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Tether Withdrawals Top $10B

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Re: Tether Withdrawals Top $10B

#441

Post by kwere »

MisterBastahrd wrote: post #9

I'm sure this is all just fine and we just aren't sophisticated enough to understand the big brains behind the upcoming blockchain revolution that's going to decentralize all the things and grant freedom to everybody while also making us all rich. Hell, just today I read about a new coin that was going to behave as a stand-in for gold so that we could invest in that instead of destroying the environment to pull the a…

One of the brains Giancarlo Devasini, Italian chameleon, plastic surgeon, got sued from Microsoft and Toshiba for "patents issues", got accused by UK courts of to"fraudulent tax losses",joined Bitfinex soon after its founding that year, running its trading and risk management operations [0]. Truly a self-made/self-taught men, representative of Italians business ethics.

[0] https://www.ft.com/content/4da3060c-8e1a-439f-a1d7-a6a4688ad...

Re: Tether Withdrawals Top $10B

#442

Post by jcpham2 »

MockObject wrote: post #175
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 If the Tether is pegged to the USD, who would ever sell one for $0.99?

I think it would be super helpful if some of ya'll were to watch the USDT:BTC (edit: really any USDT currency pair) order books on the exchanges on different intervals and watch the market making bots in action - this is what I think. See the spreads, see the intervals they make their trades on - study it.

Re: Tether Withdrawals Top $10B

#443

Post by jakelazaroff »

aeternum wrote: post #427
jakelazaroff wrote: post #408

Earlier quoted context omitted.

> 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…

> How do you know?

They've admitted to it in court. Multiple times. Patrick Mackenzie (patio11 on here) has a couple good articles about the fraud. [1][2]

> 12% is a pretty extreme test, it's enough to cause most banks to fail.

A bank can cover its customers' withdrawals by borrowing money from the Fed. If a run happens on Tether, who's going to rescue them?

> It also does not make sense for Tether to take on additional risk.

It might not make sense. That doesn't mean they didn't do it.

[1] https://www.kalzumeus.com/2022/05/20/tether-required-recapit...

[2] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ (2019)

Re: Tether Withdrawals Top $10B

#444

Post by logifail »

cormacrelf wrote: post #440
logifail wrote: post #276

Earlier quoted context omitted.

> If copper were going up in value compared to the other metals, you’d want to hold copper. But you can also sell all your metals for cash. You would do this when all the metals are going down in value, which means USD is the “best-performing metal” and you want to be holding it. I'm not sure I follow that description, are you really saying one buys commodities when they're rising in price and sells when they're fall…

Uh yeah, predicting the future is the entire idea. People are always guessing what the price is going to be in the future. If you guess correctly you make money when you sell later. If you don't, you lose money. Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator. That's not only true of metals exchanges. If you…

> Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator.

It seems a majority of those (highly-paid) people incentivised to predict the future seem not to be that good at it?

FT: "Active managers fail to beat the market again"[0]

FT: "Only a third of UK-based active equity funds outperform passives" [1]

FT: "Three-quarters of stockpickers lagged US market last year"[2]

FT: "Active funds underperformed during Covid market stress, watchdog finds"[3]

[0] https://www.ft.com/content/7e4c0d91-8b6d-419b-9be3-80131d5cb... [1] https://www.ft.com/content/06317e0e-b6bf-4fdc-9255-cf664cb92... [2] https://www.ft.com/content/d1f96d83-1a72-47d7-a4af-2483bd49b... [3] https://www.ft.com/content/fbb3d1e7-f5a7-41fc-95c7-d7bf20e3c...

Re: Tether Withdrawals Top $10B

#445

Post by jakelazaroff »

cormacrelf wrote: post #437
jakelazaroff wrote: post #220

Earlier quoted context omitted.

This all is a good explanation for why you might hold USD instead of other assets. It’s a less compelling explanation for why you might hold USDT, which would be the same as holding USD except it also might crash and leave you with nothing.

I'm not going to do the job of Tether's accountants. There is no compelling reason to hold it given this risk. Nevertheless people do, and the reason is what I said + they additionally believe the claims about it being redeemable 1:1 for USD + it's easier to buy and sell crypto with it than actual USD.

>* There is no compelling reason to hold it given this risk.*

Sounds like we're on the same page :)

Re: Tether Withdrawals Top $10B

#446

Post by cormacrelf »

logifail wrote: post #444
cormacrelf wrote: post #440

Earlier quoted context omitted.

Uh yeah, predicting the future is the entire idea. People are always guessing what the price is going to be in the future. If you guess correctly you make money when you sell later. If you don't, you lose money. Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator. That's not only true of metals exchanges. If you…

> Lots of people are highly incentivised & therefore trying really hard to predict the future, and this is what makes capitalism an efficient resource allocator. It seems a majority of those (highly-paid) people incentivised to predict the future seem not to be that good at it? FT: "Active managers fail to beat the market again"[0] FT: "Only a third of UK-based active equity funds outperform passives" [1] FT: "Three-…

You missed the point entirely, which is a bit sad for the amount of effort I put into writing all that. It is right there in the bit you quoted. Individuals may do poorly or they may do well. The market as a whole, as you point out, is likely to do better than individual investors. The reason the market does well as a whole is that individual correct predictions are rewarded and incorrect ones are not, and there are a lot of people guessing. The smart ones tend to use more money and account for a lot of the market's overall intelligence, and the small fish tend to be dumber, so you would expect a Pareto distribution of performance of individual investors.

If your evidence that people aren't making good predictions is that the market itself does better, then... who do you think the market is made up of? It's just more people!

Are you really trying to argue that people aren't trying to predict the future when they buy a stock? Or are you just butting your head against these concepts and getting nowhere?

Re: Tether Withdrawals Top $10B

#448

Post by jerf »

sudosysgen wrote: post #358
jerf wrote: post #174

Earlier quoted context omitted.

And look at the incentives of all the individual parties in such a scenario. I think this is the only way a "stablecoin" can function as designed... but it is not possible to construct an entity that has any scalable incentive to provide the backing that would create such a coin. For that entity, it is nothing but downside. Therefore, stable coins are a fiction on par with perpetual motion machines. In the short term…

Why couldn't you use short-term fed paper? Even a 0.5% yearly yield would be more than enough.

But why would you use short-term fed paper to make money with your stake, when you could just plain buy short-term fed paper, without the risk of people "redeeming" it from you?

Backing a currency isn't about taking deposits from people. You can't back with deposits because your liabilities = assets then. You have to put your own stuff up, but then all you are doing is running the risk that people will redeem it away from you. Backing a currency is basically just giving your stuff away with extra steps.

Re: Tether Withdrawals Top $10B

#449

Post by johnrgrace »

LatteLazy wrote: post #261
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…

They only need to have made 2% on those other investments and the 2% lost on crypto is irrelevant. Also, if 2% of outstanding tether has been lost (forgotten wallet keys etc) then those can never be redeemed and again, tether wins. Inflation is another factor worth considering here: tethers deposits are deminishing but it's investments are (or should be) shielded. I think people fail to notice how similar a (non-frau…

The federal reserve is a backstop for banks, if they need cash to pay depositors they are there with unlimited cash. Part of why they are there is because they know every banks assets exceed their deposits. Tether doesn't have that backstop.

Re: Tether Withdrawals Top $10B

#450

Post by aeternum »

jakelazaroff wrote: post #443
aeternum wrote: post #427

Earlier quoted context omitted.

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…

> How do you know? They've admitted to it in court. Multiple times. Patrick Mackenzie (patio11 on here) has a couple good articles about the fraud. [1][2] > 12% is a pretty extreme test, it's enough to cause most banks to fail. A bank can cover its customers' withdrawals by borrowing money from the Fed. If a run happens on Tether, who's going to rescue them? > It also does not make sense for Tether to take on additio…

From your link:

>The Consolidated Reserves Report alleges that Tether’s reserves included, as of March 2022, $4,959,634,446 of “Other Investments (including digital tokens).” A 3.27% decrease in the value of these investments wipes out all Tether equity and causes their tokens to be undercollateralized.

First this is wrong, equity includes Enterprise Value which the article seems to ignore. The ability to control $70B of float is worth quite a lot enterprise value. They should be able to take out debt against that EV (or even sell shares/equity) if needed to re-collateralize.

They can also handle another 73-5=68B worth of redemptions before they need to touch those "Other Investments".

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