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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#421

Post by SparkyMcUnicorn »

lmm wrote: post #415
SparkyMcUnicorn wrote: post #293

Earlier quoted context omitted.

Zelle has strict limits on how many transactions you can do and how much you can transfer. Yeah, ETH has high fees. Don't use it directly. Use an L2, Polygon, or something else where fees are pennies or less. ETH is not a good chain to be on for the average user, unless you have a lot of money to waste on gas.

Those "L2s" are the same kind of entity as something like Zelle, and equally able to exercise controls on what kind of transactions you can do and for how much.

What are the limits and who they were ever applied to?

Personally, I'm most familiar with other chains like Polygon, Aurora, Harmony, etc. Dealing with large sums of money is a non-issue. Ever.

Re: Tether Withdrawals Top $10B

#422

Post by smoovb »

balefrost wrote: post #297
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 NY Attorney General successfully prosecuted the parent company of Tether and Bitfinex. They found that the two were sharing funds, transferring them back and forth to make it appear that Tether was fully backed while using the same funds to prop up Bitfinex (after they lost coins, maybe in a hack?) https://ag.ny.gov/press-release/2021/attorney-general-james-... That doesn't necessarily mean that Tether's assets a…

The outcome was a $18.5 settlement with no admission of wrong doing. If there was really shady activity, would NYAG disclose it?

Re: Tether Withdrawals Top $10B

#423

Post by smoovb »

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.

A chart of the landslide: https://stablecoins.wtf/

Re: Tether Withdrawals Top $10B

#424

Post by Gigachad »

throwaway6734 wrote: post #263
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…

What's stopping them from just printing tethers without dollar backing and injecting them into the market?

Considering how much marketing there is over “decentralised” and “trustlesss”, crypto systems are remarkably based in trust.

Re: Tether Withdrawals Top $10B

#425

Post by tyrfing »

dragontamer wrote: post #419
tyrfing wrote: post #283

Earlier quoted context omitted.

> So if Tether had say, $50-billion in 10-to-30Y treasuries at the start of the year, they only have $45-billion of that now. They don't. As stated at the link: > U.S. treasury bills comprises U.S. treasury bills with a maturity of less than 120 days.

Except USDT doesn't have any audits or proof of their reserves. My overall point is that USDT could very well be buying up dollar-backed securities, such as 30-year treasuries, and yet still lose a ton of money if the market moves under them. Unless Tether allows 3rd party audits of their reserves, I don't think its necessarily safe to assume that they actually hold those reserves.

If you assume that the attestation is fabricated, there's really no reason to talk about treasuries - might as well assume they embezzled 50-70B. Personally, I think it's mostly accurate, with discrepancies being around things like marking securities to market. (Just look at VC practices there, for example.) The explicit statements of "X amount of treasuries under Y maturity" are likely to be true, a vague catchall like "other investments" not so much, which puts an upper bound of ~ 15B short.

Lastly: a temporary liquidity crisis that drives USDT down far below the peg is something that would be incredibly profitable for the operators. With perfect information, it would be a situation of trading 50 cents for dollars, and could be used to erase a partial deficit overnight.

Re: Tether Withdrawals Top $10B

#426

Post by smoovb »

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…

Correct. Finex may have started out on shaky ground, but now passed a NYAG lawsuit and is working to become more legit. Even the CEO is out in public now doing podcasts and he never used to be. The only way USDT fails now is a concerted attack, likely by a government, thru some mix of disinformation, lawsuits and new laws.

Re: Tether Withdrawals Top $10B

#427

Post by aeternum »

jakelazaroff wrote: post #408
aeternum wrote: post #369

Earlier quoted context omitted.

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 gener…

> 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. That's the issue — they don't have $1 USD for each USDT in circulation.

How do you know?

Tether has seen over 10B in withdrawals over the last couple weeks. The total circulating supply is 73B so that was something like a 12% withdrawal over a very short time window.

Consider that banks are only required to maintain a 5% leverage ratio. 12% is a pretty extreme test, it's enough to cause most banks to fail. It also does not make sense for Tether to take on additional risk. They can make a nice yield by investing the 70B+ in very safe highly liquid short-term US treasuries.

Re: Tether Withdrawals Top $10B

#428

Post by slim »

jameshart wrote: post #323
Geee wrote: post #180

Earlier quoted context omitted.

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…

In Swizerland maybe? (or Malta, Luxembourg, Isle of Man, etc..)

Re: Tether Withdrawals Top $10B

#429

Post by imtringued »

lilyball wrote: post #387
jcranmer wrote: post #310

Earlier quoted context omitted.

> They only need to have made 2% on those other investments and the 2% lost on crypto is irrelevant. A quarter of their investments are commercial paper, which hasn't averaged as high as 2% yield since a brief period in March 2020. Actual cash of course has 0% yield. US Treasuries (sub 1-year), which make up nearly half their assets, also hasn't hit 2% yield any time recently. So no, they aren't recouping their loss…

Cash has a negative yield, because rats and other vermin nibble on it.

Close. Cash has a negative yield once savings exceed investments because any additioan investment in physical capital will produce capital that rats and other vermin nibble on. If the yield is stuck at 0% then the physical capital is gone but the money is still there, leasing to inflation. Since money is a claim on the production of other people, it would be wholly absurd to distort the market by forcing the interest rate to never fall below zero as this does not deal with the rat problem. In fact it makes it worse because holding onto money let's you avoid costs associated to rat damage and therefore it fools our brain into thinking we have something that really isn't there anymore, the rats ate it. So instead, to prevent rats from eating our physical capital, we decided to produce none and leave a portion of the population unemployed. As it is illegal to trade without money the division of labor breaks down, people can no longer feed themselves because it is illegal for them to do so. The masses get angry at the rich because they took all the remaining opportunities while simultaneously pretending to be the heroes with their philanthropy.

Re: Tether Withdrawals Top $10B

#430

Post by logifail »

thehappypm wrote: post #386
logifail wrote: post #271

Earlier quoted context omitted.

> It sounds like the only way to do this is to create your own bank which directly integrates with the federal reserve ...but isn't the whole point of Tether to stay as far away from the traditional banking system as they can? This of course includes avoiding - as much as possible - all the KYC/AML legislation that traditional banks are obliged to follow?

Not at all, the whole point of Tether is to create a clean link to the US financial system — a tether to it.

> the whole point of Tether is to create a clean link to the US financial system

If one's business is "providing a clean link to the US financial system", why would one choose to avoid financial services regulation?[0]

If one is clean, or at least trying to look clean, why would one choose an accountant based in the Cayman Islands?[1] This bit in particular is beyond parody.

[0] https://www.coindesk.com/policy/2021/01/26/what-tether-means... [1] https://www.coindesk.com/markets/2022/01/26/tethers-new-acco...

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