Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Tether Required Recapitalization in May 2022

kalzumeus.com

Post reply on HN
Print view View original

51–60 of 336 posts

Re: Tether Required Recapitalization in May 2022

#51

Post by vzcx »

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.

Tether has the veneer of bank equity from the balance sheet "attestations" it publishes, but I think a better analogy would be that tether issues casino chips for the decentralized casino that encompasses the tether-based offshore exchanges and defi universe.

There isn't any real visibility into the balance sheet, but I'd guess most of the "collateral" boils down to margin loans issued at the exchanges, and since the house has the edge on those platforms, their ship stays afloat.

Re: Tether Required Recapitalization in May 2022

#52

Post by mathgenius »

Anderkent wrote: post #16
mathgenius wrote: post #11

It recently occurred to me, with the whole LUNA fiasco, that any "stablecoin" that is 1-1 backed by fiat can come under attack from leveraged traders, and get de-pegged. So it really doesn't matter what backing tether has, although more is obviously better. When the music stops it's anyone's guess what will happen.

You mean any stable coin that is _not_ 1-1 backed?

No, once you have leverage the ratio doesn't matter anymore. It's just whoever has deeper pockets wins.

Re: Tether Required Recapitalization in May 2022

#53

Post by SilasX »

shuckles wrote: post #39
SilasX wrote: post #25

Earlier quoted context omitted.

Eh, that just comes down to the arbitrary definition of how much of a discount you consider "losing the peg". Sidestepping the definitional issue, I certainly worry when a pegged asset trades at a persistent discount, even a small one, when it didn't before. A stablecoin should generally trade at a premium just as often as it trades at a discount. When one goes long periods without ever being above, that is a strong…

Before you thought Tether was unable to hold a peg why would you be long Tether? Isn’t it better to just be long the USD?

I had invested in liquidity pools (which collect fees for you for facilitating trades between tokens that you contribute), and some such pools had Tether. One downside of such pools is that, if any one of the assets in it goes to zero, all your invested capital goes to zero (though you keep the fees). It was therefore a Tether long.

I had also held a small amount for online purchases.

More generally, the reason to hold a stablecoin rather than a "real" dollar is because you need the former in order to interface with smartcontracts on blockchains. Also, to buy from merchants who sell goods for stablecoins because they're in a grey market that banks don't want to touch.

Side note: I don't know why people keep asking that question -- it gets asked and answered each time this topic comes up e.g.

https://news.ycombinator.com/item?id=31352262

Re: Tether Required Recapitalization in May 2022

#54

Post by lacker »

axg11 wrote: post #12

The most important point in this article is that whether Tether is fully collateralized ultimately doesn't matter. As long as there are well-capitalized parties (Bitfinex, other exchanges) that want to prop up Tether, it will be fine. Nobody should be under the illusion that Tether is decentralized or anything other than a bet on Bitfinex.

It's such a weird "bet", though. Pay $1, get back $1 if you win, get back $0 if you lose.

Re: Tether Required Recapitalization in May 2022

#55

Post by meirelles »

silly question, being USDT "only" 80B, why does it matter if it collapses? considering cryptos market cap is more than 1T, and 100B's wipeouts routine, sometimes during crypto winters (where we observe -80% across the board) or collapses such as Luna recently (>50B? no idea)

Of course, panic would happen, but still. I think people would move on, forget, and continue believing whatever they want to

just curious to read counterarguments

Re: Tether Required Recapitalization in May 2022

#56

Post by runesofdoom »

rowls66 wrote: post #20
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.

I assume that the USDT holding of the big exchanges are on behalf of their customers. I those customer begin asking to convert their USDT to USD, that could be a massive run.

I'm not a crypto participant, but my understanding is that technically Tether doesn't promise redemption in USD, just backing by USD. That still seems like it could precipitate a crash, but IDK if such a crash would be best described as a run or not.

Re: Tether Required Recapitalization in May 2022

#57

Post by peyton »

AlexandrB wrote: post #38
mh- wrote: post #33

Earlier quoted context omitted.

> once things get real in crypto (e.g. you can buy a house with it) it feels odd to speak about this scenario like it's a foregone conclusion.

No kidding. Crypto is deeply unpopular with a significant portion of the public - myself included. This is not the same as the early era of smartphones where you either had one or didn't really know much about them (i.e. were neutral). Many people have made up their minds on the utility (or lack thereof) of crypto and want nothing to do with it. Some of the recent incidents of backlash around NFTs in games come to mi…

It’s just money. It’s a commodity. If I can get a better deal on a house if I pay with crypto, I’ll do it—don’t need your approval, really.

Re: Tether Required Recapitalization in May 2022

#59

Post by PKop »

lacker wrote: post #54
axg11 wrote: post #12

The most important point in this article is that whether Tether is fully collateralized ultimately doesn't matter. As long as there are well-capitalized parties (Bitfinex, other exchanges) that want to prop up Tether, it will be fine. Nobody should be under the illusion that Tether is decentralized or anything other than a bet on Bitfinex.

It's such a weird "bet", though. Pay $1, get back $1 if you win, get back $0 if you lose.

If you just sit in Tether sure, but the ecosystem of stablecoins gives you access to DeFi yield opportunities with much better "passive" interest than bank deposits or treasuries, so the bet is a little more sophisticated than dollar for dollar.
Post reply on HN