Tether’s total (on-chain) liabilities sum to a bit less than two months’ worth of Federal Reserve purchases of agency mortgage-backed securities. They’re huge, if they’re a fraud they’re probably the biggest ever, but in macro terms they’re small fry.
When it says out of thin air, it means that is some verifiable confirmation of no collateral? Or is the "out of thin air" part just means normal minting?
No one has seen any of their collateral or knows how much of it they actually have. I believe the finance people call this being over-leveraged but I'm not an expert. Seems kinda weird that the SEC hasn't looked into it.
I don't know. I'm not an expert but seems like there should be some institution that figures out whether financial games like stablecoins are actually economically beneficial and whether they should be regulated in some way or other.
It's even worse than that. Tether fired that auditor (Friedman LLC) because they were looking into it in a bit more detail.
From the very same article: "Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame."
Even Friedman LLP says in the internal memo “Do not rely on this report”.
It's been almost 4 years since that and no independent firm has ever audited Tether.
The US treasury released a report on stablecoins last month warning that a run on them could disrupt the wider financial system:
> In addition to market integrity, investor protection, and illicit finance concerns, the potential for the
increased use of stablecoins as a means of payment raises a range of prudential concerns. If stablecoin
issuers do not honor a request to redeem a stablecoin, or if users lose confidence in a stablecoin
issuer’s ability to honor such a request, runs on the arrangement could occur that may result in
harm to users and the broader financial system. Further, to the extent stablecoins are widely used to
facilitate payments, disruptions to the payment chain that allows stablecoins to be transferred among
users could lead to a loss of payments efficiency and safety and undermine the functioning of the broader economy. The potential for stablecoin arrangements to scale rapidly raises additional issues related to systemic risk and concentration of economic power.
I see this as the government equivalent of shouting from the rooftops. It's just a shame no one will treat it that way.
Just about every Ethereum competitor has some equivalent to ERC20 tokens. I'm surprised Tether dedicated 1 Billion USDT to TRON but its likely because they don't think there will be any repercussions for creating liquidity out of thin air.
A huge amount of Tether is TRC20 (if memory serves, the majority). Tron is very China centric, and Tether has massive connections to Chinese capital control evasion.
Nah, most of USDT is on TRC20 because gas fees are way cheaper there and most of the exchanges support withdrawing USDT using TRC20.
So all arbitrageurs, market makers, etc, transfer USDT between different entities through TRC20 network. USDT on TRC20 started to increase only after Ethereum gas fees got ridiculously high and it became too expensive to use even for pretty high volume market makers.
Absolutely not. Large Tron issuances started well before Ethereum gas fees soared. We are talking a couple of years ago.
Also, market makers moving Tether around do not give two shits about $60 in gas fees or whatever. Additionally, a huge amount of Tether has gone into DeFi on Ethereum and L2s (or bridged to newer L1s, which typically don't have a Tron bridge).
TRON is used for tether payments in Southeast Asia, so there’s a decent amount of volume there. These tether takes eg “printed out of thin air” etc are tiresome. They also do billions in redemptions. Even if half their commercial paper was in Chinese real estate developers (which I think is a dumb rumor), it’s still likely they end up 90%+ collateralized if everything suddenly moved against them. Around halfway thru this podcast Sam bankman-fried + Matt Levine do some scenario analysis https://open.spotify.com/episode/2Oy0ZRklDSMMu40PTDiyOd?si=M...
My take on all of it is that the tether doomers have no idea what they’re talking about. Even the UT finance professors’ charts can be explained by the simple idea that people that made a lot of money in crypto wanted to take some of it off the table.
Every time there's a tether story here, the inevitable discussion of fraudulent activity comes up because Tether seems like an outright scam. I'm inclined to believe all that from what I've read and however little I can make sense of. However, I can't really tell how this ends. They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right.
Eventually, that's bound to catch up, but I suspect it's going to hurt a lot more than just those with crypto assets and hurt a lot of those without crypto assets, no?
Of course but you could give people some free money nevertheless and it would make the world a better place.
What do you think would happen if you gave 1000 dollars to each person in America every month? I think a lot of good would come from that and not much bad.
A UBI doesn’t necessarily result in inflation. The later is a combination of monetary policy and expectations. UBIs can be paid by means other than printing money.
The thing is, inflation caused by printing money AND distributing it directly and every to all people is fine… it’s just the most efficient / progressive wealth tax!
Even if (printing and then) giving everybody $40K/yr caused, say, 40% inflation, anybody making under $100K/year would be better off. You actually wouldn’t need any taxes if the government just printed all money it needed, hopefully most of which is in the form of direct checks to all residents/citizens.
>it’s just the most efficient / progressive wealth tax!
no, it's not a wealth tax. it's a cash tax. if you printed money and caused 100% inflation, that'll just cause every scarce asset (eg. houses, stocks, gold) to double in price. Since the rich hold most of their wealth in assets, not cash, I doubt it will be fair or progressive.
> Stocks aren't scarce assets. They're infinitely dividable, so the price per share going up doesn't cause them to be harder to buy.
That doesn't make any sense. Stocks ultimately represent ownership in an enterprise that consists of people, equipment, and intellectual property. Those are scarce. Just because the ownership units is infinitely divisible, doesn't mean they aren't scarce. If people only bought stocks so they could hang a fancy certificate on their wall, you'd be right. But people don't do that, they buy stocks to get dibs on a certain fraction of future production. That's the scarce part.
>Houses aren't really either, it's the land that is. Thanks Henry George.
1. seems like a nitpick? When people talk buying "houses", they generally talk about buying the combo of house + land it sits on.
2. houses are still scarce[1]. we can't will infinite houses into existence. they're more plentiful than original picasso paintings, but that doesn't make them not scarce (at least according to the economic definition).
Well, the other reason stocks aren't scarce is that the company can print new ones. You'd expect this to reduce valuation and therefore have shareholders oppose it, but in practice that doesn't seem to happen lately.
> If people only bought stocks so they could hang a fancy certificate on their wall, you'd be right.
This is highly underrated as a reason. What's the fundamental improvement in Gamestop and Tesla causing their stock price to go up this year?
> 1. seems like a nitpick? When people talk buying "houses", they generally talk about buying the combo of house + land it sits on.
Many people don't seem to understand how to separate them, leading to beliefs like "luxury apartments cost more because they have granite countertops" and "gentrification can be prevented by not building new buildings". You can't build houses forever, but you sure can build many more of them than the US does right now.
> Well, the other reason stocks aren't scarce is that the company can print new ones. You'd expect this to reduce valuation and therefore have shareholders oppose it, but in practice that doesn't seem to happen lately.
If you're doing this in an above-board way, it's still scarce, because the whole reason why companies even issue new shares is to raise capital. When you're doing that, you're trading one scarce resource (capital) for shares, which means that the shares are also scarce. You can make an infinite amount of TVs given infinite raw materials, but TVs are still scarce.
>This is highly underrated as a reason. What's the fundamental improvement in Gamestop and Tesla causing their stock price to go up this year?
Any evidence that people bought exactly one share TSLA/GME just so they could hang on their wall and/or feel smug about it? In both cases it's far more likely they bought into it because of expectation of future profits (from greater fools or actual operating profits).
>Many people don't seem to understand how to separate them, leading to beliefs like "luxury apartments cost more because they have granite countertops" and "gentrification can be prevented by not building new buildings". You can't build houses forever, but you sure can build many more of them than the US does right now.
While there might certainly be people who think the housing crisis is caused by "developers only building luxury condos" or whatever, I doubt this is a popular view on HN. Any time a housing-related thread shows up on HN, that explanation almost never shows up, and the NIMBY/zoning explanation almost always does. I'm sure a decade+ member like yourself can see this. Therefore I don't really see much point in arguing this distinction, because you'd be preaching to the choir.
Except IF the money is being printed to be distributed to everybody, there’s going to be more money in the hands of people who can’t afford picassos and Malibu real estate, and less going to those who can, so I would expect in that scenario the increase in price of those assets would likely have a hard time keeping up with inflation.
The taxes are what gives the official currency its value. If you didn't have to pay sales tax in USD for every transaction, it would be equally or more convenient to pay in other currencies, but this keeps it all in USD.
I think it might be hard to bootstrap this system without tax maybe, but the usd is pretty well established now and I bet they could make the switch and people would keep using it!
Prices only go up if the demand approaches or exceeds supply. If there is capacity in the system all is good, more jobs. This is how Franklin D. Roosevelt brought an end to the Great Depression.
If the economy is running at capacity and you wanted a UBI taxes would have to increase to prevent inflation. This would end up being wealth redistribution.
Only if there’s a bread cartel. Otherwise it’ll sell at a much lower equilibrium price, as anyone who can undercut him will take all his sales while still profiting (as marginal cost of additional bread production is well below $1000).
> I think a lot of good would come from that and not much bad.
Here something that'd happen - the homeless in encampments would get hoovered up by slumlords who put them in squalor and consume their $1k checks. Poor people would have more children because each child = $1k/mo, even if they have to wait 18 years. Abduction would be easy - the ransom pays itself over time. Fraud would be rampant. The ultra poor underclass who are undocumented would still get nothing, further exacerbating the divide.
“ Abduction would be easy - the ransom pays itself over time. Fraud would be rampant.”
Do we have any evidence that abduction and fraud is rampant in countries in Western Europe, known for the very generous social programs? Are they exploding with poor people having kids??? Is it dangerous to live in, idk, Sweden because someone is gonna kidnap you for your social bux? I’m genuinely asking because the notion of rampant abducting and child having hasn’t happened in countries I know of with very generous social programs.
The USA actually does have laws against creating anything that might be interpreted as competing with the official currency. This is the most likely avenue for violence to come in, as people try to resist devalued money by using substitutes.
There are generally no laws in the USA against creating and using alternative currencies. I can buy and sell using Euros or Monopoly money or whatever if I can find a willing counterparty. However, if those transactions are taxable then I have to report them at the US Dollar fair market value equivalent and pay any taxes due in US Dollars. And if someone owes me a debt I am required to accept US Dollars for settlement.
> There are generally no laws in the USA against creating and using alternative currencies.
This is not correct. If you try minting coins, you can be shut down. You can buy and sell using whatever you want, yes. There aren't laws against using alternative currencies. But there very much are laws against creating them.
If you don't intend to be hyperinflationary, the printing of money has to be associated with the acquisition of value or the assumption of debt. The debt is repaid through taxation.
Grandparent comment is referring to the position that taxes are extracted via threat of force. This is an extremely emotionally fraught position, and it's difficult to discuss rationally.
So, the reasoning goes, if you have to tax to print money, it is done by resort to force or threat thereof.
So to paraphrase, "Printing money is inflationary, which I believe is bad, and I believe the only way to rectify that is through taxation (violence)." That means you are the one who is proposing violence, not the commenter suggesting that we print money. They never said anything about taxation.
I would argue it is taken from people (yes with violence if needed) in exchange for goods and services provided, part of an implicit contract you are forced to make when you are a citizen.
I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it, which is generally something the left very much dislikes.
As already seen with covid aid, people wouldn't work in low wage jobs any more. This would lead to inflation or disappearance of some amenities. E.g. you might have to put your groceries into your bag yourself, or might have to pay a dollar extra for that service. This isn't something negative though, just a neutral change I guess.
It would help a lot of poor and suffering people, but note that even in countries with good unemployment benefits, homeless people still exist.
> I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it
What do you mean by “strict” and why is this inaginee5 to be necessary? Note that UBI is usually envisioned with a defined population but the absence of means or behavior testing within that population, either “citizens” or “citizens and LPRs” or “citizens and aliens with work authorization” or “citizens and aliens with satisfactory immigration status in a specific set of visa categories based on basis and duration” would all be valid populations, with wildly different impacts on the viability of UBI with any given immigration policy.
> I'm in favour of UBI, but note that it'd require extremely strict immigration policy as well as good enforcement of it,
COVID aid isn't like UBI, critically, key parts of it (enhanced unemployment) are conditioned on absence of work or reduction of it below pre-benefits levels, and thus forces people to choose between benefits and work. This is the kind of incentive with means tested benefits that UBI is intended to fix.
To your first point, regardless of which class of people you consider for UBI inclusion, even if you only consider citizens of the USA, it will have a tremendously attractive effect for billions of people around the globe. Even now quite many people want to immigrate in to the USA and the USA has multiple systems designed to keep them out, but UBI will make this way worse, which is why I said that enforcement needs to be very strict.
Plus I'd say it would be even more unfair for the undocumented immigrants than it is now because they would not get any UBI. But if you gave UBI to the undocumented, way more people would attempt to become undocumented immigrants, by overstaying their visas, etc. Which then probably will lead to you having to issue less short term visas, or actually deporting undocumented immigrants.
COVID aid was designed to discourage (some kinds of) work because we literally didn't want people to (do that kind of) work; that being the point of closing the stores. It was more like disaster relief than anything else.
It also didn't create new money insofar as it was used to pay existing debts like rent; what it did was avoid a financial crisis.
Other kind of aid designs don't do this very much; demand is infinite and won't go away if you give people some money.
"Poverty" is not about how much money you have, income or wealth. The only reason money matters to poverty or to human well-being is when that money can buy something meaningful. If we find we are able to forget this, it stands as a testament to the remarkable stability of modern fiat currency.
Marking arbitrary large numbers in digital ledgers, blockchain or otherwise, does not cause prosperity. When everyone has infinite money, no one has any money at all, they just have their things.
Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance? I am genuinely curious why people think that is a sustainable idea.
You can't keep traders from trading bitcoin. That doesn't mean bitcoin is unprincipled. It's in the whitepaper and the design of bitcoin. For example, the 21M btc supply limit. Bitcoin's design reflects a certain ideology about money.
>Bitcoin: by limiting issuance to 21M we have made price manipulation of our currency impossible
At what point did people claim that "price manipulation of [bitcoin]" was "impossible"? I think you're mistaking "price manipulation" with "dilution" (eg. quantitative easing or debasing).
Dilution is still possible either by forking it (and having normal non-Austrians accept the new one) or by starting lending programs (since banks create money by lending it.)
Technologies don't have principles, people who use them have principles; the people who buy and sell bitcoin are mostly the same as the other cryptocoins.
Satoshi intended certain principles with the creation of bitcoin, but these are not the predominant driver of its use in actuality.
Bitcoin really is defined by its principles. A fork that violates its principles (say, changing the 21M cap or violating the transaction history which hashes back to the genesis block) wouldn't be bitcoin, just like no amount of people believing the earth is flat would make it flat.
so by "principled" you just mean "has algorithmic constraints?"
that's not what most people mean by principled. Also, in that sense, crypto also has principles in that most altcoins are built on ethereum, which also has algorithmic constraints.
Bitcoin has principles the way most people mean the term. Ethereum does not. I've already given examples that make it clear.
Ethereum's algorithmic constraints are merely algorithmic constraints that can be changed easily, whereas bitcoin's key algorithmic constraints also are actually principles; changing them results in a non-bitcoin fork.
The principles of crypto finance? Cryptocurrencies are not built on principles, they are built on technologies. The only unifying principle across all cryptocurrencies that I've noticed is that you access your assets through a cryptographic hash. You could launch USD+SEPA+your banks online banking interface today and call it a cryptocurrency, it's as much a cryptocurrency as for example Ripple is.
edit: ok the other "principle" might be that all (most?) cryptocurrencies are independent from government, they are owned and managed by individuals, companies and groups of people/devices (if you're lucky).
>Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance?
or maybe the crypto community isn't a monolith, and all the cryptoanarchists aren't the people who hold/support tether?
They might not be a monolith, but I've yet to see participants advocating for Tether to show audited financials like anybody else in their position would be obliged to.
They appear to all be playing by the rules Tether is setting.
> What makes you sure that at least some of the "tether is a scam (or is at least shady)" people aren't also crypto "participants"?
I imagine there are many people that believe in crypto and participate in the markets, but dislike that Tether is behaving like the fiat central bankers they abhor so much.
> Or maybe they're voting with their feet and moving to an exchange that doesn't deal in USDT, and so won't be subject to tether's rules?
Unbacked Tether inflates the price of any coin that it's used to purchase, so what you're describing would have no effect. When Tether's $1bn pump pushes up BTC's price from it's 20% overnight decline, are the theoretical USDT-free exchanges going to reflect bid/ask prices as they were pre-pump? Of course not.
There are many crypto currencies with different goals and approaches to handling market dynamics. And there are some where doing such a think is fully against there principles and would brake their marked dynamics. But not necessary for other reasons. But this also means you need to look at the specific crypto system in question to decide why it might or might not work.
I don't know much about Tether specifically, but lets say you have a new arbitrary crypto currency you try to make price stable, but like many crypto currencies it end up having deflationary tendencies (more demand, money getting "locked" in, etc.). In which case minting new coins would not only be sustainable but likely necessary.
Yes, Tether comes with a ton of suspicious circumstances and leadership that just nervously repeats the phrase "the money is there!" in interviews. A YouTube channel named Coffeezilla has been doing some great reporting & investigations on it (and many other crypto scams). It's insane what's going down on the crypto market, including influencers selling unmarked ads for currencies.
" They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right."
For the most part the crypto market being unregulated means that there can't be any consequences, except for market consequences. And market consequences are vaaaaastly worse. It's basically like having no one make you wear a seat belt. Sure seems fine until you're just dead.
It's still a great deal for the perpetrators to only make 1MM in liquid capital after defrauding billions. Non-market consequences of theft include jail time and forefeiture of funds outside of an LLC.
They seem confident that there will be no repercussions to minting money out of thin air and, so far, they've been right.
Tether and bitcoin have been very robust, bitcoin has crashed and recovered many times now. But I have to say that every single bubble has involved the statement "so far, they've been right." as the follow-up to "this time things are different".
Right now I think a good analogy is it's like musical chairs. The game is fine as long as the music is playing. When the music stops, someone's gonna lose big.
The problem is when the music stops and there's a run on crypto. People are trying to get out of $USDT and convert it into cash. Exchanges have to have buyers of $USDT so they can exchange $USDT back into cash for anyone that wants to. But they can't just create dollars out of thin air. If there's no buyers for $USDT anymore than the "currency" flatlines, it's no longer tied to the dollar.
If Tether were truly backed 1:1, Tether itself could just buy $USDT with its own cash on any exchange, and that would be enough to keep their currency afloat and stop the run.
>But there is a fair probability it becomes worthless, meaning that you gain from it.
>While you need to pay premiums in the interim, for something with an indefinite timeframe, that risk seems fairly minor for the potential reward.
1. the chance of collapse might be lower than you think. the "tether is going to collapse any day now" sentiment has been around for years now, but collapse has proved elusive.
2. borrowing costs are high. I searched around and it looks like the APY for lending out tether is around 9%. The cost for borrowing tether is certainly higher. If you held a $100 short position for 5 years, and there was a total collapse at the end of year 5, then you'd make $65 (factoring in interest payments). That sounds good, but chances are thether probably has more money in the bank than $0. If it only collapsed to $60 (ie. they went bankrupt but had 60 cents of real money for every dollar issued), then you'd only make $5.
3. there are rumors/conspiracy theories that tether/bitfinex/tether affiliated exchanges force USDT/USD rates up periodically to force liquidation of tether short sellers. If you're caught in one, you'd lose money and be forced to rebuy tethers at an unfavorable price.
I work with a blockchain project that lends a lot of USDT, USDC, and DAI. The cost at this moment to borrow USDT on the blockchain is 4%-5% for any amount, or 3.75% in bulk while playing defi games. The two biggest to lend it are Compound [0] and AAVE[1].
Unfortunately that scenario only works if there’s a ‘fair’ long/short game beneath the fraud, but the fraud is such that that is not the case:
Remember Folks: Don't short Tether, once the exchange leaks your position to their buddies, Bitfinex shareholders will organize to liquidate you by working with their wash trading bots.
If USDT collapses it will take out multiple exchanges with it, and the fact that you have a winning position won't matter if the the people running the exchange it was on have entirely disappeared to sandy beaches somewhere. Counterparty risk during the systemic "banking" collapse will be very high, and completely uninsured.
If you have extracted the cash in dollars somehow before the crash, then it would work, but you have to move your money out of the exchange as fast as you can.
All exchanges require staff interaction for large withdrawals. You can be sure that in a very volatile market, friends of exchange operators will get priority.
The collapse of Tether is likely to be right in the middle of the crash and the exchanges will have suspended withdrawals already, and everyone will be looking for a lifeboat.
You have a database entry showing that you have a large amount of winnings that you can see on your screen.
You are going to have to deal with corrupt human beings on other end, who are outside of your jurisdiction, and are assuming they are just going to wire your bank account money based on that database entry, when you have no leverage over them at all, and when they will be better able to see the writing on the wall than you do.
Even within your jurisdiction, for something like Coinbase, if it becomes completely insolvent then you become an unsecured creditor in the bankruptcy liquidation process.
You'll be stuck yelling into the ether making twitter posts shaming them for not wiring you your winnings. And whatever actual cash you sent them to make those bets will be long gone and you'll lose everything.
Even assuming you could find some form of betting market outside of the crypto exchanges to place bets with other people that Tether would collapse the interest you have to pay should more than offset the eventual winnings. This is similar to how using options for portfolio insurance is a poor idea because by the time you're worried about your portfolio losing value everyone else can see the issue as well and wants a premium to write you that insurance.
And there's no sure bet that Tether/crypto collapses in the near term. I suspect that crypto will likely pop to a new bubble blow-off peak in 2022 and then 2022/2023 there will be another systemic test of crypto that could lead to its failure. But there's many billionaires with a vested interest in seeing the game continue who will do whatever they can to kick the can further down the road. I thought that it would fail in 2018 and was wrong (but the transcripts with bitfinex showed that it was probably on the brink). You could wind up betting Tether collapses for so long that by the time it finally does you've spent more on those bets than you've won back.
For a while I had a 5x leveraged tether short (with a USDC long deposit reserve) on a decentralized exchange. I was briefly making money through this on arbitrage but it fluctuates rapidly.
It costs about 9% per year to short it on most exchanges but about 4-5% on many DeFi platforms. Since most fractional banks live off of a 10% reserve ratio, you could very well be keeping Tether alive and prevent it from ever going under by shorting it.
They are profiting from all of the tether FUD nonsense by being able to lend their coins at a higher rate.
> Since most fractional banks live off of a 10% reserve ratio, you could very well be keeping Tether alive and prevent it from ever going under by shorting it.
Some might say that FDIC made the banks super rich -- it wasn't the services that made the banks profitable, as it was the bank had a sudden and large influx of government backed cash to make loans from.
In the US, it's not just reserves it's that 95% of account holders will be FDIC insured. And because the accounts are insured, there's rigorous banking regulations around the bank so FDIC doesn't have to pay out constantly.
So at what point does a run on $USDT happen? When the Chinese commercial paper market goes belly up? When they bitfinex files for bankruptcy or is charged with RICO? Sure there's a lot of FUD but if you read the tea leaves, I think China already sees systemic risk.
Tether has been manipulating the market since 2018 through using wash sales to prop up the price through apparent demand.
Tether has most of its liabilities backed with unsecured commercial paper from China.
China has had issues with their real estate companies being in too much debt and offering too much commercial paper to keep them running day to day.
China also has moved against crypto currencies recently, and regulating the real estate companies to move forward to pay back their debt.
So this strikes me as systemic risk. If USDT goes, so does the Chinese Commercial Paper Market, and vice versa. Who knows what gets taken out at that point. Tesla? Coinbase? Nvidia and AMD for losing sales to mining rigs? I don't know.
At least in musical chairs some others get to keep their chairs. When a currency fails, you can't sell it because nobody else will touch it. Everyone loses… save the first out.
Moreover, they roped in a nation state (El Salvador) to issue bonds that fund El Salvador’s Bitcoin City to be issued on Blockstream’s Liquid Network and processed by iFinex, the controversial company behind Tether.
From the article: "Among the concerns the SEC raised in the disapproval order included possible “wash trading”, when the same institution is on both sides of the trade, generating extra fees for minimal risk; potential price manipulation by whales who dominate bitcoin; and possible “manipulative activity involving the purported ‘stablecoin’ Tether”.
"$USDT" seems intentionally named to confuse people and imply that there's some relationship to, like, actual dollars. Has the US government ever sued somebody for trademark infringement?
1. Is that actually confusing? The first time I saw "USDT" on an exchange, it was immediately obvious that it wasn't real US dollars, mainly because of the extra "T". If I logged onto my wells fargo account and saw that my balance was in USDW ("W" for wells fargo), I'd be pretty concerned as well.
2. does the federal government even hold a trademark on "USD"?
They get one thousand USD (but I think they need to wait until a 3rd party wants to do the trade). That works right up until the inevitable collapse. Anyone who holds Tether is a fool. That's even dumber than buying an NFT.
They never will. There is no liquidity. How many crypto people have cashed out all of their money? The scam is to build up this community of people who are convinced that the USD is going to be worthless in the future and that crypto is going to be only way of buying things in the future. Like Maddof there is no end game, just keep telling people that their gains exist and that they are idiots if they cash out, forever.
Circle has passed multiple audits. Coinbase is a company that managed to at least convince the SEC they are doing things correctly. Also important, no one from Circle/Coinbase leadership is missing, incommunicado or in hiding.
Circle has absolutely never been audited. Circle, like Tether, has published attestations, which do not remotely approach the thoroughness of an audit.
I worked at Circle. If you think that Jeremy Allaire is going to go to federal prison, you are out of your mind. Their combined in-house plus external legal teams are larger than 95% of the YC startup headcounts. The US government has been all over them for years.
> I worked at Circle. If you think that Jeremy Allaire is going to go to federal prison, you are out of your mind.
You're making massive leap in logic. I completely agree with you. Regulators have been absurdly slow to react, and I think that both Circle and Tether will probably end up just fine, at least legally. There may be a cataclysmic breaking of the peg but ultimately it will be retail that gets slaughtered. Tether's own terms from day 1 have basically told you that all you're getting from them is something that hopefully someone else will value for close to $1.
I think these guys are pretty iron clad. Doesn't change the fact that Tether has almost certainly played a key role in manipulating crypto higher, on the mild end by providing leverage through crypto collateralized loans, and at the serious end by outright fraudulently printing Tether.
How it is a massive leap when you are insinuating that the attestation means Circle is doing something shady? You are trying to have it both ways.
Circle is not a sketchy Eastern European or Caribbean operation. They have a big office in Boston across the street from the Federal Bank of Boston and employ highly paid people who wouldn’t jeopardize their careers. The FUD is just ludicrous.
> How it is a massive leap when you are insinuating that the attestation means Circle is doing something shady?
Because being shady isn't illegal? You're the one suggesting this might amount to something felonious, which is perhaps telling.
> They have a big office in Boston across the street from the Federal Bank of Boston and employ highly paid people who wouldn’t jeopardize their careers.
This is a terrible argument. I have worked with people who were highly paid people working for well connected shops in fancy offices (Enron, Lehman, etc).
> The FUD is just ludicrous.
What FUD? Point to a single thing I've said that isn't purely factual.
As someone who worked at Circle, how comfortable would you be if you held a significant percentage of your savings as USDC? Same question, but for USDT, DAI and hard-cash-in-hand?
What purpose would somebody have to keep a significant percentage of their savings in USDC, which isn't subject to FDIC protections? The same logic would extend to anything else that is a similar digital cash-equivalent.
Given the purported 1:1 peg with the USD, there is no advantage to holding any cash savings in USD[C|T] form.
Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI.
I have had returns that are simply unmatched by any savings account, the liquidity pools with stabletokens help to reduce a lot of the volatility while generating some income from the collected fees, and if I there is any big downswings, I don't need to rush to cash out because most of my holdings are in stables.
I know that I don't want to touch Tether, but if USDC is also deemed toxic, it forces me to reevaluate the risks of both USDC and DAI (which is basically 50% backed by USDC currently)
> Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI.
It's worth pointing out that most pools with USDC on curve also expose you to USDT.
Not the one from Compound. It is cDAI + cUSDC only.
But to be completely honest, I am not on this anymore. I moved to the EURS/sEURS based one, as the CRV incentives are very good at the moment. Seeing how I was wrong about Circle status regarding audits, I need to do some more checks about the bank behind EURS.
There's no free lunch. Returns on lending stablecoins are ~ 2X higher than a 5-year treasury bond atm because the risk is 2X higher that Circle/Tether will default vs the US-government over the next 5 years.
Stablecoin returns aren't a miracle - you are effectively lending money to these organisations and taking on associated credit risk. For example there are many small banks around the world that will pay > 3% APR on USD deposits [1]
I'm not sure if I'm looking in the right place, but this [0] shows 5-year treasury bonds at 1.25% right now. You can get anywhere from 9% (blockfi, gemini, etc) up to 20 or 30% depending on where you look - much more than 2x.
Looking at Compound since it's DeFi [1] the rate is 2.6%
CeFi platforms like Celsius or BlockFi can offer more, but they are just as risky as any unregulated sub-prime lender in a third-world country (eg micro-lending institutions can offer those sorts of yields too).
The reason DeFi loans are much lower yield than CeFi loans is precisely because the risk is on-chain in the former case, so deposits can't be stolen.
Not sure where you see 20-30% on USD? Those rates are an indication of a rug-pull scam or a ponzi imho.
The risk is not that Circle would lose your money, I am extremely confident in their security and key management. The risk would be that you yourself would lose your key somehow.
You are also open to smart contract risk in Uniswap from your other comment, but they also have been around a very long time.
I wouldn’t worry about USDC, I would worry about everything surrounding it in the defi ecosystem.
I am not asking about the technical risks, those I am already aware and are factored in. The question is about how much you would trust Circle's claims about what they have in their reserves.
Nonetheless, they have been done by independent third-parties who are a lot more reputed than whatever has actually managed to look into Tether's data. Even if you take the "attestation" done by Tether at face value, it showed a mix of assets that is absolutely unhealthy.
Cool. So you clearly have no idea what an attestation is, or why the fact that it's not an audit is so important.
> Nonetheless, they have been done by independent third-parties who are a lot more reputed than whatever has actually managed to look into Tether's data.
Like the New York Attorney General? Go read the NYAG settlement. Tether got an attestation by wiring in $850m of Bitfinex's cash to their account the morning before an attestation, and then wiring it back to Bitfinex immediately after. The attestations merely state certain very shallow facts like "at this point in time, there were $X assets in an account". They do not audit the source and ultimate ownership of those things.
Look man, I get that you want someone to pump your bags. But sometimes it's best to just bite your tongue. Tether doesn't have any defense. They may be totally legit, and if they are, it's totally indefensible to act this way. And if they're not legit, well...
I am not defending Tether, quite the opposite. My only argument is in favor of Circle, and even then admittedly in terms of "Circle at least provides a better sense of legitimacy".
> I get that you want someone to pump your bags.
Sure, I will make a fortune by shilling USDC. /s
Anyway, you are right. I was under the impression that Circle was doing proper audits, and if that is not true, we need more people and exchanges pressuring them to do or to stop using it.
> I am not defending Tether, quite the opposite. My only argument is in favor of Circle, and even then admittedly in terms of "Circle at least provides a better sense of legitimacy".
My bad, lost my sense of bearing in a Tether thread. I agree with you here, and for the blockchain work I do, I use USDC.
Appreciate the rest of your comments. Didn't mean to jump on you.
Wrong, USDC has never been auditted. They do publish a monthly "attestation" by an independent accountant that seems to amount to tautologically saying that they are satisfied that Circle is not engaged in fraud IF the account balances provided by Circle are truthful: https://www.centre.io/usdc-transparency
Anyone holding Tether will be stuck selling it for the equivalent of $0.05 or whatever. This alone would have no effect on crypto prices.
However, it will become harder to get various government-type currencies in to exchanges so presumably purchasing demand will fall, which seems like it would make crypto prices fall too.
why? a friend said it's because he doesn't have to pay tax, i corrected him last year. are people doing this because they really think they don't have to pay tax unless they swap to actual USDs? Or they're just hiding their USDs away from the IRS and other taxation entities?
It's suspected (not proven) that the majority of the trade is actually wash trading to pump the price of Bitcoin. Additionally, an exchange trading in USD will be exposed to US regulation as a result of that, even if not situated in the US--if you're trying to evade US financial regulations (or sanctions), you really don't want to touch any USD whatsoever.
The exchanges are able to buy USDT for less than $1 and use it to trade against customers. Big advantages to them to use it, and also they don’t need banking relationships to acquire it this way.
FTX and Binance among biggest customers. Likely offering commercial paper to Tether in exchange for the USDT. Already established that Tether made crypto backed USDT loans to Celsius.
That for sure. But I am more wondering about the collateral damage to other coins. Coz it would likely trigger sell off of many other coins to cover loses.
On the other hand, the market cap is 75B, while ETH is 488B and BTC is 919B. So the impact maybe wouldn't be too drastic and too long lasting.
I wonder if it's worth converting USDC and DAI loans to USDT, would be easier to repay if it did crash..
If Tether collapses, so does USDT. If exchanges have majority of their volume in USDT pairs, then the market liquidity dries up and the whole thing collapse. Remember that those coins need to be cashed out for actual USD. But if that USD does not actually exist, what will you sell into?
Don't forget the amount of exchanges that can not trade USD so they rely on USDT to deal with BTC. Tether crashing is going to destroy the value of BTC and it will take all of the alts with it. It will make Mt Gox look like a hiccup.
Still, it needs to happen. Keeping Tether alive is the worst thing that can happen to crypto.
> Still, it needs to happen. Keeping Tether alive is the worst thing that can happen to crypto.
Exactly. The next big crypto crash is waiting to happen. Will probably come from the debt ceiling crisis with the US then cracking down on Tether afterwards with the US government also collecting unrealised capital gains taxes; enough to scare the hands out of lots of investors.
Tether knows they are a scam. So they are getting out while they can.
Lots of people in here who don't understand neither Tether nor Bitcoin. The quickest way to get rid of Tether for most people, is to buy Bitcoin. The alternative would be to try to withdraw your Tether. Good luck with that during a crisis situation! Your best bet is thus still to buy Bitcoin, which would necessarily lead to a spike in its price. Then Bitcoin can be transferred to any exchange that deals in actual fiat currency, and sold from there, most likely with a nice profit to boot. Or do like the pros and just don't sell it ever, because that's actually safer than keeping your fiat these days, and especially if you're keeping it in mumbo-jumbo like Tether.
Nobody “keeps” tether. Other than for having liquidity readily available. Your stance on Bitcoin is uncritically over optimistic, but if we stay in the confines of this topic, a tether crash would most likely make a significant dent on BTC. How big and how long would it take to recover, that’s a question. Might be days, might be years.
Tether is used to buy Bitcoin and other cryptos. As you correctly observed. But:
Tether ? Bitcoin.
Tether FUD = get rid of Tether.
The only thing that could dent Bitcoin, as in making it dip, would be if potential buyers withdrew Tether instead of doing the logical thing, which is to buy Bitcoin. The most likely outcome is that the “dent” results in a blow off top scenario, meaning that price would surge before a sell-off.
As for “over optimistic;” people have been saying that since Bitcoin was a dollar, and possibly before that too.
If that quantity of Tether (1/75 of the float) were dumped into the open market for USD, you'd expect to see the USD change rate fall. That clearly hasn't happened. The rate has been very close to 1:1 forever.
There's this unsubstantiated conspiracy theory that as I gather goes like this: Tether prints tokens, uses them to buy bitcoin when the USDBTC exchange rate falls. These Tether issuance spikes always happen after BTC corrections, and this is taken as evidence of pumping USDBTC.
The problem is that if there were legitimate buying of BTC with Tether, which is plausible after the ass-whooping USDBTC has taken recently, new Tether would need to be issued to keep the 1:1 peg.
Sources critical of Tether IMO don't provide the evidence needed to distinguish the two scenarios.
> [I]f there were legitimate buying of BTC with Tether, which is plausible after the ass-whooping USDBTC has taken recently, new Tether would need to be issued to keep the 1:1 peg.
Can you explain in detail why new Tether would need to be issued?
Increased demand for tether causes the exchange to rise as buyers compete against each other. Same as any other currency market. There's nothing special here. Tether needs to be issued to satisfy the demand and prevent the price of tether from rising against the dollar.
Look, Tether is in all likelihood a scam that will eventually collapse. I'm just saying there are multiple ways to explain what's happening. Those making the claims have the burden of proof. And that proof has been rather thin for my taste.
> If that quantity of Tether (1/75 of the float) were dumped into the open market for USD, you'd expect to see the USD change rate fall.
Not if the small amount of people who want to redeem their Tethers for USD or vice versa are able to. Everyone else will happily trade at that rate as long as they feel confident what they own is equivalent to a dollar. The problem is if everyone suddenly wants their money back and it turns out it doesn't exist.
> The problem is that if there were legitimate buying of BTC with Tether, which is plausible after the ass-whooping USDBTC has taken recently, new Tether would need to be issued to keep the 1:1 peg.
Um, no. Not sure how you think markets work, but this isn't right. Suggest you ask yourself if you really understand this topic, or if you own some crypto and thus have an incentive to believe you understand it so that you can dismiss it and enjoy the sweet crypto gainz.
Can anybody with an understanding of the matter ELI5 to me how it can be that, given all the uncertainty, 1 Tether is still trading for ~1 USD on the major exchanges? That price seems to be determined by the open market. There are competing stablecoins. Is everybody just so confident that Tether is the real deal?
It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing.
I assume people in the banking industry allow them to operate as a way to hold leverage over the crypto markets and absorb capital that would otherwise flow to altcoins.
> It certainly is strange that Tether hasn’t been shut down for counterfeiting, which is essentially what they are doing.
It really isn't counterfeiting. If you made fake hundred dollar bills and passed them off, that'll be counterfeiting. However, if you decided to give a bunch of people $100 IOUs and claim they're "totally backed by real dollars in a vault somewhere", but they're not, then it's just fraud. The NY AG and/or CFPB were able to prosecute/fine them for that, but they also got rid of the "totally backed by real dollars in a vault somewhere" claim, so whether they're currently committing fraud is unclear.
There are some other stablecoins, like USDC (about half the size of Tether. Why would Tether need to be closed down while USC not? Or do you think all of them should be shut down?
Tether is just an IOU note. I don't have problems with IOU notes, unless someone forces me to use them. Personally I haven't used tether and probably never will, however I don't have any problem if someone else wants to use it.
Why do you assume the price is determined by the open market? Who are the large scale crypto entities that would bet against Tether?
This happens every time the price dips, but the current best explanation/theory is that Tether prints more USDT with BTC backing from exchanges, who then use that USDT to buy BTC from the market. The issue is that the exchange is part of that loop.
The price is not being determined on the open market, Tether's whole job is to maintain the peg at 1-to-1. Contrary to the FUD that is being recycled in here on all Tether topics, Tether doesn't print new money just because they feel like it, they do it in response to the demand for USDT in order to maintain the price at $1.
Yesterday cryptos crashed hard, people started moving out of their crypto positions and into stablecoins. Demand for stablecoins increased bringing their price > $1. Tether printed USDT and exchanged them for USD (and put the USD into their reserves) in order to bring the price down and maintain the peg. When the opposite happens they will sell some of their USD reserves for USDT.
Huh? They peg on Saturday? (OP's ref'd txn has a Sat date on it.
They wait to peg only for nice round numbers like $1B exactly? No cents? No decimal?
They don't peg end-of-day, or at market-close, month or quarter end?
Is there an official financial notification of peg events like a crypto-currency corporate event calendar? Nobody should be surprised because pegging is telescoped ahead right?
Is there an offset in another block chain showing USD movement? Surely they didn't just phone the bank (broker) and do a regular ACH transfer, right? They used non main stream tooling cause they're the cool kids?
And where's proof USD moved in offset?
C'mon ... there's nothing here to take seriously. Heck, based on this nonsense I can peg USD out of my garage with carrots. Wanna know what? Wholefoods produce then straight to the keyboard. See you guys on the flip side with CyrptoCarrots, the organic sustainable cyrpto coin.
I am not quite following what you are saying. When a currency is pegged to another, the central bank is actively buying and selling it's currency on the secondary market in order to maintain the peg ratio. It certainly doesn't happen at the end of every month or quarter.
The problem with tether is a lot of crypto use it as sort of an "on-chain peg" and some people trade "real value crypto" (bitcoin) for tether. It's not a problem until the actual tether holders can't cash out to fiat.
The secondary effect is that tether may be pumping the price of all crypto everywhere because it's so ubiquitous.
Do I have this right? I'm mostly stuck on the "value" of tether beyond some sort of "accounting" or "tax avoidance" (no judgement here, trying to figure out why ppl would have tether's instead of "actual crypto".
If one is using something like Uniswap to exchange crypto, you cannot go directly to Fiat, so people that want to sell a token or Ethereum will trade the asset for USDT and then later trade the USDT for another asset when the price has dropped.
It's just a way to buy and sell crypto with an intermediate asset that has almost no price volatility.
I understand why stablecoins exist, but doesn’t an operation like Tether go against the decentralization goal of “crypto”? The fact that the ecosystem has become dependent on these types of players is interesting to me. Why hasn’t the community demanded even basic transparency about their operations? It seems to be totally exempt from the pious expectations of other crypto projects.
Most of the crypto heads on Twitter actually seem to believe that it is properly backed. But you know, you're judging the opinion of people who invest in cartoon apes.
The toilet paper is backed by nuclear weapons and the world's most offensively-capable Navy and Air Force (arguably no longer the world's largest Navy so I clarified the metrics).
Can’t put my finger on why that backing seems dubious. Didn’t I read about a smackdown somewhere recently done by some ragtag dudes with Kalashnikovs? Talibsomething.
The threat of devastation works better on countries that aren't already completely devastated by decades of internecine conflict anyway. It also works better against the non-theocratic adversaries that are legitimately concerned for their own corporeal wellbeing (Qaddafi, Saddam, KJU, Assad).
Yea, they back the value through the crypto they buy using part of what they minted. It’s a brilliant strategy that can never fail because crypto fundamentally can only go up…
"PSA: 1B USDt inventory replenish on Tron Network. Note this is a authorized but not issued transaction, meaning that this amount will be used as inventory for next period issuance requests and chain swaps."
The tether CTO routinely comments on these seemingly large moves because people get very worked up about them.
Why does tether seem to bring out the tinfoil theories from people that have absolutely 0 background in finance or crypto market structure or econ in general.
You might be attaching some temporal qualities to the phrasing, but that's not how I read the comment. Generally, if you want to make a government investigation go away, you cooperate by demonstrating your innocence. Of course, it's the government's job to prove guilt, but usually good actors have an abundance of mitigating evidence at their disposal, and it's usually just easier to say "here's the evidence, we're not guilty".
> but usually good actors have an abundance of mitigating evidence at their disposal
You must be joking. That's not how it works when the government has you in their crosshairs.
>and it's usually just easier to say "here's the evidence, we're not guilty".
And then the government will spend years and millions of dollars trying to poke holes in that evidence of innocence.
Anyone who follows the news has seen this repeated over and over again. Various government authorities routinely engage in witch hunts with little evidence.
Maybe Mansoor Adayfi should've just provided evidence of his innocence after being shipped to Guantanamo Bay? They would have immediately released him, right? What a stupid guy he must have been that it took the government 14 years to release him.
I am talking about white collar crime, which tends to be much more black and white than terrorism. And no, the government doesn't have a history of spending millions in trying to chase frivolous cases. Has it happened? Sure. But prosecutors are graded on their closure rate which is why you see so many settlements. The last thing they want is to waste millions on a witch hunt.
You only see the bad. You say "anyone who follows the news" which means you've probably followed a handful of these...out of the millions of cases which get referred to prosecutors: the vast majority are ignored, the remainder are mostly settled, and a small amount end up in court. Government is a necessary evil, but an evil nonetheless. I'm quite libertarian myself, but let's not concoct ridiculous narratives to affirm our views.
Tether is obviously the kind of business the government fundamentally doesn't like. Whether or not what they're doing violates any current laws doesn't matter, they are yet another Liberty Reserve enabling large scale money laundering.
Even in an imaginary world where Tether is a completely legitimate business not operating in violation of any existing laws, there would be no way for them to make government investigations go away within any reasonable timeframe.
It is simply ridiculous of you to suggest that we could expect the government to play fair when dealing with Tether.
> they are yet another Liberty Reserve enabling large scale money laundering.
> there would be no way for them to make government investigations go away within any reasonable timeframe.
Yes, this is usually the problem with breaking the law (such as facilitating large scale money laundering). You seem to believe this is a bug, while every other citizen views this as a feature.
People breaking the law cannot making investigations go away. And?
Sorry, I'm not interested in taking part in your weird struggle against Tether.
I am obviously not defending Tether, I do not have a single good thing to say about Tether. But unlike you seem to be, I'm not emotionally invested in what happens to Tether.
I was simply calling out the obvious bad faith argument presented by wmf. Even if Tether isn't violating any laws, the US government is going to go out of their way to get them.
>You seem to believe this is a bug, while every other citizen views this as a feature.
I have said precisely nothing that could be interpreted by a person of ordinary intelligence to suggest such a belief. This is something you have created inside your own head. I wonder why?
> Why does tether seem to bring out the tinfoil theories from people that have absolutely 0 background in finance or crypto market structure or econ in general.
Hilarious. People with backgrounds in finance are for the most part the group of people that have made an issue about this, myself included.
But more curiously, I'm not even sure what you're attempting to to convey with this comment? Do you think that a background in finance, or econ, is necessary to understand the incredibly simple business that Tether operates, and the even simpler reasons of why it is likely problematic (if not an outright fraud)?
I’m not saying tether is fully backed (I think it’s been admitted they’re not), but do people not understand how it even ostensibly works?
When people sell other crypto for tether/USDC, they are essentially “buying” tether/USDC. Which tether and circle “print” out of thin air… but ostensibly back by selling the other crypto they just received for real dollars.
With the huge crash, a lot of people were selling their crypto.
>When people sell other crypto for tether/USDC, they are essentially “buying” tether/USDC. Which tether and circle “print” out of thin air… but ostensibly back by selling the other crypto they just received for real dollars.
You're missing the previous links in the chain. When you sell your crypto at an exchange, your counterparty isn't the exchange, it's another person who wants to buy crypto. Therefore you making the trade doesn't cause new USDT to be printed. That happens before the trade, when your counterparty made the deposit.
Money flowing into the cryptocurrency ecosystem causes tethers to be printed; money flowing out causes it to be destroyed. If people were all simultaneously cashing out (on net), it would stand to reason that tethers be destroyed, not issued.
If I were tether themselves, I know I’d be personally market making every usdt trading pair on every major exchange myself. And when people bought my tethers for crypto I’d turn around and sell the crypto for usd and issue more usdt.
That sounds like a lot of work for nothing? Suppose 1 BTC = $50k
>And when people bought my tethers for crypto
now you have 1 BTC, and $49,995 (assuming $10 spread and you were a maker) USDT (aka IOUs) outstanding
>I’d turn around and sell the crypto for usd
now you have 0 BTC, $49,995 USDT outstanding, and $50,005 (assuming $10 spread and you were a maker)
From a balance sheet point of view that looks like a pretty standard market making operation. You don't need to be issuing unbacked IOUs for it to work. The only advantage that tether has is access to the initial $50k capital for market making, but you don't need to be a stablecoin issuer to pull this off. You could just as well embezzle an exchange's funds directly.
Actually come to think of it, if you wanted to market make and you were ifinex/tether, the biggest advantage you can get isn't the free funds you can issue/embezzle, it's the differentiated order flow you can get as an exchange operator. You can categorize order flows as toxic/non-toxic[1] (maybe based on account trading history?), and keep them for yourself to internalize.
At least with tulips you could plant a nice garden. And if you could keep the deer and voles away, they would slowly multiply over time, with no quantitative easing needed at all, just sun, rain, and good soil.
People who have no idea how crypto markets work always get riled up by these tweets. Contrary to popular belief, there is generally huge demand spike for USDT when crypto market has flash crashes, not other way around.
More USDT got issued because there was opportunity to make 0.1-0.2% on each new USDT since demand for it was that high (i.e. people were paying real USD to buy USDT at a premium, imagine that).
USDT (and USDC) demand spikes during crypto crashes because people actually cash out to these instruments because they are so widely used and trusted by actual market players. People aren't cashing out of crypto ecosystem during most crashes, money actually stays in crypto networks.
> Contrary to popular belief, there is generally huge demand spike for USDT when crypto market has flash crashes, not other way around.
This is not contrary to popular belief at all. Tether almost always prints a few billion around large pullbacks, and the cynical view is that this is to stabilize markets by buying the dip.
> More USDT got issued because there was opportunity to make 0.1-0.2% on each new USDT since demand for it was that high (i.e. people were paying real USD to buy USDT at a premium, imagine that).
Uh yeah this is not at all how stablecoin premia get arbed. If you'd like a real answer, I'd be happy to explain. But I get the feeling that you're pretty invested in crypto and just want answers which align with your beliefs.
While I am no huge volume arbitrageour/market maker, I actually make a living running arbitrage systems and market making systems specifically for stablecoins.
I do consider to know what I am talking about, considering my systems make hefty profits and have no real exposure to volatile crypto assets (or even long term exposure to crypto in general, my profits are in real world dollars). This is why I know that USDT has actual real utility and it is currently best instrument in its category. USDT is indeed somewhat shady but it’s premise and utility are all sensible and it is hugely profitable for its founders. They have zero reasons or incentives to do suspect things that could risk its peg.
If something goes horribly wrong for USDT it is going to be due to incompetence and not because of some long term planned con.
I'm not really sure what you're getting at here. If you're generating income but arbing stablecoins, then you know exactly what I'm talking about. I can say with near certainty that you have never, and never will, directly mint or redeem Tether...which proves my point.
> This is why I know that USDT has actual real utility and it is currently best instrument in its category.
I don't disagree at all.
> If something goes horribly wrong for USDT it is going to be due to incompetence and not because of some long term planned con.
Market making on crypto exchanges is difficult because of high fees, small tick sizes, and minuscule spreads. Of course you can get volume discounts, but still.
On which exchanges do you trade and do you rely on volume discounts to make profit?
What does any of that have to do with the discussion? That doesn't in any way address the issue with Tether's lack of transparency. The issue is whether Tether actually has the capital to back up it's stablecoin.
0. Mint dollars backed by nukes and military and in anticipation of GDP growth
1. Create new cryptos out of thin air to suck in dollars
2. Mint USDT in *anticipation* of swaps from non-stable cryptos. No dollars have actually been deposited yet!
3. USDTs actually come in? maybe, maybe not, maybe fuck yourself.
4. Loan out USDT to hedge funds for crypto futures trading.
5. Give back portion of interest to people who stashed the USDT.
Why do crypto/Tether critical threads always sink very quickly on HN? This was #2 when I saw it, now it's second page.
> Tips on adding JSON output to your CLI app (kellybrazil.com)
> 67 points by kbrazil 3 hours ago | flag | hide | 21 comments
Current #4 was submitted at the same time, but has 36% of the votes, and 13% of the comment activity. I'm no expert, but that sort of engagement you'd expect to be punching above the current #4.
> Why is A ranked below B even though A has more points and is newer?
> You can't derive rank from votes and time alone. See "How are stories ranked?" above.
> How are stories ranked?
> The basic algorithm divides points by a power of the time since a story was submitted. Comments in threads are ranked the same way.
> Other factors affecting rank include user flags, anti-abuse software, software which demotes overheated discussions, account or site weighting, and moderator action.
1B tethers should be created when someone deposits $1B into Tether Corp's bank account. "Created out of thin air" means tethers have been issued on blockchain, but no one deposited any US dollars into said bank account. What evidence do you have for the latter?
If you are confident that is exactly what happened, why don't you go and short USDT/USD pair? Why no insider executed that profitable short trade? How come after so many years of tireless accusations on every message board available, that 99% of people seem to agree with, said pair still trades at exact 1.000 ratio? Why authorities have not stopped the obvious fraud going on for so long?
Who are currently the biggest holders? Lots of different random individuals? All the people who have deposited cash into an exchange but haven't bought bitcoin yet/people who have sold bitcoin on an exchange, and haven't cashed out for USD yet? Institutions, if so which ones?
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