When Tether Blows Up • Hacker News Board

Re: When Tether Blows Up

#61

Post by projektfu » Mon, May 30, 2022, 11:48 PM UTC

jcranmer wrote: post #59

projektfu wrote: post #57

Earlier quoted context omitted.

You could purchase millions in Bitcoin and other crypto, then sell it to a tether-based exchange for USDT. Then demand it as a withdrawal to USD. Rinse, repeat. No idea how that would end up panning out but you don't necessarily have to accept new tether in exchange for your USD.

The Bitcoin is still an asset they could sell for USD at a similar rate for what you acquired it for.

Ah, but tether foundation would have to buy it, but more likely a third party buys it with already existing tether.

They would have to liquidate a lot of Bitcoin into USD at once to satisfy a big request for withdrawal, which is a problem since tether's raison d'etre is to provide that liquidity because the dollars weren't there.

Re: When Tether Blows Up

#62

Post by adra » Tue, May 31, 2022, 1:04 AM UTC

acchow wrote: post #26

I feel like Tether wanted to prove, once again, that the entire system is illusory anyway just like how the Bretton Woods system ended in 1971 (no more convertibility of USD into gold). As long as people use USD effectively, who cares whether or not it is backed by actual gold?

The system promised other nations for gold, not necessarily US depositors, remember that. Also that this pillar of the financial system only started operating on the gold standard in the 1930's? The system has been dead for as long as it was ever alive and its continues to be held up as this shining pinnacle of capital market control done right.

Re: When Tether Blows Up

#63

Post by tim333 » Tue, May 31, 2022, 1:00 PM UTC

mattzito wrote: post #14

zamadatix wrote: post #8

As much as I have always had zero faith in Tether since the beginning I've also been reading about how it's going to blow up for about just as long. Here is an article from 5 years ago https://hackernoon.com/what-will-happen-when-the-shit-hits-t...

“The markets can stay irrational longer than you can stay solvent” It’s hard to predict when things are going to fall apart. Archegos capital worked for quite a while until one day it didn’t.

I can't see any reason for Tether to have to blow up or motivation for the people running it to let it do so.

Rather than holding US$ to back USDT they have been holding commercial paper ie. loans which pay interest. High quality corporate bonds pay something like 4% so say they invested their $72bn in that they'd be making $2.8bn a year for doing nothing.

They may have invested in iffier stuff but they are on such a nice earner they will be quite motivated not to break it. This is not like Madoff when he was paying 10% interest that was unsustainable. They are paying 0% interest which is not so hard to sustain.

If something gets them it'll probably be anti money laundering regulations, not running out of money.

Re: When Tether Blows Up

#64

Post by Animats » Tue, May 31, 2022, 11:11 PM UTC

ahnick wrote: post #54

Animats wrote: post #46

Earlier quoted context omitted.

It collapsed because everyone started withdrawing their money at once, and then the whole house of cards collapsed. That may be happening to Tether now. Take a look at Tether's market cap chart.[1] Click on Overview->Market cap-> 1 month. You can see the cashouts. Between 5:09 AM and 5:14 AM on May 27, 2022, the market cap of USDT suddenly dropped by $750 million dollars. There have been five huge cashouts like that…

The Tether MC has been leveling off. (See the 1M view of MC on CoinMarketcap -> https://coinmarketcap.com/currencies/tether/ ) While Tether may be technically insolvent there looks like there would need to be another $40 Billion in redemptions to really test the peg based on the latest attestation. (They had $82B MC & now have a $72B MC. Cash Equiv. - Comm. Paper & COD = $50B back in March). My guess is they may have…

It's only been four days since the last dump, and there was a 3-day weekend in there. Too soon to say it's over.

Re: When Tether Blows Up

#65

Post by evdubs » Wed, Jun 01, 2022, 1:54 AM UTC

tim333 wrote: post #63

mattzito wrote: post #14

Earlier quoted context omitted.

“The markets can stay irrational longer than you can stay solvent” It’s hard to predict when things are going to fall apart. Archegos capital worked for quite a while until one day it didn’t.

I can't see any reason for Tether to have to blow up or motivation for the people running it to let it do so. Rather than holding US$ to back USDT they have been holding commercial paper ie. loans which pay interest. High quality corporate bonds pay something like 4% so say they invested their $72bn in that they'd be making $2.8bn a year for doing nothing. They may have invested in iffier stuff but they are on such a…

Not to disagree with your point, but commercial paper rates have been more in the range of 0-2% over the past couple years.

https://www.federalreserve.gov/releases/cp/rates.htm