The Tether Ponzi Scheme(singlelunch.com)
singlelunch.com
The Tether Ponzi Scheme
https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/
276 comments
They print a billion every few days: https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...
Can someone recommend an alternative? Binance USD (BUSD)? Other stablecoin?
Anyway, Bitcoin is not going to drop to 18k anytime within the next 8 months, so funds are safe for now.
Anyway, Bitcoin is not going to drop to 18k anytime within the next 8 months, so funds are safe for now.
https://www.gemini.com/dollar
Supposedly it's FDIC insured to $250k per user.
Supposedly it's FDIC insured to $250k per user.
USDC, GUSD, BUSD, or DAI are the main 4 (in that order).
TUSD, PAX, and UST also exist.
It depends on what’s offered on your exchange but I think most people trust those first 4. Tether has a big target on it’s back with a lot of other stable-coins vying for it’s position.
TUSD, PAX, and UST also exist.
It depends on what’s offered on your exchange but I think most people trust those first 4. Tether has a big target on it’s back with a lot of other stable-coins vying for it’s position.
https://www.gemini.com/dollar
Suppposedly it's FDIC insured to $250k per user.
Suppposedly it's FDIC insured to $250k per user.
USDC is a stablecoin by Circle which is backed 1:1 by USD, with Circle being based in the US, properly licensed, audited, etc.
It's not audited. Circle tries to imply it's audited, but the company supplies only attestations, which are Grant Thornton looking at a snapshot of one day's numbers handed them by Circle.
That's good to know, thank you. I'd be surprised they would be able to hold on to their US and UK licenses with that kind of behavior though.
It’s pretty funny that people are so upset at Tether for practicing fractional reserve. What Tether is doing is literally what the entire banking industry did for centuries.
The global financial system is just money created out of thin air, redeemable for nothing, yet every week HN has to upvote some screed about Tether being a scam.
The global financial system is just money created out of thin air, redeemable for nothing, yet every week HN has to upvote some screed about Tether being a scam.
> tether likely never had a dollar in a bank account for each USDT, at any point, ever
Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing.
Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?
Why does this really matter? As a user of USDT the only thing that matters is that the people in the market amicably agree to trade it at around 1 USD, which they seem to be doing.
Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy. What is USD backed by anyway?
USD is backed by the faith & credit of the United States Government. USG has a 200 year history of paying it's debts. It has the power to tax a massive economy. There are hundreds of millions, if not billions of people, who believe in the creditworthiness of the USG. This is why markets are "amiable" wrt the dollar.
Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy.
You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
Tether is backed by a shady company who's been caught lying numerous times. The claim that 1 USDT is backed by 1 USD is what was meant to establish it as creditworthy. This has been walked back so many times - it's not USD, it's a basket of goods. Those goods might include cryptocurrencies. Those cryptocurrencies might include coins we've minted. Et cetera. It is not reasonable to have faith in their statements. It is not reasonable to consider them creditworthy.
You can't keep USDT pegged to $1 if the organization backing it can't be trusted.
> faith & credit of the United States Government
Why should I have faith in the government?
> USG has a 200 year history of paying it's debts
Wait what? https://www.worldometers.info/us-debt-clock/
Why should I have faith in the government?
> USG has a 200 year history of paying it's debts
Wait what? https://www.worldometers.info/us-debt-clock/
> Why should I have faith in the government?
Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why.
Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it.
There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet.
“What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
Because you’re allowed to be this naive on a computer forum on an international network of high-tech computing devices, some of which you own, openly call for economic reforms you don’t understand, and not find yourself up against a wall with seconds to live. That’s why.
Your ability to study crypto instead of working a field to feed your family under the watch of rifles, crypto’s entire existence (arguably), the fact that you’re ostensibly literate, the food in your stomach, and countless other secondary concerns that add up to you making this comment right now only happened because you are subject to a government that permitted it and created an existence for you where you can have all of those things. The other side of that wall has guns pointed at it. Note that specifying status quo does not communicate an opinion on it.
There are real concerns with every world government. On the other hand, it’s naive young people who assume their comfortable existence is “just the way it is” for everyone universally and their ethnicity and sovereign power has nothing to do with it. You don’t have to trust the government to tell you the truth. You do have to implicitly trust that governments worth paying attention to can, and will, exercise actual power when they consider it necessary and consequently create a free existence where you are allowed to flourish. Those are different things. That’s what “backed by the full faith” means. Not that we trust the government to be honest about who it’s talking to late at night on Snapchat. The world implicitly trusts the Third Fleet.
“What has the government done for me?”, you’re essentially asking, on the downstream consequences of a decentralized government command and control network experiment which also happened to feed you your entire economic worldview in a society where limits on education are mostly forgotten, particularly by you.
Should you have faith that your treasury bonds will be paid? I'd say so. I certainly have qualms with my government. But their ability to send out checks is not one of them.
Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
Yes, the national debt is rising. Debt is being issued faster than it is being paid. So what? Are coupon payments being missed? Is there any reason to believe that the government will default?
The US debt clock does not say that the US does not pay its debts.
As someone who understands little about Tether, it seems to me that why it matters is pretty obvious: since Tether can be issued by the authority that controls it arbitrarily, it enables that authority to 'print' the currency at will. This is similar to how governments that control currencies may just generate more of it. Wasn't the thought of Bitcoin to be against this very thing? Didn't the very first block of Bitcoin contain a message condemning the practice of bailing out banks by 'printing' money? It seems that some people with business-smart skills picked up on this and integrated the same principle into cryptocurrencies, and that principle is called Tether. And it appears to completely defeat the point of crypto-currencies.
But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
But I might be wrong. I'm just a lay-person in this or whatever. Maybe I'm misunderstanding things.
You can't think of a reason why it matters that a financial firm was lying about whether or not it had literal billions of dollars when they issue a coupon that allegedly can be redeemed for actual dollars?
I don’t have a strong opinion about tether, but it matters who gets to create money in an economy. Ideally, the judges of the money spigot should point it towards productive and beneficial long term endeavors. I also happen to think that the existing financial system is failing to do that.
Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
Addition: also the democratic principle should be kept in mind. Sovereign currencies are a resource of their respective people.
> I also happen to think that the existing financial system is failing to do that
What are they currently doing wrong, in your view, and what should they be doing better?
Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
What are they currently doing wrong, in your view, and what should they be doing better?
Lots of fed hate on HN nowadays. I personally think that they are doing a so-much better job than '08 and am happy that academic economists seem to at least be learning a few lessons.
Well it’s clear that small companies have a much harder time obtaining credit, while huge conglomerates don’t have a problem. I also have a feeling that new money has been disproportionally funneled toward the financialized economy, instead of funding research, education or other long term focused work. Perhaps my qualms should not be attributed simply to the monetary side of things (cheap money), but also to the lack of fiscal action.
Huge companies can build up trust and fail less easily, so it makes sense to me that creditors would be more willing to lend to them. If you are small, it is probably easier to get liquid capital by selling ownership stakes.
As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
As you've mentioned, I don't think deciding what industries we should focus on/invest in is within the purview of the Fed.
Since we’re talking about the collective resource of money shouldn’t we move past the reductive risk based assessment? And I’m not talking about the Fed here, they don’t create money. Banks do, and they do a strictly a risk based calculation. Hence the situation that we are now where most money is chasing other financial products.
Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets.
Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
Btw, I don’t think there’s a simple solution here, and banks aren’t necessarily to blame here. They’re merely reacting to the incentive structure. To solve the problem we need deep structural changes in how we view economics. I’m one of those people that like aspects of both MMT and crypto assets.
Addition: since my comment is a bit too light on practical solutions, I think we should have a decentralized way in which local communities can direct money creation towards productive long term projects that help that community. And the same can be done at the federal level for very big projects (rockets, dams, infrastructure etc)
I think it mostly matters because an article like this can be released if they lack actual cash backing that causes people to lose faith in the real value of USDT and then people don't amicably agree to trade it at around 1 USD because it can't actually be converted to that value.
This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
This may seem pedantic but that's because economics is pedantic - things can appear to be running fine for a long time but if some basic assumptions are violated the whole thing can topple like a house of cards.
That you don't realize that the dollar is backed up by the force of the US military shows how far detached those who live in the imperial core are from those who live near its outskirts.
It's not backed by the US Army, it's backed by the US Governments ability to pay it's debts, and the integrity of the US economy and financial system.
Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false.
There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are.
That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up.
Nikola is a similar thing - they have vapour, and yet are worth billions.
A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc..
It's a problem.
A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen.
2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
Now that is obviously supported by the US Military. But to state without context 'it's the US Army' is just false.
There's a lot of question marks about how Central Banks do money supply, but it's part of governance, their books are public, at least now they are.
That Tether can still exist even though it's a proven fraud is at the core of the problem: the new RobinHood Armies (not just them of course) are keeping everything buoyed up.
Nikola is a similar thing - they have vapour, and yet are worth billions.
A lot of this froth exist in regular stocks as well, across the board, but even in Google, Tesla etc..
It's a problem.
A lot of this might go away with slightly higher interest rates. When things get close to 0 then a lot of weird leverage things happen.
2% -> 1% interest is one thing, but 1% -> 0% (or negative) and systems start to go weird.
> it's backed by the US Governments ability to pay it's debts,
https://www.worldometers.info/us-debt-clock/
I don't see a whole lot of difference between this and USDT honestly.
https://www.worldometers.info/us-debt-clock/
I don't see a whole lot of difference between this and USDT honestly.
The dollar is the reserve currency of most of the world because of the explicit threat of violence. This isn't hyperbole, this is reality.
It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't.
This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. You try to break the embargo, we sink your ships. You try to make your own regional currency, we assassinate you. This is why you can afford to purchase expensive goods yet the people who produce them can't.
This is the fundamental basis of the modern world. That more people aren't actively aware of this is the powerful result of ideology.
"The dollar is the reserve currency of most of the world because of the explicit threat of violence. This isn't hyperbole, this is reality."
This is mostly a conspiracy theory.
And this: "It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. "
Is essentially not true in any broad sense.
Also, there is no such thing as a 'world reserve currency'.
The US does use some leverage to require that Oil is traded in USD, particularly with Saudi Arabia, but that's the price of effectively keeping that nation relatively stable, which is not unreasonable.
Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
Oil is a key issue in the equation, but it's not actually essential.
The USD is mostly a reserve currency because of the size, openness, and relatively integrity of the US system.
The Euro is definitely a 'reserve currency' along with UK pound, but proportionally so.
The RMB isn't really a reserve currency because of lack of transparency in China, that said, the sheer power of China means that nations that trade with it will adopt it as a reserve on some level.
Cryptos unfortunately don't really solve the problems in this geopolitical equation.
But someday, they may help to.
This is mostly a conspiracy theory.
And this: "It's simple. You take the loan in dollars, then pay us back in goods, sold at a discount in dollars. If you don't, we sanction and embargo you. "
Is essentially not true in any broad sense.
Also, there is no such thing as a 'world reserve currency'.
The US does use some leverage to require that Oil is traded in USD, particularly with Saudi Arabia, but that's the price of effectively keeping that nation relatively stable, which is not unreasonable.
Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
Oil is a key issue in the equation, but it's not actually essential.
The USD is mostly a reserve currency because of the size, openness, and relatively integrity of the US system.
The Euro is definitely a 'reserve currency' along with UK pound, but proportionally so.
The RMB isn't really a reserve currency because of lack of transparency in China, that said, the sheer power of China means that nations that trade with it will adopt it as a reserve on some level.
Cryptos unfortunately don't really solve the problems in this geopolitical equation.
But someday, they may help to.
This is not a conspiracy theory, it's history. You basically described the whole process yourself. But it's not just oil, it's everything the empire needs.
> Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
This, however, is fundamentally wrong, and smacks of naive libertarianism. In a "rational" universe, where gravity of a feather falling to earth is frictionless and I trade my two eggs for your bottle of wine, maybe, sure. In the real world, no. The reason is violence. We won the war and we got to set the rules which benefited us at the expense of others. This is undeniable.
Other nations transact and hold reserves in dollars, and occasionally Euros, because of the system of force I described earlier. This why the IMF exists. Everything else is ideology.
China's Belt and Road initiative is their own alternative to the IMF. They are able to do this because they have a military force which they believe is now capable of standing up to the United States, by which I mean they will be able to impose their violence rather than ours.
> Outside of Oil, there's really no reason for any nation to transact in USD or to keep reserves other than for what makes sense to them.
This, however, is fundamentally wrong, and smacks of naive libertarianism. In a "rational" universe, where gravity of a feather falling to earth is frictionless and I trade my two eggs for your bottle of wine, maybe, sure. In the real world, no. The reason is violence. We won the war and we got to set the rules which benefited us at the expense of others. This is undeniable.
Other nations transact and hold reserves in dollars, and occasionally Euros, because of the system of force I described earlier. This why the IMF exists. Everything else is ideology.
China's Belt and Road initiative is their own alternative to the IMF. They are able to do this because they have a military force which they believe is now capable of standing up to the United States, by which I mean they will be able to impose their violence rather than ours.
This is what you are looking for WRT debt [1]
[1] https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
[1] https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
It doesn’t matter at all, until it’s the only thing that matters.
You could say that about any fiat.
It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.
I don't know if the confidence actually is at an endpoint, it depends if this article and similar sentiments get widespread acceptance.
If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage.
If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent).
Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage.
If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent).
Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.
Gen Z economy. What are you talking about? USD has been fiat since the 70’s
Gen Z economy:
- Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value.
- Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that
- Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical.
- Money itself is a joke, for the most part
- We are in the midst of a revolution in which we are exploring new models for financial governance
- Hype IS value. Investors mostly invest in hype. Bring something of scientific or humanitarian value to the table without some fancy story and they 100% won't invest in that. Doesn't matter if it's stock market public investors or crypto investors or private investors, they all go after the hype, time after time, demonstrating with their wallet that hype IS in fact what they value.
- Currencies don't operate around scarcity, and their value is not fully correlated with scarcity, their value is more correlated with the intrinsic value they provide as a product, e.g. dApps and NFTs; USD provides none of that
- Manipulation is legal, part of the game rules, embrace it. Manipulation and trick shots are legal in table tennis, too, the only rules are physical.
- Money itself is a joke, for the most part
- We are in the midst of a revolution in which we are exploring new models for financial governance
Do people really believe this bloviation outside of the cryptocurrency thought bubble? I thought you were trolling until the last bullet. Then I realized you’re serious. Hype is value? (To who?) Money is a joke? Comparing economic security to table tennis? Come on, dude, get real. Those are the exact sentiments that disqualify you from having an opinion on economics worth hearing, not qualify. I’d bet currency you consider worthless that you can’t even discuss the tradeoffs of money and why they were consciously accepted by economists who actually studied their subject and went on to advise and design modern civilizations.
Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved.
You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right?
I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
Don’t tie these thoughts to a generation as if everyone in the generation expects the outcome you do. I have a hard time believing everyone in Gen Z understands what you’re saying, much less wants what you do. There is no watershed moment for uprooting the world economy that only people of a certain age understand. Revolutions do not happen on Medium. You’re discussing the economy. There are militaries involved.
You are interacting with forces far beyond yourself and acting like you have all the answers. Our entire existence is defined by the economy, and rejecting it wholesale is interesting for a blog post but a complete nonstarter for actual reform. Since humans mostly subsist as a product of economies, you realize poor economic reform kills people, right?
I’m going to reiterate that last point in clearer terms because it needs to get into that bubble with purpose. Say the world stops being stupid and sees your light. Now you need a phone to eat. Do you think those people you just starved to death are going to go “well, Gen Z economy!” or do you think they’re going to arm themselves and start killing everyone involved? History is a guide here and human subsistence is not something a bit of Go can just fuck with because you say so. Good luck!
It's ridiculous to call anything a 'gen Z' economy when most gen Z aren't of asset-holding age.
Maybe because their promise from the start was to be 100% fully backed by cash reserves and to do regular audits. The audits never happened and then they just changed the language in the website without announcement.
If it didn't matter then why make the promise in the first place?
If it didn't matter then why make the promise in the first place?
By an army
> Being "backed" by something is a concept of a bygone century that doesn't really apply to the Gen Z economy.
If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.
If it's so unimportant then why did Tether lie about it? This, on its own, seems like a pretty big red flag to me. The kind of red flag that smashes you in the face.
It'll matter if there's a bull market, and lots of people try to exchange their tether for Bitcoin/Ethereum en masse, and Bitfinex runs out of money to maintain the $1 peg, because they lack reserves.
If I start printing really nice-looking $20 bills, will you accept them?
Will your bank?
What about the Tax Man?
Will your bank?
What about the Tax Man?
If the bank and tax man accepts them with full knowledge of what they are, I'll accept them. :)
In the case of USDT, everyone accepts them, so why shouldn't I?
In the case of USDT, everyone accepts them, so why shouldn't I?
> everyone accepts them
You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction.
USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
You and I have very different ideas of what "everyone" means. USDT is not even accepted by everyone that deals with crypto, even less if you actually start thinking about the financial institutions that are looking into crypto, and the amount of people who would take USDT is infinitesimally small compared to those that would accept greenbacks in a regular transaction.
USDT is only accepted at shady exchanges that couldn't find a banking partner and their ignorant/SOL users who were forced or "incentivized" into taking USDT for a premium.
A stable coin worth $1 isn’t very stable of it’s not worth $1, is it?
It's worth what people say it's worth, not what it's backed by. And people seem to be saying it's worth $1 from the charts so ... it's worth $1.
Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.
Elon Musk's "net worth" is 146 billion, is that backed by something? No, TSLA shares are manufactured just like USDT.
How much would you pay for 1 USDT?
Tesla is a company that creates products; that has intrinsic value. Could it all go belly-up? Of course. But the value isn't just invented whole-cloth "just because someone said so".
Pro tip: the deposits in your bank account are not backed by actual money 1-to-1
Yeah, but in the US the FDIC insures my bank account up to $250,000 (per account!). Tether has no such guarantee, which makes Tether's financials a lot more important.
Which is why banks are highly regulated, have reserve and capital requirements and central banks acting as lender of last resorts.
They are, however, backed by the FDIC.
Only up to 250k. Any more and you need your own insurance.
$250k per account, up to 6 accounts. So the FDIC insures up to $1.5 million. If you have more then that, I think you can find other ways to secure your money.
Anything above FDIC insurance limits and you’re in US Treasuries, backed by the full faith and credit of the US Treasury. They’re one of the safest financial assets in the world. The risk of default is almost, but not quite, zero.
the fed has never not bailed people out, whether it’s money market funds or anything else even if not fdic insured
The FDIC could not make the system solvent in the event everyone tried to redeem their funds. It can only keep up confidence to try to prevent people from all trying to redeem their funds.
The government promising by law to pay everyone back does build more confidence than Tether's 2.3 cents + outstanding debt from other exchanges.
This is why I stick with defi stablecoins.
This is why I stick with defi stablecoins.
Pro tip: Modern finance is also a Ponzi scheme.
No, it's not a Ponzi scheme. A Ponzi scheme, "is a fraudulent investing scam promising high rates of return with little risk to investors. A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors. This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers." (https://www.investopedia.com/terms/p/ponzischeme.asp)
Modern finance is regulated. Schemes that aim to generate a return have to file a prospectus and must be audited and exposed to legal liability should they fail to follow the rules.
Modern finance is regulated. Schemes that aim to generate a return have to file a prospectus and must be audited and exposed to legal liability should they fail to follow the rules.
If I own $100 worth of tether can I exchange them through the official tether organization/company for $100 cash?
Yes. However, if you and the rest of the world want to at the same time, you cannot. This is a known risk, normal banks suffer from the same problem. However, normal banks are strictly regulated, and will receive a bailout to make sure your life savings do not vanish in thin air. Tether does not have such guarantees, so you will have to solely trust Tether foundation to prioritise your money over their profit.
No, you can’t. And their TOS state they have zero obligation to do so.
Although the fractional reserve requirement has been dropped to 0% recently.
https://www.eidebailly.com/insights/articles/2020/4/federal-...
So there goes that regulation. At least there's FDIC?
https://www.eidebailly.com/insights/articles/2020/4/federal-...
So there goes that regulation. At least there's FDIC?
You are not wrong, but you are making a false equivalence between Tether and banks.
Banks have fractional reserve because they take their customer funds and reinvest, make loans, etc. So they will never have one dollar in their vaults for every dollar they get deposited from their customers.
Tether is not doing any of that, they are just minting ~1.3 USDT for every USD they get deposited. What they are doing is criminal and should never be accepted as "just a known risk".
Banks have fractional reserve because they take their customer funds and reinvest, make loans, etc. So they will never have one dollar in their vaults for every dollar they get deposited from their customers.
Tether is not doing any of that, they are just minting ~1.3 USDT for every USD they get deposited. What they are doing is criminal and should never be accepted as "just a known risk".
Customers of regular banks doesn't suffer from this. In the US the treasury, or more accurately fdic, will protect the first 250k of each customer account.
No, only approved clients can.
The list is basically exchanges and large traders.
The list is basically exchanges and large traders.
Maybe. Depends upon the exchange you are using. There will likely be fees and you'll end up with ~$90 in your bank account or in "cash".
People keep posting these articles, and Tether keeps not collapsing. You can exchange your Tethers 1:1 for dollars right now, and have been able to this entire time.
The question is what happens when more than 2.9% of people try to do that at the same time.
What happens when everyone tries to withdraw their money from their banks at the same time?
The Federal government steps in as the lender of last resort to provide liquidity: https://en.wikipedia.org/wiki/Lender_of_last_resort
Central bank prints a shitload of money
Printing money in real terms just means taking money from someone who holds it.
In what sense? In a world of fiat currency, post-Bretton Woods, what does money mean? I am not an expert by any means, but to me, it seems like the USD has value (ignore the rest of the world for a moment) because the US issues taxes that it says can only be paid with this wacky tokens called dollars and if you don't pay your taxes, then bad things happen. The rest follows from there. I think that you are saying (correct me if I'm wrong) that printing money leads to inflation which lowers what you can exchange your tokens for (maybe it takes more of them to buy apples). So, the first question is whether that is actually true. We have seen a fair amount of printing of money in recent years, but fairly low inflation. It's not obvious to me at what point that changes. The second question is whether inflation if it does occur is net bad/good and for who. I think we can agree Weimar Republic style hyperinflation is bad. However, let's say that inflation is 1% is that good or bad? For who? I think this question doesn't have meaning on an absolute scale. I think it has meaning relative to growth (and the productive capability of the full economy). Let's say that the economy is growing at say 6%, but we have 1% inflation--I'm fairly happy with that. But, let's say that we have 2% growth and 1% inflation--I'm less happy. Deflation is deadly (which has historically been the fate of gold based currencies), so we could argue that having a bit of inflation is insurance that we pay to avoid disaster. But, what about beyond that? The typical argument is that it helps drive consumption and encourages investment. Do you disagree?
> We have seen a fair amount of printing of money in recent years, but fairly low inflation.
The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values.
> The second question is whether inflation if it does occur is net bad/good and for who.
Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.
The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values.
> The second question is whether inflation if it does occur is net bad/good and for who.
Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.
It’s getting above my level of expertise but in addition to taxes, mortgages, corporate bonds, and state bonds also play a part.
Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.
Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.
Not really, the entire function of central bank is that it can create money at will.
Imagine we own a company, I own 20 stocks, you own 10 stocks. I unilaterally decide to print 10 more stocks and give them to myself. Do you have the same amount of stocks? Yea, but in real terms now you have less stocks. The same thing with money. It doesn’t matter how much money you have, what matters is how much you have it relative to others.
Depends entirely on the velocity of money. Remember also that central banks can remove money by raising interest rates.
If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?
If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?
I don't believe this would cause any additional inflation, since this is not scenario of creating money, but rather converting one class of money(bank deposit) into another class(reserve notes).
The people may even simply move money from one bank to another, it doesn’t matter. What matters is that the bank goes insolvent. So what you have now is a bunch of loans not supported by anything.
@eloff I think our replies crossed. I think that the question is whether you are still at a net positive as a result of inflation (consider the counterfactual).
If that causes inflation then it is taking money from the existing holders.
They're guaranteed to get at least $250,000 back based on the FDIC based on each bank account. At least in the US.
[deleted]
Coinbase and Binance are insured by FDIC as well.
https://www.investopedia.com/binance-vs-coinbase-5120852
> FDIC-insured USD balances
> Binance security features also include [...] Like Coinbase, all USD balances are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and held in custodial bank accounts.
https://www.investopedia.com/binance-vs-coinbase-5120852
> FDIC-insured USD balances
> Binance security features also include [...] Like Coinbase, all USD balances are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and held in custodial bank accounts.
That is for USD only though, only deposits in USD are insured and only on bank failures.
Anything in a coin, even a stablecoin like Tether, USDC, DAI etc is not USD. Stablecoins really are not as "stable" as USD for the insurance reason. They are merely pegged to the USD.
Coinbase and Binance are not SPIC insured which covers some securities but not losses, only situations where the exchange, or bank, fails much like with FDIC.
Most brokerages are both FDIC for USD deposits, and then SPIC for deposits and some securities, not on losses on the market though [1]. Robinhood I believe is only SPIC still [2], but most brokerages are FDIC AND SPIC insured.
FDIC is backed by the US treasury. SPIC is a private company ultimately and not as backed as FDIC but it is the main securities insurance most brokerages use.
Tether is like an individual stock though, even if Coinbase, Binance or other exchanges had SPIC insurance, if Tether (USDT) fails it would be like a stock failing, there would be no insurance even then. The insurance is really at the bank/exchange level if they are insolvent or have no reserves/capital.
Side note: A good use of stablecoins is buying into that stablecoin and then converting to other coins you want, that minimizes fees but keeps tax hit at 1-to-1 since they are pegged to the USD, makes all the cost basis and other accounting easier. A common technique is buying into USDC or DAI and then converting to other coin to reduce purchase fees. Stablecoins are also a "home base" or refuge when the market is falling without going back to USD fully, that is why volume of USDC, DAI, and USDT is so immense right now.
[1] https://www.investopedia.com/articles/stocks/08/sipc-fdic-ba...
[2] https://www.cnbc.com/2018/12/14/robinhood-debate-highlights-...
Anything in a coin, even a stablecoin like Tether, USDC, DAI etc is not USD. Stablecoins really are not as "stable" as USD for the insurance reason. They are merely pegged to the USD.
Coinbase and Binance are not SPIC insured which covers some securities but not losses, only situations where the exchange, or bank, fails much like with FDIC.
Most brokerages are both FDIC for USD deposits, and then SPIC for deposits and some securities, not on losses on the market though [1]. Robinhood I believe is only SPIC still [2], but most brokerages are FDIC AND SPIC insured.
FDIC is backed by the US treasury. SPIC is a private company ultimately and not as backed as FDIC but it is the main securities insurance most brokerages use.
Tether is like an individual stock though, even if Coinbase, Binance or other exchanges had SPIC insurance, if Tether (USDT) fails it would be like a stock failing, there would be no insurance even then. The insurance is really at the bank/exchange level if they are insolvent or have no reserves/capital.
Side note: A good use of stablecoins is buying into that stablecoin and then converting to other coins you want, that minimizes fees but keeps tax hit at 1-to-1 since they are pegged to the USD, makes all the cost basis and other accounting easier. A common technique is buying into USDC or DAI and then converting to other coin to reduce purchase fees. Stablecoins are also a "home base" or refuge when the market is falling without going back to USD fully, that is why volume of USDC, DAI, and USDT is so immense right now.
[1] https://www.investopedia.com/articles/stocks/08/sipc-fdic-ba...
[2] https://www.cnbc.com/2018/12/14/robinhood-debate-highlights-...
Not sure why this is being downvoted. Also, gemini is FDIC is insured as well. https://www.gemini.com/legal/user-agreement#section-fdic-ins...
But aren't those USD balances?
Isn't the idea that if many people try to convert USDT to USD, they won't be able to, So they won't have FDIC insured USD?
Isn't the idea that if many people try to convert USDT to USD, they won't be able to, So they won't have FDIC insured USD?
[deleted]
If Tether were not exchanging USDT for dollars it would be impossible to support the market prices on exchanges between Tether and other stablecoins. Kraken also has a real USD/USDT market that is quite liquid. There is no way that these could be operational and liquid if the company was not exchanging the stables for real dollars.
And none of these Tether hit pieces ever attempt to explain this in the slightest. Until they do, there's not really much to see here. The explanation given in the piece is utterly transparent nonsense.
And none of these Tether hit pieces ever attempt to explain this in the slightest. Until they do, there's not really much to see here. The explanation given in the piece is utterly transparent nonsense.
No you haven't.
Where? How? People have posted bounties for anyone able to show demonstrable proof that they've successfully had Tether exchange their USDT for USD. No-one has claimed them.
Last I saw, two things, 1) Tether's TOC said they had no obligation to redeem, and 2) in the hypothetical event you wished to, it was an onerous situation requiring holdings of six digits, being non-US, and requiring "90-180 days" of processing time.
Where? How? People have posted bounties for anyone able to show demonstrable proof that they've successfully had Tether exchange their USDT for USD. No-one has claimed them.
Last I saw, two things, 1) Tether's TOC said they had no obligation to redeem, and 2) in the hypothetical event you wished to, it was an onerous situation requiring holdings of six digits, being non-US, and requiring "90-180 days" of processing time.
You can trade USDT for USD on any of the big exchanges that allow trading for USD.
Bernie Madoff was paying redemptions from his "fund" for decades.
Interestingly, the Gemini dollar (GUSD) is backed by real dollars, and is thoroughly audited, but regularly has fluctuations of +/-8%, even when Gemini does redemptions on demand. That’s a lot more than USDT (and DAI, for that matter) vary.
https://coinmarketcap.com/currencies/gemini-dollar/
https://coinmarketcap.com/currencies/gemini-dollar/
All ponzi schemes keep not collapsing until they do
The peg broke by 10% today for ONE HOUR and it caused pandemonium.
If the peg breaks more significantly, it'll be worse.
If the peg breaks more significantly, it'll be worse.
> The peg broke by 10% today for ONE HOUR and it caused pandemonium.
Where was this event recorded? Is there a USDT/USD chart somewhere?
Where was this event recorded? Is there a USDT/USD chart somewhere?
See e.g. here: https://coinmarketcap.com/currencies/tether/
Sure, go to coingecko or livecoinwatch
In don’t see it on the CMC chart.
https://coinmarketcap.com/currencies/tether/
https://coinmarketcap.com/currencies/tether/
I don't see it either. 1 USDT = 1 USD ± 0.01.
An increase in price smaller than one cent? This caused pandemonium?
The peg broke because during times when the market is extremely volatile:
1. Exchange deposits/withdrawals are slower and more expensive because of ethereum network congestion
2. Other assets have larger price disparities across exchanges
Because of this reason, arbitrageurs have better pairs to arbitrage with their assets during these busy times. Why make 10% on usd/usdt when you can make 15/30% on eth or altcoin price dislocations across exchanges?
1. Exchange deposits/withdrawals are slower and more expensive because of ethereum network congestion
2. Other assets have larger price disparities across exchanges
Because of this reason, arbitrageurs have better pairs to arbitrage with their assets during these busy times. Why make 10% on usd/usdt when you can make 15/30% on eth or altcoin price dislocations across exchanges?
Yeah, I don't get it either. Despite all this uncertainty, somehow 1 USD = 1 USDT. The more I read about Tether itself the more it looks like fractional reserve banking to me.
Fractional reserve banking doesn't work without insurance. The practice of fractional reserve banking is actually encouraged by governments around the world due to the generally acceptable amounts of risk and the increase in effective cash supply, these are advantages that are seen to outweigh the risks. The issue is that tether may be imposing these risks on the market without any coordination of either insurance or widespread liquidity benefit - they may just be doing this to increase their effective private market power.
In America's situation, FYI, that insurance is supplied in the form of a gigantic economic engine and lots of guns to get more money if needed - elsewhere in the world this risk will often times be subsidized by the IMF.
In America's situation, FYI, that insurance is supplied in the form of a gigantic economic engine and lots of guns to get more money if needed - elsewhere in the world this risk will often times be subsidized by the IMF.
So are you not refuting that the core mechanic looks the same with Tether? The difference is just that the fractional reserve banking system is protected by the government, with guns if necessary?
I wasn't actually addressing whether tether does or does not under reserve assets. I'm not particularly familiar with tether in general and the article isn't the easiest to follow when it comes to where specifically the money is and how secure those investments are. It'd be a poor practice to have all their backing cash invested into GME, but it'd also be a poor practice to have their cash in actual bills somewhere. Ideally Tether can maintain an oversupply of asset value in various sources that are stable enough to justify less than the oversupply they have.
“people keep saying this about bernie madoff but he keeps not going bankrupt. in fact you can withdraw your money right now” - poor sap 2007
How would this prevent it from being a Ponzi scheme?
Ponzi schemes do keep paying out, for as long as they are growing.
Ponzi schemes do keep paying out, for as long as they are growing.
Technically, you could withdraw your money for a profit from Bernie Madoff's company for a long time
Well, this article is an improvement in that it has a testable prediction. When BTC falls below ~19k, for an extended period, Tether should collapse, according to the article.
The article also said that BTC has already dropped into the dead zone just one year ago during the pandemic crash. Tether is still alive and BTC is worth 10 times more.
I don't know how reliable of a prediction this could be.
I don't know how reliable of a prediction this could be.
These people were making predictions like this in 2017 when btc was at 20k. It crashed brutally for a long time, and nothing happened to Tether. I see no reason whatsoever to think that this time is different. This article relies on the same specious arguments as all the others. The simple fact of the matter is that you cannot maintain a peg in liquid markets for a ponzi asset for any appreciable period of time. Tether trades in liquid markets on many exchanges, and there is no way to fake that.
It is possible that Tether is a ponzi, but if it is, it's at least mostly backed. It's certainly true that the company is shady, and probably doing riskier things with the capital than it should be, but the idea that Tether is a complete ponzi that's been used to inflate the entire market is just demonstrably false.
It is possible that Tether is a ponzi, but if it is, it's at least mostly backed. It's certainly true that the company is shady, and probably doing riskier things with the capital than it should be, but the idea that Tether is a complete ponzi that's been used to inflate the entire market is just demonstrably false.
People have been predicting the imminent implosion of Tether Real Soon Now™ for at least 4 years. At what point can we say we are in Q territory?
That's a terrible argument in the financial world. Obviously this would be a Black Swan type of event like the 2009 financial crisis - there wouldn't necessarily be foreboding events or even the ability to predict when this would happen. What we can do is analyze the fundamentals, and that's what this guy is doing
"The danger zone happens when BTC drops below $18,500". Does that mean the scheme can continue as long as BTC doesn't drop that far?
I think the danger zone thing is saying if it drops to $18,500 then at this point the bottom will fall out and it will drop a lot further.
If it doesn't drop below $18,500 there could still be danger. Of course danger means it will then drop, well, you know ... below $18,500!
If it doesn't drop below $18,500 there could still be danger. Of course danger means it will then drop, well, you know ... below $18,500!
USDC and DAI ftw
Those gas prices tho :C
Those gas prices tho :C
Got to wonder what crypto prices would be at today without Tether's pump scam.
I too believe it's a massive ponzi scheme.
However, I wasn't even aware (not trading crypto at all) that Binance offer 'affiliate' programs where influencers can earn Tethers. It's kind of funny - it works literally like a ponzi scheme - influencers bring in new 'investors' and earn 'tethers' (which are just printed out of thin air) - they can buy crypto with those tethers - and then guess what ? They sell them to the new 'investors' they just brought in.
It works until it doesn't.
However, I wasn't even aware (not trading crypto at all) that Binance offer 'affiliate' programs where influencers can earn Tethers. It's kind of funny - it works literally like a ponzi scheme - influencers bring in new 'investors' and earn 'tethers' (which are just printed out of thin air) - they can buy crypto with those tethers - and then guess what ? They sell them to the new 'investors' they just brought in.
It works until it doesn't.
I mean, Bitcoin is printed out of thin air as well. Just because you compute some hashes you can get something that people value at $40K?
It's not that different than if we had a "cat picture" coin that anyone with a cat could manufacture cat pictures at will and sell them.
Granted Bitcoin is a little bit more governed in terms of technical difficulty and cryptographic security, but that doesn't change the fact that it's printed out of thin air in a decentralized fashion.
If I developed some hardware in secret that could mine Bitcoin 10X faster, there would be nothing illegal about using it to my advantage. If I had a hypothetical device that could print it 1000X faster, I could do that too. Maybe I do. You wouldn't know if I did.
Bitcoin is a Ponzi scheme as well.
That $1T market cap of Bitcoin? Was there really $1T USD put into it? I don't think so.
It's not that different than if we had a "cat picture" coin that anyone with a cat could manufacture cat pictures at will and sell them.
Granted Bitcoin is a little bit more governed in terms of technical difficulty and cryptographic security, but that doesn't change the fact that it's printed out of thin air in a decentralized fashion.
If I developed some hardware in secret that could mine Bitcoin 10X faster, there would be nothing illegal about using it to my advantage. If I had a hypothetical device that could print it 1000X faster, I could do that too. Maybe I do. You wouldn't know if I did.
Bitcoin is a Ponzi scheme as well.
That $1T market cap of Bitcoin? Was there really $1T USD put into it? I don't think so.
People like to say Ponzi scheme, but that's got a specific meaning. Having secret hardware which can mine it faster is not it. Being worth more money than was put in is not it. (Otherwise almost every stock market ticker would be a Ponzi scheme)
I’m amused that you expect someone who openly thinks money is a joke to grasp the subtleties of what constitutes a Ponzi scheme.
I know Ponzi schemes are bad. I think your money is bad. Therefore, your money is a Ponzi scheme. That’s the entirety of the logic employed by the comparison.
Just wait until you hear what they’ve done with the term “market capitalization”.
I know Ponzi schemes are bad. I think your money is bad. Therefore, your money is a Ponzi scheme. That’s the entirety of the logic employed by the comparison.
Just wait until you hear what they’ve done with the term “market capitalization”.
Ponzi schemes mathematically just reduce to a lottery with slightly better odds than most lotteries.
You can't just 'create' a Bitcoin out of thin air and say - hi guys, here is my Bitcoin.
But a private entity (based in Bahamas) can do that with Tether. And you can use those to buy 'real' Bitcoins. It works perfectly until somebody tries to convert a big enough amount of those Tethers to real USD.
In real world, I'm not sure it's a very good example, so feel free to challenge it, would be:
- somebody prints perfect fake 100$ bills and floods the market with them
- prices of real goods go up significantly
- at one point somebody notice that those fake dollars have a small red dot in a corner
- they become instantly worthless, and all prices crash as there is suddenly much less real dollars than everybody thought
It's not a great analogy as there is nobody guaranteeing the conversion of those fake dollars to true dollars in the first place. Tether pretends to be doing that - but it appears more and more that they are just printing them out of thin air.
But a private entity (based in Bahamas) can do that with Tether. And you can use those to buy 'real' Bitcoins. It works perfectly until somebody tries to convert a big enough amount of those Tethers to real USD.
In real world, I'm not sure it's a very good example, so feel free to challenge it, would be:
- somebody prints perfect fake 100$ bills and floods the market with them
- prices of real goods go up significantly
- at one point somebody notice that those fake dollars have a small red dot in a corner
- they become instantly worthless, and all prices crash as there is suddenly much less real dollars than everybody thought
It's not a great analogy as there is nobody guaranteeing the conversion of those fake dollars to true dollars in the first place. Tether pretends to be doing that - but it appears more and more that they are just printing them out of thin air.
> You can't just 'create' a Bitcoin out of thin air and say - hi guys, here is my Bitcoin.
Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses, you can still most certainly say "here is my Bitcoin" and it will be usable.
If the hashes you generate are indistinguishable from the hashes generated by an AntMiner, you have made Bitcoin out of thin air.
Yes, creating such a "counterfeit miner" would involve technological feats. But that shouldn't be the deciding factor here. It's still a PoW coin and assuming you are a super-powered genius hardware inventor with an insanely advanced lab, you can do the work much more efficiently without anyone knowing. And the coins would be actually legal to use.
Which is VASTLY different from USD in that if you have a secret lab to create USD bills that are indistinguishable from the real thing, it's still illegal.
With Bitcoin, it's still decentralized, i.e. printed out of thin air. If the coins you generate work with the system, they're legal and valid, it doesn't matter how you generate them or how much work you really did.
Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses, you can still most certainly say "here is my Bitcoin" and it will be usable.
If the hashes you generate are indistinguishable from the hashes generated by an AntMiner, you have made Bitcoin out of thin air.
Yes, creating such a "counterfeit miner" would involve technological feats. But that shouldn't be the deciding factor here. It's still a PoW coin and assuming you are a super-powered genius hardware inventor with an insanely advanced lab, you can do the work much more efficiently without anyone knowing. And the coins would be actually legal to use.
Which is VASTLY different from USD in that if you have a secret lab to create USD bills that are indistinguishable from the real thing, it's still illegal.
With Bitcoin, it's still decentralized, i.e. printed out of thin air. If the coins you generate work with the system, they're legal and valid, it doesn't matter how you generate them or how much work you really did.
If you had such a miner, you would be awarded a large proportion of the coins mined in the future. These coins are part of the 21 million capped supply of Bitcoin, and this would not be secret as everyone would be able to see your activity. All you will do is speed up the rate at which the cap of Bitcoin is reached. No unlimited printing is possible.
I have no idea where 'counterfeit miner' even comes into this. If you're the best at mining, you get the most coins. That's not controversial, it's a decentralised system, who would even be deeming you counterfeit? Were the first ASICs 'counterfeit'?
I have no idea where 'counterfeit miner' even comes into this. If you're the best at mining, you get the most coins. That's not controversial, it's a decentralised system, who would even be deeming you counterfeit? Were the first ASICs 'counterfeit'?
> If you're the best at mining, you get the most coins
Exactly, so I'm demonstrating that Bitcoins are printed out of thin air by doing some arithmetic. The fact that a concept of "counterfeit" doesn't even exist demonstrates that ALL of them are printed out of thin air. You don't need to pan for gold, you don't need to save a kitten, nothing. All you need is to punch some numbers into a GPU or ASIC and voila you have thin air printed Bitcoin.
As opposed to USD, where the person who has the most coins isn't the one who can print a physical dollar bill most efficiently. There is a notion of counterfeit, there is centralized governance, and thin air printing is not allowed at the threat of arrest by that governance.
Exactly, so I'm demonstrating that Bitcoins are printed out of thin air by doing some arithmetic. The fact that a concept of "counterfeit" doesn't even exist demonstrates that ALL of them are printed out of thin air. You don't need to pan for gold, you don't need to save a kitten, nothing. All you need is to punch some numbers into a GPU or ASIC and voila you have thin air printed Bitcoin.
As opposed to USD, where the person who has the most coins isn't the one who can print a physical dollar bill most efficiently. There is a notion of counterfeit, there is centralized governance, and thin air printing is not allowed at the threat of arrest by that governance.
If there's a hard 21 million coin limit, I don't really see it as 'out of thin air'. There are 21 million Bitcoins that have and will ever exist. It's no more printing from thin air than pulling gold from the ground is.
Besides, why is panning for gold or saving a kitten fundamentally any different? A difficult physical process must take place, the fact it happens to be digital does not make it magic, despite how complex these devices may seem.
Besides, why is panning for gold or saving a kitten fundamentally any different? A difficult physical process must take place, the fact it happens to be digital does not make it magic, despite how complex these devices may seem.
Well if you are much, much better at mining you can just fork it and take all the bitcoin? A side effect of this is you only need to be much better at mining for a short time.
> > You can't just 'create' a Bitcoin out of thin air and say - hi guys, here is my Bitcoin.
> Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses
You can in theory but not in practice. The person you're responding to was talking about practice, not theory. Practice is what matters in this case.
> Sure you can. If your "counterfeit miner" secretly works 1000X faster than the miners everyone uses
You can in theory but not in practice. The person you're responding to was talking about practice, not theory. Practice is what matters in this case.
Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD? It doesn't seem hard to convert the USDT to USD at par so I can't see the difference.
>Is there a meaningful difference between them paying the influencers in USDT compared to paying them in USD?
Yes. You print USDT and pay someone then lie about not printing it.
For the love of god, don't hold any USDT. Its really convenient to exchange cryptos but don't be holding it when the cards fall.
Yes. You print USDT and pay someone then lie about not printing it.
For the love of god, don't hold any USDT. Its really convenient to exchange cryptos but don't be holding it when the cards fall.
So the following is okay:
1. bitfinex asks some influencer to do some influencer things for them
2. bitfinex hands them a $100 bill
but the following isn't fine:
2. bitfinex hands them 100 USDT tokens
But hold on, corporations don't often pay people using paper bills, they pay them using ACH, so is the following fine?
2. bitfinex transfers $100 to their bank using ACH
Probably fine right, given that there isn't really a difference between getting paid in ACH vs paper bills. But some companies are old fashioned and don't do ACH transfers, they issue checks instead. So is the following fine?
2. bitfinex writes them a check for $100
Well, a check is just an IOU right? It's only a promise to pay them something. If you try to deposit the check and the check bounces it's not like the FDIC will save you. You'll have to chase after them for it. Given that fact, and recognizing that USDT is just an IOU, is there any difference between the above and
2. bitfinex gives them 100 USDT tokens
?
1. bitfinex asks some influencer to do some influencer things for them
2. bitfinex hands them a $100 bill
but the following isn't fine:
2. bitfinex hands them 100 USDT tokens
But hold on, corporations don't often pay people using paper bills, they pay them using ACH, so is the following fine?
2. bitfinex transfers $100 to their bank using ACH
Probably fine right, given that there isn't really a difference between getting paid in ACH vs paper bills. But some companies are old fashioned and don't do ACH transfers, they issue checks instead. So is the following fine?
2. bitfinex writes them a check for $100
Well, a check is just an IOU right? It's only a promise to pay them something. If you try to deposit the check and the check bounces it's not like the FDIC will save you. You'll have to chase after them for it. Given that fact, and recognizing that USDT is just an IOU, is there any difference between the above and
2. bitfinex gives them 100 USDT tokens
?
It's a crime to write bad checks. That's what the article is all about.
Hmm, was writing a longer answer to you, but ended up agreeing without expecting to.
Bitfinex could either issue some USDT, convert it to USD and hand that to the influencer, or issue some USDT and hand that to the influencer. Can't really see the difference here, except if they hand over USDT that will hype the market a bit as well? As long as the conversion works they two are functionally the same.
Bitfinex could either issue some USDT, convert it to USD and hand that to the influencer, or issue some USDT and hand that to the influencer. Can't really see the difference here, except if they hand over USDT that will hype the market a bit as well? As long as the conversion works they two are functionally the same.
They control the issuance of USDT, something they can't do with USD. They sure hope influencers don't immediately convert it to USD and buy other bitcoin or other cryptos with it instead. That way, they keep the USD and the influencer helps pumping the price.
If I were that influencer I would cash the check and then provide services.
Same with USDT. Cash it for Bitcoin and then provide services.
Same with USDT. Cash it for Bitcoin and then provide services.
The difference is, of course, that exchanges want to encourage liquidity in USDT and they might not have the means to offer USD, especially if they're based in regions with tighter regulations so bank wires are out of the question. Just because they can convert USDT to USD doesn't necessarily mean they can offer the same means to everybody else.
Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
> how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
It seems to me the crypto folks on one hand complain about the governance of USD, but then also "need" it to stabilize their own currency. I thought crypto was the currency of the future.
It seems to me the crypto folks on one hand complain about the governance of USD, but then also "need" it to stabilize their own currency. I thought crypto was the currency of the future.
> The difference is, of course, that exchanges want to encourage liquidity in USDT and they might not have the means to offer USD, especially if they're based in regions with tighter regulations so bank wires are out of the question. Just because they can convert USDT to USD doesn't necessarily mean they can offer the same means to everybody else.
1. is paying influencers USDT going to increase liquidity or decrease it? From a maker-taker model, I'd think that will decrease liquidity because those influencers are probably going to place a market order which reduces liquidity.
2. Is the typical influencers (or the average influencer they hired) going to have trouble converting USDT to USD? My profile of them would be 18-35 year old, middle to upper class, living in a developed country (or at least not a country that's subject to USD sanctions). It doesn't seem hard for those people to accept a USD wire transfer.
>Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
Agreed, I avoid holding USDT where possible.
1. is paying influencers USDT going to increase liquidity or decrease it? From a maker-taker model, I'd think that will decrease liquidity because those influencers are probably going to place a market order which reduces liquidity.
2. Is the typical influencers (or the average influencer they hired) going to have trouble converting USDT to USD? My profile of them would be 18-35 year old, middle to upper class, living in a developed country (or at least not a country that's subject to USD sanctions). It doesn't seem hard for those people to accept a USD wire transfer.
>Even the staunchest believer in crypto will have a hunch there's something funny going on with Tether, but so far most people have been willing to look the other way as Tether and other stablecoins answer a genuine need: how to represent fiat money in the crypto ecosystem when centralized banks refuse to play along with their own downfall.
Agreed, I avoid holding USDT where possible.
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Ultimately Tether is backed by obligations from the participating exchanges to fund the tethers that were generated on their behalf. It is basically a scheme being run on behalf of the large crypto exchanges to enable wash trades (which are illegal in every market EXCEPT crypto because nobody figured out how to regulate crypto properly, as per Gensler’s recent comments).
If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...
One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.
If you want to kill Tether and Bitcoin, you don’t need to go after Tether directly or wait for some price drop. Subpoena all of the exchanges and ask for their commercial relationship with Tether to be documented, and for them to disclose all of their loan obligations, collateral and so on. But, your friendly politicians aren’t going to do that, because Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...
One of the craziest things is actually USDC — an attempt to replace Tether with a cleaned up, legitimate-looking version of the same nonsense.
> Coinbase and Binance and the others have locked up some very high powered lobbyists at this point. That’s where Madoff went wrong...
Madoff was extremely well connected, and numerous reports to the SEC were ignored as a result. His empire came down when he confessed to his sons, who immediately called the FBI.
Madoff was extremely well connected, and numerous reports to the SEC were ignored as a result. His empire came down when he confessed to his sons, who immediately called the FBI.
> That’s where Madoff went wrong...
FYI Madoff did have high-powered friends, and was never caught despite numerous tip offs. Madoff turned himself in when the GFC hit and his marks wanted their money.
FYI Madoff did have high-powered friends, and was never caught despite numerous tip offs. Madoff turned himself in when the GFC hit and his marks wanted their money.
How is USDC nonsense? If you actually have the associated USD as collateral, it is most definitely not nonsense.
A reason to be wary about USDC are that their haven't been audited, just attested https://www.circle.com/en/usdc , and not even recently at that.
Note that attestations are easy to fake: the article mentions the case of Tether
> Failing to complete an audit and settling on an attestation “for transparency”. The morning of the attestation, tether moved $380m from sister company bitfinex into a bank account to pass the verification
Note that attestations are easy to fake: the article mentions the case of Tether
> Failing to complete an audit and settling on an attestation “for transparency”. The morning of the attestation, tether moved $380m from sister company bitfinex into a bank account to pass the verification
>wash trades (which are illegal in every market EXCEPT crypto
Illegal in crypto as well. https://www.cftc.gov/PressRoom/PressReleases/8369-21
Illegal in crypto as well. https://www.cftc.gov/PressRoom/PressReleases/8369-21
USDC doesn’t have backing either?
USDC isn't backed by actual USD in a bank account somewhere either. (Largely because you can't just stick that much money in a bank account, and it wouldn't actually be close to 100% safe even if you could.)
What? They literally hold 1:1 collateral in USD custody accounts.
Don’t they hold things like treasury bills which are practically equivalent to USD?
Coindesk has a breakdown [1]. Treasury bills make up 2.94% of their cash/cash equivalent balances, which in turn make up 75.85% of their balance sheet. It's mostly in commercial paper. As the Coindesk article points out, it's hard to say what the credit rating or liquidity of the commercial paper is.
Compare to the capital ratios of your average bank, though.
[1] https://www.coindesk.com/tether-first-reserve-composition-re...
Compare to the capital ratios of your average bank, though.
[1] https://www.coindesk.com/tether-first-reserve-composition-re...
This mini-thread is about USDC.
From what I can tell, unlike Tether USDC haven't publicly disclosed what proportion of their reserves are backed by treasury bills and what proportion are stuff like commercial paper - just that they're backed with a mixture of both. On the other hand, they do claim that everything backing their token has very good credit ratings and I don't think Tether do.
Bank customers money are backed (up to 250k for each account) by the US treasury though which is a pretty significant difference. The US can print itself out of any bank run, at least in the short term.
> Disclaimer: I have short positions on the cryptocurrency ecosystem, through MSTR and COIN puts
Not a good way to start the article. I think Tether can crash without affecting MSTR or COIN, for example. A short on GBTC might be more obvious connection. But... that's another article for sure.
-------------
Otherwise, the news on Tether's sketchy drum has been beaten for almost 5 years now, at least by my own memory. Tether could very easily survive this most recent crash by... whatever mysterious means its survived before.
This blogpost adds a $18,000 BTC price as the time they think everything falls apart. An interesting theory. Maybe we'll get there in a few weeks and see if the theory bears any fruit. Its an objective price point for sure, so its an easy one to test if the price shifts lower in the future.
Not a good way to start the article. I think Tether can crash without affecting MSTR or COIN, for example. A short on GBTC might be more obvious connection. But... that's another article for sure.
-------------
Otherwise, the news on Tether's sketchy drum has been beaten for almost 5 years now, at least by my own memory. Tether could very easily survive this most recent crash by... whatever mysterious means its survived before.
This blogpost adds a $18,000 BTC price as the time they think everything falls apart. An interesting theory. Maybe we'll get there in a few weeks and see if the theory bears any fruit. Its an objective price point for sure, so its an easy one to test if the price shifts lower in the future.
At least they're disclosing their stake, it's more honest that most people putting out hokum about crypto.
Oh yeah. I appreciate them disclosing their stake. I just... don't think their logic is very good in that sentence. But its kind of a tangent and unrelated to the rest of the post.
I remember reading some advice from some seasoned traders years (maybe ~decade ago). Knowing the future is overrated. Timing is everything.
Even if you knew that Tether was worth $0 as of the year 2025 with a magical crystal ball, if you don't know all the price points between now and then (and therefore are unable to make an appropriate "timing" for placing your bet), you'll lose money.
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I think a lot of us around here are willing to bet Tether is worthless. But when does everyone else realize it? That's the big question for any bubble. Timing is everything, even when you are correct.
In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
I remember reading some advice from some seasoned traders years (maybe ~decade ago). Knowing the future is overrated. Timing is everything.
Even if you knew that Tether was worth $0 as of the year 2025 with a magical crystal ball, if you don't know all the price points between now and then (and therefore are unable to make an appropriate "timing" for placing your bet), you'll lose money.
-------
I think a lot of us around here are willing to bet Tether is worthless. But when does everyone else realize it? That's the big question for any bubble. Timing is everything, even when you are correct.
In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
> In the meantime, Tether will be worth $1 or so, and "be operational". So even a perfectly accurate crystal ball seeing into the future doesn't help you in the now.
I brought it up in another post here in this thread, but I think the easiest way to know when Tether is genuinely in trouble is to keep an eye on the settlement iFinex reached with the NYAG [0] and if it's unable to fulfill it. Until then, be as sketchy as it may, it's "safe".
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
I brought it up in another post here in this thread, but I think the easiest way to know when Tether is genuinely in trouble is to keep an eye on the settlement iFinex reached with the NYAG [0] and if it's unable to fulfill it. Until then, be as sketchy as it may, it's "safe".
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
Surely they can post 18 million?
As the saying goes "the market can remain irrational longer than you can remain solvent" !
But isn't this a special case? Unlike shorting a stock there's an upper bound on the price ($1), if it's exceeded they'll print more to depress it, so the risk of getting margin called is low. The only real risk is the financing cost.
I don't know - I would say there is a massive counterparty risk too - my understanding is that to short Tether, you need to do it on an exchange. And if this ponzi theory is right, I would be pretty woried about the return of any money from the exchanges.
If you're playing vs Bitfinex, then what if they stop printing Tether and force the price to go up?
They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
The best move is to just sit back and wait for the chaos to unfold. Even then: what if USDT becoming worthless causes people to hoard BTC? What if BTC-USD spikes severely, as people "rush to safety" ? Is there reason to believe that a Tether collapse would in fact bring down BTC with it?
They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
The best move is to just sit back and wait for the chaos to unfold. Even then: what if USDT becoming worthless causes people to hoard BTC? What if BTC-USD spikes severely, as people "rush to safety" ? Is there reason to believe that a Tether collapse would in fact bring down BTC with it?
> If you're playing vs Bitfinex, then what if they stop printing Tether and force the price to go up?
>They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
I'm not sure whether that makes sense or not. I guess it's worth doing for revenge reasons, but if there are people willing to pay $1.1 for a $1 IOU, that seems like the perfect opportunity to decrease your deficit.
>They obliterate your short position, and once you're margin called, they go back to their printing Tethers business. You can't win at this game.
I'm not sure whether that makes sense or not. I guess it's worth doing for revenge reasons, but if there are people willing to pay $1.1 for a $1 IOU, that seems like the perfect opportunity to decrease your deficit.
You can trade USDT-USD on kraken and coinbase, which are some of the more regulated exchanges out there. So it's not as bad as shorting it on bitfinex itself.
Agreed, how amazing would it be to see that on all articles!
I’d like to think that even if I really disagreed with the article, I’d still appreciate the disclosure, but might just use it for fuel to ignore the content. IDK.
I’d like to think that even if I really disagreed with the article, I’d still appreciate the disclosure, but might just use it for fuel to ignore the content. IDK.
There is another theory that if BTC falls below X, mining is no longer profitable so the network would halt, and these points correlate with tether expansions, and the exchanges and whales are incentivized to look the other way
>There is another theory that if BTC falls below X, mining is no longer profitable so the network would halt
1. difficulty adjustments are a thing, so it wouldn't halt, only be slow until the next adjustment
2. there isn't a single profitability point for all miners, so all the miners won't drop off at once, so barring a massive collapse (eg. 95%) the network won't halt.
1. difficulty adjustments are a thing, so it wouldn't halt, only be slow until the next adjustment
2. there isn't a single profitability point for all miners, so all the miners won't drop off at once, so barring a massive collapse (eg. 95%) the network won't halt.
MSTR has raised billions in debt to buy bitcoin. If BTC falls below $10k its liabilities may exceed assets. It will be on the hook for billions of dollars and have no way to repay it but to raise more debt. Already, the last 4 or so btc MSTR purchases are underwater on more borrowed money. This is not sustainable.
Give how much BTC fell, by now he would have been better off just buying the google-amazon-facebook-tesla-microsoft portfolio instead. He was up up a lot but not anymore. And at the rate things are going insolvency cannot be ruled out anymore.
Give how much BTC fell, by now he would have been better off just buying the google-amazon-facebook-tesla-microsoft portfolio instead. He was up up a lot but not anymore. And at the rate things are going insolvency cannot be ruled out anymore.
Who offers those puts? I would imagine that no credible financial institution would do that and hence there would be significant counter-party risk with those puts.
All coins are Ponzi schemes. Tether is a coin. Tether is a Ponzi scheme.
I find it rather annoying how the word "ponzi" is being redefined to just mean "shady business".
Tether is definitely shady af, but I don't understand the obsession people have for calling anything they don't like (bitcoin/gamestop/nfts/etc) a ponzi.
Tether is definitely shady af, but I don't understand the obsession people have for calling anything they don't like (bitcoin/gamestop/nfts/etc) a ponzi.
Well the thesis per the article is that unless more cash keeps piling into tether in order to handle withdrawals then tether could collapse, which is pretty much the practical definition of a ponzi - don’t be the last one without a chair when the music stops
A Ponzi scheme is an investment fund whereby older investors are paid returns from newer investor principle.
Tether does not promise any returns. It’s not an investment. It’s a stable coin. It’s traded near $1 to 1 tether. Most traders don’t redeem tethers. They sell them on an exchange when they need to go back to dollars.
Tether does not promise any returns. It’s not an investment. It’s a stable coin. It’s traded near $1 to 1 tether. Most traders don’t redeem tethers. They sell them on an exchange when they need to go back to dollars.
I’m not saying it is or it isn’t. The thesis of the article is that it is, and the reasoning they provide is consistent with the definition of a ponzi scheme. So it’s consistent and your reasoning is no better than theirs until we have more evidence (ie it fails or it becomes the cornerstone of a long lived vibrant ecosystem)
Bitcoin is a ponzi in the classic sense though. There is no underlying value and the price only goes up if more people buy in. A lot of people see the parallels: https://www.cnbc.com/2021/04/23/bitcoin-a-gimmick-and-resemb...
More people ->
Higher Market Cap. ->
??? ->
Profit.
"Gold is a ponzi scheme in the classic sense though. There is no underlying value[1] and the price only goes up if more people buy in."
[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
except gold has been valuable for thousands of years and retains value without electricity and internet, none of which are true for BTC.
In other words, gold is a more proven/resilient ponzi scheme
Gold has plenty of use besides speculation - jewelry, decoration, electronics, healthcare.
Covered in the GP comment.
>[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
>[1] it's literally a shiny yellow rock. You can argue that there's some intrinsic value for use in jewelry or electronics, but given the demand breakdown (https://www.statista.com/statistics/299609/gold-demand-by-in...) and the current price, anyone buying right now is going to experience massive losses should a collapse happen
I know that only about half of the demand for new gold is for investment, but this means gold is in much better position than Bitcoin. Bitcoin can go to zero because it has no intrinsic value, unlike gold.
Well, everything in the economy is a ponzi scheme in a loose sense of the word. The real question is whether it provides a value that allows its price to be set on a market. A classic ponzi scheme has no value beyond its commitment to yield a return. There are several arguments for why crypto might have a priceable value, and one has to decide if they're persuasive. I think the comparison to gold isn't actually that bad for a coin with a predicable increase in supply, like doge.
No, ponzi means that proceeds from later investments pay returns to earlier investors, this is not what is happening with Bitcoin. It might be what's happening to tether (in a sense that they pay withdrawals out of recent deposits and rely on having more deposits that withdrawals). Bitcoin might be a bubble like tulips, but it's certainly not a ponzi scheme in any "classic sense."
This is not what Ponzi scheme means. They lied that every coin is backed by the US dollar, but it is not. That’s all.
Does every country that has a pegged currency have 1-to-1 reserves? No, the only difference is that they don’t claim they do, and people don’t base their trust on this false fact.
Does every country that has a pegged currency have 1-to-1 reserves? No, the only difference is that they don’t claim they do, and people don’t base their trust on this false fact.
It is a more general form of a Ponzi scheme, where you substitute the nominal positive returns from Madoff's scheme with a theoretical stable price, when in reality both schemes should (if the author of this article is right) offer a significantly negative return
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It get's really old to see people to continually misunderstand the nature of what a ponzi scheme is.
Things can be fraudulent or unethical without being a ponzi scheme.
Tether could be called maybe an indirect type of pump and dump on the crypto space. It could easily be called a confidence scheme. It called also involve accounting fraud and securities fraud as well as outright fraud if any of the audits were deemed to have not really happened.
None of these make it a ponzi scheme because it fits essentially none of the characteristics of a ponzi scheme
Things can be fraudulent or unethical without being a ponzi scheme.
Tether could be called maybe an indirect type of pump and dump on the crypto space. It could easily be called a confidence scheme. It called also involve accounting fraud and securities fraud as well as outright fraud if any of the audits were deemed to have not really happened.
None of these make it a ponzi scheme because it fits essentially none of the characteristics of a ponzi scheme
Well, the unsustainability of a negative sum game being masked by new investment is basically the most general form of a Ponzi scheme, and that's what this article is arguing Tether is
The essence of a Ponzi scheme is claims about above-average profit rate. Holding Tether by its essence can’t provide you more profit than holding cash.
It doesn't matter what profit rate Tether or any other Ponzi scheme claims to provide. In the case of Tether, they're claiming you'll have a profit rate of 0%, which is still worse than you should be getting, given that it may in fact be not backed by anything in particular
No, but holding Bitcoin that is having its value artificially inflated by Tether can (for now).
So it is a Bitcoin Ponzi scheme?
No. The essence of a Ponzi scheme is that outsized returns are fraudulently produced by using new investment funds to pay for withdrawals rather than being invested or retained. That's pretty much what Tether is alleged or suspected to be doing.
Ugh, outsized returns, that’s what I said. What outsized returns do owners of Tether expect? How much money can I expect to earn if I buy Tether instead of stocks or bonds? I expect to earn less.
Check out Nexo and Defi. Those places claim to let you earn 12-20+% interest on USDT.
There’s your Ponzi returns.
There’s your Ponzi returns.
That is not at all the definition of a ponzi scheme. That's at best a single attribute of a ponzi scheme.
It's certainly the closest thing to the central idea of the Ponzi scheme https://en.wikipedia.org/wiki/Ponzi_scheme
The entirety of the crypto space is a distributed Ponzi scheme.
All of it is backed by dollars[1]. That is what people want, they want more dollars so they get more out at the end. There is vastly less dollars sloshing around the system than the current ~$1.6T valuation of all crypto.
Crypto as a business would have ~$1.6T in liabilities with maybe a few $10B of actual cash on the balance sheet. It is very balance sheet insolvent. Once outflows exceed inflows for a sufficiently long amount of time so that the cash drains to zero it would then hit a liquidity crisis or cash insolvency.
This is basically the same thing as a Ponzi scheme, but there's no one person or entity running the whole thing.
[1] Yes, really its all priced in dollars, everyone investing in it wants the number to go up, nobody barely remembers "in it for the tech" or "1 BTC = 1 BTC" these days, we're all watching the dollar value of bitcoin bounce around because that is what ultimately "backs" Bitcoin. It isn't an alternative currency at all.
All of it is backed by dollars[1]. That is what people want, they want more dollars so they get more out at the end. There is vastly less dollars sloshing around the system than the current ~$1.6T valuation of all crypto.
Crypto as a business would have ~$1.6T in liabilities with maybe a few $10B of actual cash on the balance sheet. It is very balance sheet insolvent. Once outflows exceed inflows for a sufficiently long amount of time so that the cash drains to zero it would then hit a liquidity crisis or cash insolvency.
This is basically the same thing as a Ponzi scheme, but there's no one person or entity running the whole thing.
[1] Yes, really its all priced in dollars, everyone investing in it wants the number to go up, nobody barely remembers "in it for the tech" or "1 BTC = 1 BTC" these days, we're all watching the dollar value of bitcoin bounce around because that is what ultimately "backs" Bitcoin. It isn't an alternative currency at all.
Again you are confusing the word "scam" with ponzi scheme. You are arguing that the crypto ecosystem is a scam or a scheme. Nothing you go on to describe past there has a resemblance to the specific type of scheme called a Ponzi scheme.
Yeah it is, the people cashing out now are being paid by the people buying in now and the whole thing is a grossly balance sheet insolvent entity. When the cash in the pot hits zero and there's people lined up waiting to take their money out the the Ponzi scheme is busted.
This is precisely what happened to Madoff when he had no cash to meet redemptions as the market crashed in 2008. This is what is going to happen to crypto eventually, but there's no one person in charge of crypto. Hence, distributed Ponzi scheme.
This is precisely what happened to Madoff when he had no cash to meet redemptions as the market crashed in 2008. This is what is going to happen to crypto eventually, but there's no one person in charge of crypto. Hence, distributed Ponzi scheme.
Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is. The defining feature of a Ponzi scheme is that it claims to offer interest on deposits in excess of what the person running the scheme can actually earn, such that the only way to pay out that interest is by stealing from other people's deposits. It's this key feature that means that Ponzi schemes inevitably fail - those interest payments mean that the amount of money the scammer tells people they have in their accounts grows larger than the actual cash available at an exponential rate, and the only way to keep the scheme going is to find an exponentially increasing amount of new cash. Tether doesn't have this issue. They don't pay interest at all, so in theory there's absolutely no reason they can't structure the thing to be fully backed at all times (whilst probably also making money from interest themselves on the cash-like instruments they use to back it).
> Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is.
There's an underlying cash flow to the business you're buying and the stock is supposed to give you a claim to dividends paid out by the corporation from those cash flows.
The fact that the stock market is acting more and more like a Ponzi scheme doesn't make crypto any less of one. We're just forgetting how the stock market is supposed to operate.
Oh also Madoff's Ponzi was an investment scheme where he just produced above average return on investment. He always beat the market, so people invested. He dealt with charities which didn't extract money often, so he had more predictable withdrawals. He was operating like a mutual fund. He wasn't promising a fixed percentage interest, he just always beat the market claimed to never lose money.
There's an underlying cash flow to the business you're buying and the stock is supposed to give you a claim to dividends paid out by the corporation from those cash flows.
The fact that the stock market is acting more and more like a Ponzi scheme doesn't make crypto any less of one. We're just forgetting how the stock market is supposed to operate.
Oh also Madoff's Ponzi was an investment scheme where he just produced above average return on investment. He always beat the market, so people invested. He dealt with charities which didn't extract money often, so he had more predictable withdrawals. He was operating like a mutual fund. He wasn't promising a fixed percentage interest, he just always beat the market claimed to never lose money.
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copy pasted from a response to another person arguing the same fallacy, and the same point that several others are pointing out.
me >This is the most egregious of misdefinitions of a ponzi scheme that gets thrown around because it literally fits the profile of every security and commodity in existence.
You are describing the law of supply and demand in an open market place.
other person >> Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones.
me >>> Surely we cannot agree on this.
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
me >This is the most egregious of misdefinitions of a ponzi scheme that gets thrown around because it literally fits the profile of every security and commodity in existence.
You are describing the law of supply and demand in an open market place.
other person >> Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones.
me >>> Surely we cannot agree on this.
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
With Ponzi schemes, investors give money to a portfolio manager. Then, when they want their money back, they are paid out with the incoming funds contributed by later investors.
With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on. Late-joining investors pay the person who recruited them for the right to participate or perhaps sell a certain product.
Call Tether whatever it is but it's neither a pyramid scheme nor a Ponzi one. The funny thing is that people don't really understand that banks are not able to cover in case everybody wants their money at the same time either and their dollars are stretched as much as Tether is. If people have confidence in Tether it will hold, if people don't it will crumble.
[0] https://www.investopedia.com/ask/answers/09/ponzi-vs-pyramid...
With a pyramid scheme, the initial schemer recruits other investors who in turn recruit other investors and so on. Late-joining investors pay the person who recruited them for the right to participate or perhaps sell a certain product.
Call Tether whatever it is but it's neither a pyramid scheme nor a Ponzi one. The funny thing is that people don't really understand that banks are not able to cover in case everybody wants their money at the same time either and their dollars are stretched as much as Tether is. If people have confidence in Tether it will hold, if people don't it will crumble.
[0] https://www.investopedia.com/ask/answers/09/ponzi-vs-pyramid...
Would you agree that "outflows are only possible because the inflows are big enough so that the new investors can cover the payouts for the old investors until eventually the bubble gets big enough" is a hallmark of a Ponzi scheme? You could disagree that that's the case for Tether, but that's what the article lays out, no?
>Would you agree that "outflows are only possible because the inflows are big enough so that the new investors can cover the payouts for the old investors until eventually the bubble gets big enough" is a hallmark of a Ponzi scheme?
that describes most speculative bubbles.
that describes most speculative bubbles.
This is the most egregrious of misdefinitions of a ponzi scheme that gets thrown around becuase it literally fits the profile of every security and commodity in existence.
You are describing the law of supply and demand in an open market place.
You are describing the law of supply and demand in an open market place.
Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones.
You keep saying "this isn't a Ponzi scheme" but I haven't seen you elucidate your objection. Promised returns? A charismatic wealth manager? What is it that you feel defines them?
You keep saying "this isn't a Ponzi scheme" but I haven't seen you elucidate your objection. Promised returns? A charismatic wealth manager? What is it that you feel defines them?
Surely we cannot agree on this.
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow.
Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.
I wouldn’t agree that it’s what buying a thing is in al cases for everything. If a retailer has a stock of iPads and no one has an active order open for one, they don’t just decrease the price until they get orders. Not everything moves in price according to market pressures, or does so over a time span of years, not days or seconds. PlayStation 5s and RTX3090 GPUs are incredibly in-demand, and indeed on auction sites they’re being sold for far above retail prices, but they’re also still being sold AT retail prices by retailers. Just because there are zero available doesn’t mean the price is now infinity. There might not be any available according to stock tracking websites, but if one were to put out an ad to buy a PS5 for a few thousand dollars, one could probably secure a PS5 relatively quickly.
Markets can be made and they can be manipulated. Things don’t have to have an active bid/ask to have value. Is the value of $TSLA zero overnight when NYSE is closed? I would agree with the quote “ There's no such thing as a ‘free market’”
Markets can be made and they can be manipulated. Things don’t have to have an active bid/ask to have value. Is the value of $TSLA zero overnight when NYSE is closed? I would agree with the quote “ There's no such thing as a ‘free market’”
A Ponzi scheme involves paying out old investors with new investors money. There's a few steps inbetween but Tether (and by extension the whole cryptocurrency market) is very much within that definition. If people stop buying cryptocurrency tomorrow, the entire system collapses, because it's entirely dependent on new money coming in. If you disagree, a breakdown of where you think this differs from a Ponzi scheme would be much appreciated -- is there another type of fraud scheme it fits into in your view?
If people stop buying apples tomorrow the market for apples will collapse. That does not make apples a ponzi scheme.
We won't know exactly what kind of fraud it is until it crashes. It has many earmarks of being a Ponzi so it's reasonable to call it that.
If you want to know if/when Tether will crash, look at the NYAG settlement and the moment iFinex can no longer fulfill those transparency reports. [0] That'll be your canary in the mine.
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
[0] https://ag.ny.gov/press-release/2021/attorney-general-james-...
If Tether fails to satisfy their agreement the NYAG will hem and haw for two years before taking action. During that time Tether may print, say, $500B more fake money.
Tether will be to Mt. Gox what Little Boy was to a firecracker.
Cute but no, the ratios are totally off. Gox was bigger than Coinbase is now relative to the share of trades. Gox traded more BTC in its brief history than any other organization possibly can again for the rest of human history. The whole market cap of Tether is a blip, and there are several liquidity pools on public chains that would sustain their value in a confidence collapse situation.
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Is this true? According to https://en.wikipedia.org/wiki/Mt._Gox at most .5 billion was missing from Gox but from is described here a lot more can be lost from Tether if it goes black hole?
In dollars, almost certainly not. Maybe in number of BTC that traded hands?
Yes. The only yardstick to use. In 50 years the routine theft of billions may not even merit media attention.
Tether’s General Counsel is an attorney who specializes in gambling law rather than securities or investment law which should tell you everything you need to know about Tether.
In the recent thread about this topic [1] people mentioned that USDC is also not fully backed by pure cash.
Assuming USDC has no funny business like tether seems to, how is this any different than companies like PayPal, which presumably also don't just have a bank account sitting with billions of dollars cash, backing all of their virtual cash?
1. https://news.ycombinator.com/item?id=27151370
Assuming USDC has no funny business like tether seems to, how is this any different than companies like PayPal, which presumably also don't just have a bank account sitting with billions of dollars cash, backing all of their virtual cash?
1. https://news.ycombinator.com/item?id=27151370
I mean, PayPal is not a bank, and if for some reason they become insolvent, your deposits will be gone too.
That being said, I don't keep large deposits in PayPal, and I've never had trouble getting PayPal money directly deposited into my bank account via ACH. Can the same be said for USDT?
That being said, I don't keep large deposits in PayPal, and I've never had trouble getting PayPal money directly deposited into my bank account via ACH. Can the same be said for USDT?
Paypal doesn't print I pressume? Only receives fiat deposits.
But there doesn't seem to be much evidence that tether is printing USDT, only a history of them losing people's deposits due to random banking related issues.
Tether are printing USDT, then accounting for the printed USDT on the books as "loans".
This is what banks do, but Tether is not a bank.
This is what banks do, but Tether is not a bank.
The evidence is that - by their own numbers - they would've needed to buy 1% of all commercial paper in existence in a one month period.
It just didn't happen.
I will add that the problem is roughly 2x worse. Tether is only ~60% of the stablecoin market: https://coinmarketcap.com/view/stablecoin/
It just didn't happen.
I will add that the problem is roughly 2x worse. Tether is only ~60% of the stablecoin market: https://coinmarketcap.com/view/stablecoin/
> Note how this is different than buying a company’s stock. People buy and sell stocks on a stock exchange, but the companies independently have money coming in (from their clients). The stock of a profitable company is a positive-sum ecosystem. If somehow no one wants to buy the stock, a profitable company will be happy to buy it back itself.
It's almost as if the author has no sense of irony:
1. A crash in most company's stock would lead to utter disaster as interest rates, future fundraising, and executive compensation are all closely tied to the share price.
2. Stock buyback have been enabled by lax policies and a Fed only too happy to bend over backward with QE.
3. Many companies have little to no "money coming in" on a net basis.
Tether is a time bomb, there's no other way to put it. But if you're going to raise the alarm there, you might as well be fair about it.
It's almost as if the author has no sense of irony:
1. A crash in most company's stock would lead to utter disaster as interest rates, future fundraising, and executive compensation are all closely tied to the share price.
2. Stock buyback have been enabled by lax policies and a Fed only too happy to bend over backward with QE.
3. Many companies have little to no "money coming in" on a net basis.
Tether is a time bomb, there's no other way to put it. But if you're going to raise the alarm there, you might as well be fair about it.
Your point about the traditional financial markets is reasonable but it's not what the author is discussing and they have no obligation to do so.
If a company is profitable it means it generates net revenues. The owners of the company have a claim on these revenues. This means if you own the stock of a profitable company you have a claim on all this income. The stock price is the price at which you can sell this claim in the market. The thing is you don't have to sell the stock at a higher price in order to profit from it. That's what makes it different.
This trend line would suggest otherwise: https://trends.google.com/trends/explore?q=buy%20usdt,buy%20...
(Virtually every corrupt country in the world is eagerly pouring fiat money into USDT at an accelerating pace)
(Virtually every corrupt country in the world is eagerly pouring fiat money into USDT at an accelerating pace)
Legitimate question: how useful is Google trends for understanding interest in a subject for other languages, or in regions where Google's presence is limited (e.g. China)?
This seems like a really poor data point when also considering that it shows relative rather than absolute interest in a term so we can't compare countries.
This seems like a really poor data point when also considering that it shows relative rather than absolute interest in a term so we can't compare countries.
I feel like this Tether "scam" story has been posted to death. The NY AG investigated, and nothing came from it.
I guess there's a "where there is smoke there is fire" element, and something could happen. But... where's the beef?
I guess there's a "where there is smoke there is fire" element, and something could happen. But... where's the beef?
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What is one's best course of action if
- they believe that tether is shady and aren't interested in owning, using, participating or encouraging its existance and use
- they still want to own and use cryptocurrencies
- they like the ease of use, low fees and coin offerings on binance compared to the competition
?
- they believe that tether is shady and aren't interested in owning, using, participating or encouraging its existance and use
- they still want to own and use cryptocurrencies
- they like the ease of use, low fees and coin offerings on binance compared to the competition
?
The main way is to just not use USDT.
But here’s a creative way.
Step 1) Borrow USDT (tether) somewhere.
Step 2) Sell it for either a stablecoin you trust more and/or is trading below $1: Whether that’s USDC, GUSD, BUSD, DAI, PAX, or TUSD.
Step 3) Wait a long time for Tether to implode.
Step 4) Buy back Tether for 15 cents on the dollar to close your position.
Do I recommend you do this? No, not really. It involves taking on debt. I don’t think one tether FUD article is enough material for you to base an investment decision.
But here’s a creative way.
Step 1) Borrow USDT (tether) somewhere.
Step 2) Sell it for either a stablecoin you trust more and/or is trading below $1: Whether that’s USDC, GUSD, BUSD, DAI, PAX, or TUSD.
Step 3) Wait a long time for Tether to implode.
Step 4) Buy back Tether for 15 cents on the dollar to close your position.
Do I recommend you do this? No, not really. It involves taking on debt. I don’t think one tether FUD article is enough material for you to base an investment decision.
When usdt collapses. Btc will also collapse to a real price. you buy btc then but dont expect crazy gains. It will go up as fast as its adopted, but the newly found price stability will bring in wider adoption
You're asking for something that is too good to be true.
Just don't use USDT?
To summarise, Tether is bad. Tether, like all the other attempts to create shadow banks, risks becoming systemically important while not being capable of maintaining their dollar peg if there is a large demand for liquidity.
What Tether is not:
- A Ponzi Scheme. Tether makes no guarantees on returns for investors. If you have $1 worth of tether it will never be worth more or less. This is as opposed to a Ponzi scheme where your $1 increases in value (on paper) but those returns do not represent an actual increase in value, but just a gamble that enough people won't try to withdraw their money.
- A scheme to pump up the price of cryptocurrencies by creating unbacked tether from thin air and using that to buy cryptocurrencies. The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity. In addition, this was the conclusion reached by the NYAG. Note that "absence of evidence is not evidence of absence", this could still be the case but there is no credible evidence of this.
- Backed entirely by bank deposits or by bags full of dollar bills. They are instead using a number of debt instruments of varying degrees of liquidity. Although this is contrary to their initial claims, it is not dissimilar from any organization purporting to hold "cash", like corporations, etc. And realistically at the scale they are at there is no realistic way to hold that amount of money in the traditional banking system.
Tether is still bad! Read up on Rohan Grey's critiques of stablecoins from a systemic risk perspective; he's a very clear thinker in this space with a vast knowledge of historical antecedents for exactly this kind of thing. It's just not bad for the reasons that people think it's bad.
What Tether is not:
- A Ponzi Scheme. Tether makes no guarantees on returns for investors. If you have $1 worth of tether it will never be worth more or less. This is as opposed to a Ponzi scheme where your $1 increases in value (on paper) but those returns do not represent an actual increase in value, but just a gamble that enough people won't try to withdraw their money.
- A scheme to pump up the price of cryptocurrencies by creating unbacked tether from thin air and using that to buy cryptocurrencies. The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity. In addition, this was the conclusion reached by the NYAG. Note that "absence of evidence is not evidence of absence", this could still be the case but there is no credible evidence of this.
- Backed entirely by bank deposits or by bags full of dollar bills. They are instead using a number of debt instruments of varying degrees of liquidity. Although this is contrary to their initial claims, it is not dissimilar from any organization purporting to hold "cash", like corporations, etc. And realistically at the scale they are at there is no realistic way to hold that amount of money in the traditional banking system.
Tether is still bad! Read up on Rohan Grey's critiques of stablecoins from a systemic risk perspective; he's a very clear thinker in this space with a vast knowledge of historical antecedents for exactly this kind of thing. It's just not bad for the reasons that people think it's bad.
> It's just not bad for the reasons that people think it's bad.
Yes, it is. You’ve glossed over some very important issues and dismissed them. If I told you I grew wings and could fly, you don’t need evidence that it’s not true. There is enough information about other rules of the universe to suggest that probability of this is zero. The same is true for Tether.
An insignificant offshore bank has not suddenly become the beneficial owner of 3% of one of the most important markets in the largest financial sector in the world. And they certainly haven’t accumulated 1% in a matter of weeks as they would purport. This would cause monumental moves in systemically important markets (the GFC catalyst was commercial paper markets locking up…)
Yes, it is. You’ve glossed over some very important issues and dismissed them. If I told you I grew wings and could fly, you don’t need evidence that it’s not true. There is enough information about other rules of the universe to suggest that probability of this is zero. The same is true for Tether.
An insignificant offshore bank has not suddenly become the beneficial owner of 3% of one of the most important markets in the largest financial sector in the world. And they certainly haven’t accumulated 1% in a matter of weeks as they would purport. This would cause monumental moves in systemically important markets (the GFC catalyst was commercial paper markets locking up…)
>they have reserves equal to the amount issued
This is very misleading. They are backed by the very assets they buy using the tether they create! It's a perpetual motion machine, not reserves.
This is very misleading. They are backed by the very assets they buy using the tether they create! It's a perpetual motion machine, not reserves.
Wouldn't Tether in effect be a Ponzi scheme if the value of 1 Tether permanently drops below 1 USD at some point?
The reasonable assumption here is that Tether (the entity) does some sort of embezzling in the background, which means that their assets will at some point be so much smaller than their liabilities that there's no way to maintain the illusion that 1 Tether is worth 1 dollar.
Ergo money has to keep flowing into Tether to maintain its price. That's close enough to equivalent to the critical part of what I understand a Ponzi scheme to be.
The reasonable assumption here is that Tether (the entity) does some sort of embezzling in the background, which means that their assets will at some point be so much smaller than their liabilities that there's no way to maintain the illusion that 1 Tether is worth 1 dollar.
Ergo money has to keep flowing into Tether to maintain its price. That's close enough to equivalent to the critical part of what I understand a Ponzi scheme to be.
Opposite would be needed. That is I buy 1 tether for one USD. And then later I can sell that same tether for more than 1 USD. And possibly re-invest it again by buying more tether... That would be a Ponzi.
It's probably some kind of fraud, but not a Ponzi. A Ponzi operates under the pretence that it's an investment scheme whereas tether does not. A tether is a token that isn't supposed to appreciate over time and as such can't be seen as an investment.
> The balance sheet summary published shows that they have reserves equal to the amount issued, with varying amounts of liquidity.
That balance sheet was unaudited though.
That balance sheet was unaudited though.
Who could forget this gem of an interview with the Deltec Bank Deputy CEO? https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory_pe...
> "Every tether is backed by a reserve and their reserve is more than what is in circulation," said Gregory Pepin, Deltec Bank's deputy CEO.
What business does the bank have in auditing Tethers? Why would they care? They're just holding funds.
> “We can see it firsthand, so I can confirm that.”
That to me more reads like Deltec is heavily involved in the actual day-to-day operations at Bitfinex/Tether. Which wouldn't be surprising - after all, remember when Bitfinex and Tether were claimed to be entirely separate and independent entities.
It's a little bit of a stretch to say that Bitfinex has been able to get Deltec on board with keeping this all going by providing a "partnership" above and beyond the usual "banking relationship", but that's very much the vibe I get from all this, and as I said, to me, it just increases the sketchiness of everything.
Oh, and WTF, I watched the video of the interview with the "Deputy CEO" of Deltec Bank, self-described as a "50-year-old bank [whose] customers range from asset managers to high-net-worth individuals"
It's a damn "kid" who looks to be 30 (edit: 33) at most, sitting in his gamer seat with red slashes in the black, wearing a Razer gaming headset.
He has almost no photos on the internet, his LinkedIn profile is full of multiple spelling errors ("Independance Weath Management"), who claims to be a Professor of Finance at a University in Lebanon (a year after graduating from a Lausanne University) while working for numerous Swiss funds, oh and in Jacksonville, Florida, simultaneously.
How the hell are people taking this seriously?!?
And according to his profile he apparently graduated with a Masters in Science from HEC Lausanne (prestigious Swiss university) when he was FIFTEEN. I'm sorry, I'm crying now with laughter.
Funnily enough, Deltec bank removed him from their website when this interview was published, then re-added them when people asked questions, and then arranged a very quick website complete "redesign" (I use that word lightly - this looks like a WordPress template that they've struggled to fill with any content whatsoever - most of the pages are effectively empty, many of the buttons to "learn more" are not linked to anywhere). Oh, and in among the re-design, the bank went from 55 years old to 70 years old in the space of six months...
Sources:
- https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pep...
- https://www.linkedin.com/public-profile/in/gregory-pepin-0a8...
> "Every tether is backed by a reserve and their reserve is more than what is in circulation," said Gregory Pepin, Deltec Bank's deputy CEO.
What business does the bank have in auditing Tethers? Why would they care? They're just holding funds.
> “We can see it firsthand, so I can confirm that.”
That to me more reads like Deltec is heavily involved in the actual day-to-day operations at Bitfinex/Tether. Which wouldn't be surprising - after all, remember when Bitfinex and Tether were claimed to be entirely separate and independent entities.
It's a little bit of a stretch to say that Bitfinex has been able to get Deltec on board with keeping this all going by providing a "partnership" above and beyond the usual "banking relationship", but that's very much the vibe I get from all this, and as I said, to me, it just increases the sketchiness of everything.
Oh, and WTF, I watched the video of the interview with the "Deputy CEO" of Deltec Bank, self-described as a "50-year-old bank [whose] customers range from asset managers to high-net-worth individuals"
It's a damn "kid" who looks to be 30 (edit: 33) at most, sitting in his gamer seat with red slashes in the black, wearing a Razer gaming headset.
He has almost no photos on the internet, his LinkedIn profile is full of multiple spelling errors ("Independance Weath Management"), who claims to be a Professor of Finance at a University in Lebanon (a year after graduating from a Lausanne University) while working for numerous Swiss funds, oh and in Jacksonville, Florida, simultaneously.
How the hell are people taking this seriously?!?
And according to his profile he apparently graduated with a Masters in Science from HEC Lausanne (prestigious Swiss university) when he was FIFTEEN. I'm sorry, I'm crying now with laughter.
Funnily enough, Deltec bank removed him from their website when this interview was published, then re-added them when people asked questions, and then arranged a very quick website complete "redesign" (I use that word lightly - this looks like a WordPress template that they've struggled to fill with any content whatsoever - most of the pages are effectively empty, many of the buttons to "learn more" are not linked to anywhere). Oh, and in among the re-design, the bank went from 55 years old to 70 years old in the space of six months...
Sources:
- https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-pep...
- https://www.linkedin.com/public-profile/in/gregory-pepin-0a8...
TLDR: ~ 7% of Tether is in risk-free, short-term, liquid assets. The other 93% may very well be dog shit wrapped in cat shit.
Some additional good reading https://www.mymoneyblog.com/tether-stablecoin-risk.html
Some additional good reading https://www.mymoneyblog.com/tether-stablecoin-risk.html
[deleted]
Tether is a ponzi just as other shitcoins are ponzi feeding bitcoin and now eth. This is what we learned in 2018. And now you have even more elaborate schemes. Bitcoin by itself cannot survive because you need constant flow of transactions to make it appear “active”. Similar to how people create shell companies across multiple borders to launder or hide money, you can do the same with crypto. Added bonus for crypto is that you can simultaneously pump prices while you’re laundering money.
"It would be a zero-sum ecosystem, except for the fact that miners have to pay their bills in dollars"
I've also been curious since the inception of Bitcoin. As the power plants don't accept cryptocurrencies, someone should pay the bill in cash, which inevitably means there will always be less money in the market than there needs to be. How does the cryptocurrency supporters explain this structure?
I've also been curious since the inception of Bitcoin. As the power plants don't accept cryptocurrencies, someone should pay the bill in cash, which inevitably means there will always be less money in the market than there needs to be. How does the cryptocurrency supporters explain this structure?
The only explanation I've heard is that once adoption occurs, you'd be able to pay directly. That's a big IF.
Why was this moved to the 3rd page?
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