #222

Earlier quoted context omitted.

how is fraud too strong a term? what else would you call deliberate financial malfeasance?

Have just seen it many times, specifically in finance, the risk complexity of which is really hard to understand, and which has an equilibrium of stasis punctuated with earthquake-level surprises that make even careful bets into speculations into existential threats more quickly than most people are able to respond. Fraud is a catchall for a really wide range of often unintentional outcomes. Incompetence rather than…

Very early on in my MBA, I ran a pretty simple simulation of different investment strategies with different expected returns and different tail distributions. Each round, new money entered the market and was distributed based on previous empirical returns.

The result was the same “slow up fast down” sawtooth we see in the real market, and investments that had real alpha were crowded out by investments that simply pushed risk into the tails. It took like an hour to assemble that agent-based simulation and it scared me out of finance. Most financial engineering seems to just be Martingale betting schemes that guarantee small to modest returns 99% of the time.

Re: Tether Withdrawals Top $10B

#363

Post by horsecabletruck » Tue, May 24, 2022, 10:07 PM UTC

ProjectArcturis wrote: post #352

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…

Auctions already exist. Time-locking your own money is a very niche case but I'm sure you could find a way to do it with regular dollars. You can buy other tokens with dollars. You can set up trust funds, corporations, and non-profits in dollars. Escrow exists. Loans exist. The difference is the decentralization of it, but why is that an advantage? We've had hundreds/thousands of years working out the kinks of, say,…

Crypto does not need to replace all financial activity. But it may be used in place of some activity, and opens up some new use cases that we did not have before. Somebody can purchase their coffee with fiat and their NFT (which may be an ENS domain) with an ERC20.

Take decentralized escrow, which underpins auctions, crowdfunds, markets, atomic swaps and more: it does not require a private third party.

Most traditional escrow are companies that will do data collection, long settlement windows, arbitrary thresholds, high take-fees, and restrictions based on locale.

A decentralized, open source, forkable, global, instant-settlement, ownerless, and feeless protocol to handle escrow of digital assets is rather novel.

Re: Tether Withdrawals Top $10B

#364

Post by TuringNYC » Tue, May 24, 2022, 10:08 PM UTC

drumhead wrote: post #64

We're in the get out while you still can phase. At some point they'll suspend conversion and holders will be stuck with something virtually worthless. It's like watching a landslide in its early stages, as soon as enough people realise what's going on it's going to be too late.

I know in the equities, forex, and other traditional markets, these things are all force-arb'd by arbitrageurs forcing the cycle. So is that possible here? Forgive my ignorance here, but how do i short Tether here?

Re: Tether Withdrawals Top $10B

#365

Post by jallen_dot_dev » Tue, May 24, 2022, 10:11 PM UTC

MockObject wrote: post #187

flerchin wrote: post #181

Earlier quoted context omitted.

Folks who want their fiat.

What does "pegged" even mean unless Tether is always willing to pay 1 USD for one? Then who would sell their tether for $0.99, at a loss?

Tether will only redeem amounts of $100k or more. The vast majority of people get out of USDT by selling it on the market.

Depending on how many people want to sell, how quickly they want to, and how many market makers are willing/able to arb it back up to $1.00, you might just take $0.99 instead.

Re: Tether Withdrawals Top $10B

#366

Post by Group_B » Tue, May 24, 2022, 10:13 PM UTC

horsecabletruck wrote: post #363

ProjectArcturis wrote: post #352

Earlier quoted context omitted.

Auctions already exist. Time-locking your own money is a very niche case but I'm sure you could find a way to do it with regular dollars. You can buy other tokens with dollars. You can set up trust funds, corporations, and non-profits in dollars. Escrow exists. Loans exist. The difference is the decentralization of it, but why is that an advantage? We've had hundreds/thousands of years working out the kinks of, say,…

Crypto does not need to replace all financial activity. But it may be used in place of some activity, and opens up some new use cases that we did not have before. Somebody can purchase their coffee with fiat and their NFT (which may be an ENS domain) with an ERC20. Take decentralized escrow, which underpins auctions, crowdfunds, markets, atomic swaps and more: it does not require a private third party. Most tradition…

You’re gonna use nft’s as your example for a crypto use case?

Re: Tether Withdrawals Top $10B

#367

Post by leokennis » Tue, May 24, 2022, 10:15 PM UTC

oh_sigh wrote: post #317

leokennis wrote: post #308

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 block…

The transaction limit and public-ness of transactions are implementation details of certain blockchains. There are blockchains with much better TPS, and blockchains where transactions are not public.

Okay so how can you have a payment system where:

- Transactions are on a decentralized blockchain

- That blockchain is however not public

- That blockchain allows for high(er) TPS

- That blockchain isn’t vulnerable to easy fraud

Am I missing a trade-off here?

Re: Tether Withdrawals Top $10B

#368

Post by boc » Tue, May 24, 2022, 10:18 PM UTC

hiq wrote: post #355

boc wrote: post #300

Earlier quoted context omitted.

Crypto is priced on the exchanges in terms of USDT, USDC, etc. If USDT dies then BTC goes to like $500 on Binance. The cascade effects will cause runs on other exchanges, and then you're betting that they have enough reserves to cover a run. I'd want to be far away from the scene when that happens. The fiat banking system is backstopped against this behavior by the FDIC, which guarantees your funds are safe even if t…

> If USDT dies then BTC goes to like $500 on Binance. Do you just mean that confidence will be so low that people will try to shun cryptocurrencies and dump their positions, or are you talking about another mechanism?

When people say that BTC is worth $30,000 on Binance right now, what they are really saying is that BTC is worth 30,000 Tether dollars (USDT) on Binance, because there's no mechanism on Binance to exchange BTC for US Dollars in a direct swap. You have to buy USDT and then use that USDT to buy BTC.* Basically USD -> USDT -> BTC. Today the ratio is 1 -> 0.998 -> 30,000, so in theory BTC priced at 30,000 USDT is currently worth 29,940 USD.

If the USD -> USDT relationship breaks and "USDT dies", then what happens is the prices goes 1 USD = 0.05 USDT, which means that 30,000 USDT worth of BTC on Binance [1] is now worth just $1,500 USD.

[1] https://www.binance.com/en/trade/btc_USDT

* You can buy directly with a credit card, but that's likely settled off-chain with a banking relationship. If you want to use a direct bank transfer, you have to buy a stablecoin first on Binance.

Re: Tether Withdrawals Top $10B

#369

Post by aeternum » Tue, May 24, 2022, 10:18 PM UTC

jakelazaroff wrote: post #172

lupire wrote: post #160

Earlier quoted context omitted.

That's no problem at all. The person who bought the Bitcoin / sold the Tether loses , but that doesn't affect USDT.

The person who bought the Bitcoin and sold the USDT is the Tether organization itself. Here’s the same example, stated more explicitly: 1. I buy 10 USDT from Tether in exchange for $10 worth of Bitcoin. Tether now has 1:1 reserves of Bitcoin backing USDT. 2. The price of Bitcoin decreases by 50%. Tether no longer has enough reserves to cover all the USDT in circulation. 3. I want to sell my 10 USDT back to Tether and…

This is a common misconception and is not at all how Tether works.

Tether acts more like a central bank, they allow people to trade USD for USDT for exactly $1. Trading USD directly can be difficult because there are extensive KYC rules and not everyone has access to a USD bank account.

On some exchanges, there is still a demand to trade in USD and it commands a premium due to the difficulty in trading it. This generates demand for USDT and slightly increase the price, suppose to $1.02 on this exchange.

Arbitrage traders can now buy USDT for $1.00 and sell it on this other exchange for $1.02. The tether corporation simply holds the original $1 (of actual USD). They should have $1 USD for each USDT in circulation, and that's a lot of 'float' that they can invest in safe things like short-term US treasuries to make money off simply holding the cash. No need to speculate on Bitcoin or other risky investments, they are making plenty off just holding cash-equivalents.

Re: Tether Withdrawals Top $10B

#370

Post by munificent » Tue, May 24, 2022, 10:22 PM UTC

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.

Don't forget: waste tons of energy, dump tons of carbon into the atmosphere, and generate tons of e-waste from fried GPUs.