Tether price manipulation(twitter.com)
twitter.com
Tether price manipulation
https://twitter.com/JacobOracle/status/1346133062204198917
489 comments
>Bitcoin's narrative has had to morph from "digital currency" to "digital gold"
The narrative around bitcoin has always been "It is digital currency. It works like gold". Hence the notion of "mining".
EDIT: downvote me if you want but you are flat wrong
Section 6 in the bitcoin whitepaper explicitly likens bitcoin to gold [0]
>The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation
[0]: https://bitcoin.org/bitcoin.pdf
The narrative around bitcoin has always been "It is digital currency. It works like gold". Hence the notion of "mining".
EDIT: downvote me if you want but you are flat wrong
Section 6 in the bitcoin whitepaper explicitly likens bitcoin to gold [0]
>The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation
[0]: https://bitcoin.org/bitcoin.pdf
>>Bitcoin's narrative has had to morph from "digital currency" to "digital gold"
I wholeheartedly agree with this. Let's look at some Reddit /r/bitcoin posts in January 2014:
https://redditsearch.io/?term=&dataviz=false&aggs=false&subr...
People were discussing bitcoin being used as a digital currency. There was talk of bitcoin being accepted on Overstock.com, TigerDirect, and using bitcoin apps on phones as a digital wallet. I would argue the majority of people in the bitcoin community at the time were genuinely interested in the technology and its use as an everyday currency.
Now let's look at some Reddit /r/bitcoin posts in January 2020. I picked this date because there weren't any recent significant price fluctuations.
https://redditsearch.io/?term=&dataviz=false&aggs=false&subr...
There was practically zero discussion on using bitcoin as a currency. People were only interested in the price and treated it as a commodity, just like a digital gold.
> EDIT: downvote me if you want but you are flat wrong
Do people treat bitcoin as a currency or a commodity today?
I wholeheartedly agree with this. Let's look at some Reddit /r/bitcoin posts in January 2014:
https://redditsearch.io/?term=&dataviz=false&aggs=false&subr...
People were discussing bitcoin being used as a digital currency. There was talk of bitcoin being accepted on Overstock.com, TigerDirect, and using bitcoin apps on phones as a digital wallet. I would argue the majority of people in the bitcoin community at the time were genuinely interested in the technology and its use as an everyday currency.
Now let's look at some Reddit /r/bitcoin posts in January 2020. I picked this date because there weren't any recent significant price fluctuations.
https://redditsearch.io/?term=&dataviz=false&aggs=false&subr...
There was practically zero discussion on using bitcoin as a currency. People were only interested in the price and treated it as a commodity, just like a digital gold.
> EDIT: downvote me if you want but you are flat wrong
Do people treat bitcoin as a currency or a commodity today?
*The narrative around bitcoin has always been "It is digital currency. It works like gold".*
I don't think we need to get into whether or not gold is a currency or a commodity but you are fooling yourself if you think that the price of gold is driven by jewelers and PCB fabs.
I don't think we need to get into whether or not gold is a currency or a commodity but you are fooling yourself if you think that the price of gold is driven by jewelers and PCB fabs.
You'd be surprised how much does go to jewelry https://www.statista.com/statistics/274684/global-demand-for...
Long term the price is driven by the mining cost.
Long term the price is driven by the mining cost.
People were overly enthusiastic about it intially, but soon realized almost no one wants to use a slower, riskier, and now more expensive payment option. Bitcoin is good for merchants but terrible for buyers.
Bitcoin lightning could change this, instant transactions with almost no fees, but it's still in early days.
Bitcoin lightning could change this, instant transactions with almost no fees, but it's still in early days.
The Phoenix wallet[0] is actually quite a nice LN solution. When I tried it out it gave me similar feelings of excitement as when I first got into Bitcoin.
Reading about the Lightning Network gives me a headache in general, but Phoenix manages to hide all the tech stuff. I think my old parents would be able to use it.
And it solves one LN problem of having to have bitcoin for opening a payment channel, you can simply install the wallet and start receiving bitcoin.
[0] https://phoenix.acinq.co/
Reading about the Lightning Network gives me a headache in general, but Phoenix manages to hide all the tech stuff. I think my old parents would be able to use it.
And it solves one LN problem of having to have bitcoin for opening a payment channel, you can simply install the wallet and start receiving bitcoin.
[0] https://phoenix.acinq.co/
> Now let's look at some Reddit /r/bitcoin posts in January 2020.
This is a very amateurish attempt at analyzing what "Bitcoin community" (which you haven't even really defined properly either) are thinking or are interested in. Bitcoin reddit is a bunch of kids who like memes and hating on the FED. I know a lot of serious investors who would never be seen posting or commenting there. It is just not a place for a lot of people.
This is a very amateurish attempt at analyzing what "Bitcoin community" (which you haven't even really defined properly either) are thinking or are interested in. Bitcoin reddit is a bunch of kids who like memes and hating on the FED. I know a lot of serious investors who would never be seen posting or commenting there. It is just not a place for a lot of people.
r/bitcoin is heavily censored, it's the reason for Bitcoin Cash fork and why the uncensored r/btc was made.
All the original Bitcoin adopters from the beginning moved discussion there.
All the original Bitcoin adopters from the beginning moved discussion there.
I would say it’s now more promoted as an uncorrelated asset class.
That may be true but there is definitely a difference between the way people talked about it earlier ("later we will all be paying with bitcoin") to how it is now ("it's a store of value and maybe there is potential for bitcoin-backed currencies").
I think the scaling limitations were well known at the beginning. If Bitcoin were to get as large as visa/mastercard the blockchain would be growing at a rate of a few gigabytes per day, which would kill decentralization.
As far as I was aware, this problem was mostly ignored.
It was expected (again, as stated in the whitepaper) that truncating transactions (in order to shrink blocks that are "old enough") would be able to manage block size well enough to stay reasonable.
In my experience (circa ~2011,) this expectation seemed to be generally accepted without much question by anyone talking about bitcoin. If it was acknowledged as a flaw it was usually hand-waved as only likely to be a problem 10+ in the the future.
edit: Or that a new network would learn from the bitcoin experiment and implement a protocol that works better at large scale.
It was expected (again, as stated in the whitepaper) that truncating transactions (in order to shrink blocks that are "old enough") would be able to manage block size well enough to stay reasonable.
In my experience (circa ~2011,) this expectation seemed to be generally accepted without much question by anyone talking about bitcoin. If it was acknowledged as a flaw it was usually hand-waved as only likely to be a problem 10+ in the the future.
edit: Or that a new network would learn from the bitcoin experiment and implement a protocol that works better at large scale.
the limitations have been researched extensively outside of the echo chamber of bitcoin development. It is possible to scale a utxo system like bitcoins to hundreds of millions of txs per day. Xthinner[1] can compress blocksizes by 99%, but bitcoin devs have ignored this with handywavy arguments.
[1]https://github.com/jtoomim/xthinner-spec
[1]https://github.com/jtoomim/xthinner-spec
A bitcoiner pinged me and asked for my comment here. It really sucks that people are so easily bamboozled by dishonest scammers.
In the original bitcoin software a node would receive every transaction made while it was online twice: once when the transaction was first relayed, once when it was placed into blocks. This was obviously wasteful, so we created and deployed a reconciliation scheme that exploits the fact that normally all, or almost all the included transactions are already known. https://github.com/bitcoin/bips/blob/master/bip-0152.mediawi...
But because Bitcoin developers are not dishonest scammers they didn't run around putting out (no kidding) press releases claiming "98.6% compression"-- though that's what you get if you compare the size of the BIP152 message to the size of the block. In reality, since it depends on the transaction being known in advance the unachievable limit for this class of approaches is a 50% bandwidth reduction for a node compared to the original behaviour. BIP152 achieves 49.3% out of that 50%, as measured on the latest block.
Even before compact blocks was created back in December 2015, we knew even smaller could be achieved. E.g. we published a scheme that requires asymptotically 0 bytes per transaction, only requiring data proportional to size of the difference between the block and the recipients guess at the next block. But what we found is that the simpler scheme actually propagated blocks much faster because once the block is down to just a few thousand bytes other factors (like CPU time) dominate. Expending a lot of additional code and cpu time to take 49.3% closer to 50% isn't a win in actual usage.
[And for considerations other than block propagation, saving a few extra bytes per block is extremely irrelevant.]
It's also the case that some of these dishonestly hyped supposed improvements beyond what Bitcoin has done for years are actually totally brain-damaged and wouldn't work in practice because they're not robust against attack-- but there isn't much reason to dive into technical minutia because what they _claim to achieve_, once you strip off the dishonest marketing, isn't all that interesting.
In the original bitcoin software a node would receive every transaction made while it was online twice: once when the transaction was first relayed, once when it was placed into blocks. This was obviously wasteful, so we created and deployed a reconciliation scheme that exploits the fact that normally all, or almost all the included transactions are already known. https://github.com/bitcoin/bips/blob/master/bip-0152.mediawi...
But because Bitcoin developers are not dishonest scammers they didn't run around putting out (no kidding) press releases claiming "98.6% compression"-- though that's what you get if you compare the size of the BIP152 message to the size of the block. In reality, since it depends on the transaction being known in advance the unachievable limit for this class of approaches is a 50% bandwidth reduction for a node compared to the original behaviour. BIP152 achieves 49.3% out of that 50%, as measured on the latest block.
Even before compact blocks was created back in December 2015, we knew even smaller could be achieved. E.g. we published a scheme that requires asymptotically 0 bytes per transaction, only requiring data proportional to size of the difference between the block and the recipients guess at the next block. But what we found is that the simpler scheme actually propagated blocks much faster because once the block is down to just a few thousand bytes other factors (like CPU time) dominate. Expending a lot of additional code and cpu time to take 49.3% closer to 50% isn't a win in actual usage.
[And for considerations other than block propagation, saving a few extra bytes per block is extremely irrelevant.]
It's also the case that some of these dishonestly hyped supposed improvements beyond what Bitcoin has done for years are actually totally brain-damaged and wouldn't work in practice because they're not robust against attack-- but there isn't much reason to dive into technical minutia because what they _claim to achieve_, once you strip off the dishonest marketing, isn't all that interesting.
This place is not a place to learn about bitcoin Greg, it’s all changed :(
Thanks for this.
Thanks for this.
That page claims it can compress a single transaction down to 12-16 bits. Unless the vast majority of btc transactions are between the same few wallet addresses, this seems impossible? Even if you assume that the transaction is an instance of a common known script, you still need from-address, to-address, and amount, all of which are >16 bit quantities and in general are cryptographically random.
The only explanation I can think of is that they are relying on a sidechannel to communicate the actual transactions, which makes sense in the miner case (the utxo pool) but not in the general node case.
Beyond that, I run a BTC node occasionally and the bottleneck is validating blocks, not downloading them. Transactions are complicated enough right now that I'm only able to catch up at about 350x real-time (that is, it takes around a full cpu-day to validate a year of blocks/transactions).
The only explanation I can think of is that they are relying on a sidechannel to communicate the actual transactions, which makes sense in the miner case (the utxo pool) but not in the general node case.
Beyond that, I run a BTC node occasionally and the bottleneck is validating blocks, not downloading them. Transactions are complicated enough right now that I'm only able to catch up at about 350x real-time (that is, it takes around a full cpu-day to validate a year of blocks/transactions).
>but bitcoin devs have ignored this with handywavy arguments.
Can you provide links to these discussions? I searched around on google and all the results are relating to bitcoin cash. I also searched the usual places that bitcoin (non cash) people congregate and turned up nothing.
Can you provide links to these discussions? I searched around on google and all the results are relating to bitcoin cash. I also searched the usual places that bitcoin (non cash) people congregate and turned up nothing.
Sad that you're going to get no reply here, but not surprising.
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Not this again. The entire bitcoin blockchain fits in $6 of hard drive space. The average transaction right now is more than $11.50. The AVERAGE transaction costs almost double what it costs to store the ENTIRE blockchain.
Stop with the storage space nonsense. The only people even storing the entire chain are enthusiasts, servers and miners. Saying "what if it gets a thousand times as many transactions" is ridiculous, but it still wouldn't be a problem. A few gigabytes a day? A $300 dollar hard drive would still take a decade to fill up. I think the few that sync the entire chain handle that.
Stop with the storage space nonsense. The only people even storing the entire chain are enthusiasts, servers and miners. Saying "what if it gets a thousand times as many transactions" is ridiculous, but it still wouldn't be a problem. A few gigabytes a day? A $300 dollar hard drive would still take a decade to fill up. I think the few that sync the entire chain handle that.
It doesn't google anymore and might be gone now, but back in the day there was an article on a bitcoin website which went through some math, arguing that Bitcoin could achieve 4000 transactions per second. People used to link to it on a regular basis.
Aside from that, people figured Moore's Law would continue at its historical pace, and Bitcoin could grow indefinitely at the same pace.
Aside from that, people figured Moore's Law would continue at its historical pace, and Bitcoin could grow indefinitely at the same pace.
The whitepaper only likens Bitcoin to gold in regards to the emission rate, not to it's supposed usage as "digital gold".
In fact the whitepaper even opens with describing Bitcoin's usage for commerce. The very first paragraph in the introduction!
The narrative has indeed changed to "digital gold" after it's made abundantly clear that Bitcoin is no longer suitable for commerce.
In fact the whitepaper even opens with describing Bitcoin's usage for commerce. The very first paragraph in the introduction!
The narrative has indeed changed to "digital gold" after it's made abundantly clear that Bitcoin is no longer suitable for commerce.
It is not a coincidence that gold mining was chosen as the analogy for new coins.
The emission of new bit coins following the "mining" of new blocks is like the minting of new gold coins following the mining of raw gold.
Because bitcoins are like gold coins.
I agree that neither gold nor bitcoin are suitable for commerce. But the narrative around and apparent intent behind bitcoin from in the beginning was "It is digital currency. It works like gold".
The emission of new bit coins following the "mining" of new blocks is like the minting of new gold coins following the mining of raw gold.
Because bitcoins are like gold coins.
I agree that neither gold nor bitcoin are suitable for commerce. But the narrative around and apparent intent behind bitcoin from in the beginning was "It is digital currency. It works like gold".
I think people are using "gold" in 2 different ways.
In the olden days, gold was actually a currency. The supply of coins you could produce was limited by the precious metals you had. The amount of paper money you could issue was limited by the amount of gold bars you had. In this system, gold is still acting like a currency; but a currency with very real limitations on the ability of any institution to manage it. [0]. This was the original meaning of digital gold.
In contrast, modern gold is not used as a currency. It is used as a commodity and store of value; and a hedge against inflation.
[0] Unlike gold though; bitcoin actually has a predictable issuance schedule. There is no sudden spike in Bitcoin supplies because prospective suddenly discovered a rich vein.
In the olden days, gold was actually a currency. The supply of coins you could produce was limited by the precious metals you had. The amount of paper money you could issue was limited by the amount of gold bars you had. In this system, gold is still acting like a currency; but a currency with very real limitations on the ability of any institution to manage it. [0]. This was the original meaning of digital gold.
In contrast, modern gold is not used as a currency. It is used as a commodity and store of value; and a hedge against inflation.
[0] Unlike gold though; bitcoin actually has a predictable issuance schedule. There is no sudden spike in Bitcoin supplies because prospective suddenly discovered a rich vein.
It’s digital gold you can use to magically transport any drug to your doorstep. That’s an amazing killer app.
Meh, USD is much better for that. Lots more drug dealers accept it.
Not near you, and not safely.
My understanding is that the problem is not with Bitcoin, but with people buying Bitcoin with "money printed," (or unconfirmed-peg) Tether.
The same issue would arise if the USA started printing dollars and buying physical gold with it. Is that right?
The same issue would arise if the USA started printing dollars and buying physical gold with it. Is that right?
> The narrative around bitcoin has always been "It is digital currency. It works like gold".
It has not been that for years. It failed miserably as a currency, and the current narrative is that it is a "store of value".
It has not been that for years. It failed miserably as a currency, and the current narrative is that it is a "store of value".
How do you square this with the observation that other fiat-backed stablecoins like USDC, which are obviously legitimate, are also printing massively?
It would seem to me that if transparent stablecoins with utility are going up, the simplest explanation for tether going up is that it serves the same role for people who have either become accustomed to it from its earlier availability, or have it as their only option due to jurisdiction. Not anything nefarious.
There seems to be little actual evidence to support conspiracy theories that Bitcoin's price movements are due to mismanagement of tether.
It would seem to me that if transparent stablecoins with utility are going up, the simplest explanation for tether going up is that it serves the same role for people who have either become accustomed to it from its earlier availability, or have it as their only option due to jurisdiction. Not anything nefarious.
There seems to be little actual evidence to support conspiracy theories that Bitcoin's price movements are due to mismanagement of tether.
The argument isnt that there are no legitimate inflows of other stablecoins (or traditional fiat currency) into bitcoin prices. The problem is that Tether is ~80% of inflows [1], and is dubiously backed at best. If 80% of the price support disappears, prices will fall, and legitimate buy side interest from other stablecoins or fiat will almost certainly shrink as well.
[1] https://twitter.com/JacobOracle/status/1346133087877537792/p...
[1] https://twitter.com/JacobOracle/status/1346133087877537792/p...
I think the author might be confusing volume for inflow, but they're 2 different things.
Except for timing time after time. Most rallies have a corresponding Tether print right prior to them.
The price of an asset goes up when money is being poured into the asset. For many exchanges "money" means USDT, so it makes perfect sense that USDT would be printed before a rally, regardless of malfeasance on tether's part.
Is there any proof or data on Tether issuance preceding rallies? Because I have seen this claim often made on Twitter, but never with any sources.
I personally dislike Tether and avoid it, but strong claims require strong evidence.
I personally dislike Tether and avoid it, but strong claims require strong evidence.
Here's an econ paper that studies that question: https://www.researchgate.net/publication/342185292_Is_Bitcoi...
Thanks, I will have to read it carefully, but from the abstract it doesn't seem as simple as "increased Tether printing makes BTC rally." But if there is in fact a statistically significant correlation, I would personally wager there's causation and hedge my bets accordingly.
I think the abstract does effectively say that: "these patterns are most consistent with the supply‐based hypothesis of unbacked digital money inflating cryptocurrency prices." And this point is made more forcefully in the paper.
FWIW, I don't have a strong opinion on the evidence presented in the paper -- the analyses seem sensible, but this isn't my field of expertise, so I'd be hard pressed to point out, for example, what alternative analyses they could / should have done.
Also, it's not even obvious to me that unbacked Tether causing the BTC price rallies is necessarily a reason to pull out; markets are weird.
FWIW, I don't have a strong opinion on the evidence presented in the paper -- the analyses seem sensible, but this isn't my field of expertise, so I'd be hard pressed to point out, for example, what alternative analyses they could / should have done.
Also, it's not even obvious to me that unbacked Tether causing the BTC price rallies is necessarily a reason to pull out; markets are weird.
Sounds like a winning trading strategy to me then.
The killer app for Bitcoin is escaping government fiat money that is backed by literally nothing at all and is being printed at increasingly alarming rates. 40% of all USD ever created were “made” in 2020. That will have repercussions for decades and isn’t a currency I want to stay in.
https://fred.stlouisfed.org/series/M1
Ironically (or not) Bitcoin was created in 2009 right when that graph gets really crazy.
https://fred.stlouisfed.org/series/M1
Ironically (or not) Bitcoin was created in 2009 right when that graph gets really crazy.
> backed by literally nothing
It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.
It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.
Indeed. A thought experiment: say the US government created a USD-prime currency that floated freely from USD. You could still use the USD in private transactions, but the US government would only transact and tax in USD-prime. What would be the fate of the original USD?
My belief that it would go to zero. I’m curious whether “fiat is backed by nothing” proponents would disagree.
My belief that it would go to zero. I’m curious whether “fiat is backed by nothing” proponents would disagree.
Both fiat currency and Bitcoin are backed by the same thing: mass belief. An incredibly powerful thing.
Yep, but my point is that one is mass belief that the US government will continue wanting USD, the other is a mass belief that other people will continue wanting BTC. Both could be right, both could be wrong, but they are not the same proposition.
Don't forget that the US gov itself is also propped up by mass belief. Its authority rests in the people.
Now you might say "actually its authority rests on people with guns", but that's only to the extent that the people with the guns believe in the governments's authority to tell them who to point them at.
Underneath all is belief and sentiment.
Now you might say "actually its authority rests on people with guns", but that's only to the extent that the people with the guns believe in the governments's authority to tell them who to point them at.
Underneath all is belief and sentiment.
Gold and silver became money for similar reasons (probably). Kings and Emperors found that supplying their armies was much easier (especially in peace time) if they used the method of taxing the population in gold and/or silver and then using that to pay their soldiers who would supply themselves on the open market. That way you did not have the standard problems of a planned economy. The peasants have now need for gold, so they would not need/want to trade stuff for it unless they were forced to have some to give to the tax man. It's much more complicated than that, of course, but like fiat money, gold and silver do not have much intrinsic value besides using it to show off your wealth.
Maybe they didn't have any intrinsic value in the past besides looking pretty but in the modern era both gold and silver have industrial uses. They are not just stores of value. One could also argue that both metals also had intrinsic value in the past since both metals were used in jewelry and various items to make them look good.
The industrial usefulness is an irrelevant byproduct when considering gold and silver as an investment.
Put another way, if people lost faith in gold as an investment tomorrow, and the value fell to the economic value of the industrial use cases, investors in gold would be ruined.
Put another way, if people lost faith in gold as an investment tomorrow, and the value fell to the economic value of the industrial use cases, investors in gold would be ruined.
I’ve never thought of it this way. I wonder what the price of gold and silver would be if they were strictly used for manufacturing and jewelry instead of speculation and store of value?
It is not irrelevant if the price is based on anything else besides raw speculation. Gold and silver have always had utility outside of trading.
>It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.
That's more than enough reason why we should try something else. It doesn't inspire a lot of confidence. By that reasoning, the USD has the same sort of backing as the Venezuelan Bolivar. So what's to stop the prior from becoming like the latter?
That's more than enough reason why we should try something else. It doesn't inspire a lot of confidence. By that reasoning, the USD has the same sort of backing as the Venezuelan Bolivar. So what's to stop the prior from becoming like the latter?
One has more guns(planes, tanks, etc) than the other.
Ok are you saying that is a good reason to invest in it? I always hear this and it seems like if force or military force is your only bastion of reason left to invest in a currency you should have left it long ago.
This argument doesn't really refute the argument for bitcoin as digital gold. It's not as though you can't exchange bitcoin to pay your taxes.
Gold has an intrinsic use value. Maybe not as high as its current monetary value, but it isn’t zero.
Bitcoin has no floor. You can only exchange bitcoin for taxes if someone wants the bitcoin.
Bitcoin has no floor. You can only exchange bitcoin for taxes if someone wants the bitcoin.
Gold is intrinsically scarce. You can't fork gold and have Gold 2.0 which has the exact same properties of the original Gold.
Backed by nothing...as opposed to bitcoin?
People who repeat this don't understand that fiat money is based on trust...and that is not a bad thing.
This is why blockchain is fundamentally stunted: the global society is based on trust and cooperation. Trustless systems will never be able to compete in these arenas.
People who repeat this don't understand that fiat money is based on trust...and that is not a bad thing.
This is why blockchain is fundamentally stunted: the global society is based on trust and cooperation. Trustless systems will never be able to compete in these arenas.
yawn
speaking of jumping the shark, have you seen what governments have been up to lately ?
interest rates at a 5,000 year low, moral hazard abound & global fiat collapse imminent in the best case and in the worst case we have banks/elites/governments who are going to be looking to further enslave those in debt and forced out of business/work with some dystopian debt forgiveness scheme involving a 'vaccine' schedule and travel restrictions or whatever else (use your imagination).
the truth is that everything mentioned in these comments was an argument that had already been had years ago - the markets reflect that - but i did enjoy reading the last sentence of your original comment and thinking to myself "am I reading Time Magazine ?"
speaking of jumping the shark, have you seen what governments have been up to lately ?
interest rates at a 5,000 year low, moral hazard abound & global fiat collapse imminent in the best case and in the worst case we have banks/elites/governments who are going to be looking to further enslave those in debt and forced out of business/work with some dystopian debt forgiveness scheme involving a 'vaccine' schedule and travel restrictions or whatever else (use your imagination).
the truth is that everything mentioned in these comments was an argument that had already been had years ago - the markets reflect that - but i did enjoy reading the last sentence of your original comment and thinking to myself "am I reading Time Magazine ?"
1) trying to distract the above problems by pointing out other issues doesn't make them go away
2) you talk about fiat collapse being imminent...USDT is worth far less than any fiat (see: nothing) I don't get how these ardent fiat haters don't see their entire ecosystem has been coopted by something that has infinitely less value than the thing they so despise
2) you talk about fiat collapse being imminent...USDT is worth far less than any fiat (see: nothing) I don't get how these ardent fiat haters don't see their entire ecosystem has been coopted by something that has infinitely less value than the thing they so despise
Seems to me like you're tacitly agreeing with GP here - you're just making a claim about which currency system you trust more! (And attempting to convince others of the same position.)
And yet people still buy T-bills.
The 40% relates essentially to cash-like assets, which is a tiny part of the total USD money supply. The total has not grown drastically.
See https://en.m.wikipedia.org/wiki/Money_supply
See https://en.m.wikipedia.org/wiki/Money_supply
USD is backed by being valid for the redemption of outstanding USD denominated invoices, loan repayments and tax bills, all of which ensures demand to possess the currency and are likely to continue to exist in increasing quantities in future.
"Escaping" that for something which literally is backed by nothing at all is a strange move.
"Escaping" that for something which literally is backed by nothing at all is a strange move.
That only works when people take payment in BTC without translating the value provided back to a Fiat currency.
Until that time, expansion of the USD (or other Fiat) supply impacts the "value" that BTC has.
Until that time, expansion of the USD (or other Fiat) supply impacts the "value" that BTC has.
During the gold standard, did people take payment in gold?
I don't think so...
They used paper that symbolized "withdrawal rights to gold". USD (or any other piece of paper that people agree has a value) is a perfect currency for exchange, it's just not a great store of value.
I don't think so...
They used paper that symbolized "withdrawal rights to gold". USD (or any other piece of paper that people agree has a value) is a perfect currency for exchange, it's just not a great store of value.
> USD [...] is a perfect currency for exchange, it's just not a great store of value.
USD is a fantastic store of value. Since 1982 (arguably the beginning of the modern inflation-targeting era), the USD has lost no more than 6.3% of its value year-over-year, nor gained more than 2% (CPI measured, source https://fred.stlouisfed.org/series/CPIAUCSL#0).
In contrast since 2016, Bitcoin has 60% of its value year-over-year (2018) and gained 1700% (also 2018).
A store of value is not a story of appreciation and hoping for a gain, it's a story about holding a stable and most importantly predictable value into the future. The USD more than satisfies this condition. Bitcoin does not, no matter its speculative merits.
Most importantly, society does not owe people a fictional store of value guaranteed to never lose purchasing power. People don't eat quarters, nor do they live under dollar bills. It strains credulity that a nominal token (however minted) should hold a guaranteed value, without taking capital-like risks required of any productive investment.
USD is a fantastic store of value. Since 1982 (arguably the beginning of the modern inflation-targeting era), the USD has lost no more than 6.3% of its value year-over-year, nor gained more than 2% (CPI measured, source https://fred.stlouisfed.org/series/CPIAUCSL#0).
In contrast since 2016, Bitcoin has 60% of its value year-over-year (2018) and gained 1700% (also 2018).
A store of value is not a story of appreciation and hoping for a gain, it's a story about holding a stable and most importantly predictable value into the future. The USD more than satisfies this condition. Bitcoin does not, no matter its speculative merits.
Most importantly, society does not owe people a fictional store of value guaranteed to never lose purchasing power. People don't eat quarters, nor do they live under dollar bills. It strains credulity that a nominal token (however minted) should hold a guaranteed value, without taking capital-like risks required of any productive investment.
The point I was responding to was saying that they wanted to get away from USD and that this was BTC's killer app.
My point is that you can't "get away" from USD, while the BTC market is effectively tied to USD.
so if the USD supply is massively inflated, and people can use those USD to buy BTC, the tie is still there.
If and when people denominate their goods and services in BTC without any reference to a fiat amount, then they are decoupled and BTC loses the tie to USD.
My point is that you can't "get away" from USD, while the BTC market is effectively tied to USD.
so if the USD supply is massively inflated, and people can use those USD to buy BTC, the tie is still there.
If and when people denominate their goods and services in BTC without any reference to a fiat amount, then they are decoupled and BTC loses the tie to USD.
> did people take payment in gold?
No, but prices were denominated in gold, effectively, as the price of gold was fixed. That was the whole point.
No, but prices were denominated in gold, effectively, as the price of gold was fixed. That was the whole point.
Money is not property. Money is an entry on a ledger, which tracks credits and debits. So yes, fiat currency is not redeemable for a physical asset. But if it was redeemable, what ensures that say gold or a chicken will suffice to settle a debt or serve as credit for a future transaction. Chickens die and gold is only as valuable as your skills as a trader. The ledger and all of the social norms and institutional structures that accompany it is what maintains financial wealth.
Preventing debasement of currency via inflation via printing money, which a lot of people use as their go to argument against fiat money, is simply adding economy wide debt to the ledger. This is necessary from time to time especially during crises and especially in a services/financial services/ intellectual property heavy economy.
If no money existed, at all, how would you receive compensation for providing work of an IP nature to your neighbor. You would need either a perfect trade (you really want their chicken it’s just the right amount of chicken for you) or you take an iou. Which is a debt. Now have them write that iou down on a piece of paper and hand it to you. Your neighbor just printed money. Not so crazy.
Preventing debasement of currency via inflation via printing money, which a lot of people use as their go to argument against fiat money, is simply adding economy wide debt to the ledger. This is necessary from time to time especially during crises and especially in a services/financial services/ intellectual property heavy economy.
If no money existed, at all, how would you receive compensation for providing work of an IP nature to your neighbor. You would need either a perfect trade (you really want their chicken it’s just the right amount of chicken for you) or you take an iou. Which is a debt. Now have them write that iou down on a piece of paper and hand it to you. Your neighbor just printed money. Not so crazy.
I have a question, isn't the problem with the gold standard that the amount of dollars is fixed and in order to have enough currency to drive a rapidly growing economy you would in essence be buying a gallon of milk for .25 cents?
It seems to me that either you the amount of currency in circulation needs to increase or the value of the existing currency needs to increase.
Taking into account the gold standard was used for possibly centuries (not sure) was this problem encountered before and how was it solved?
It seems to me that either you the amount of currency in circulation needs to increase or the value of the existing currency needs to increase.
Taking into account the gold standard was used for possibly centuries (not sure) was this problem encountered before and how was it solved?
A shortage of bullion in Europe during the 15th century caused problems everywhere. That was followed by a huge influx of gold from the Americas in the 16th century, which also caused massive problems across the continent!
https://en.wikipedia.org/wiki/Great_Bullion_Famine
https://en.wikipedia.org/wiki/Price_revolution
Both under- and over-supply had negative effects on the economies of Europe.
The gold standard really was a primitive fiat currency anyway, governments would debase coins so they contained less gold in order to expand the money supply for instance. And only a small fraction of coins would be gold anyway, silver was far more common - the Pound Sterling takes it's name from a pound of silver from the easterlings (Germans). Paper money just made it obvious that physical currency was only a representation of wealth and not a fixed unit of wealth itself.
The gold standard is basically a political myth about a system that never really existed. Money is a very abstract concept, and reducing it to physical tokens and easily intuitive rules is appealing to many.
https://en.wikipedia.org/wiki/Great_Bullion_Famine
https://en.wikipedia.org/wiki/Price_revolution
Both under- and over-supply had negative effects on the economies of Europe.
The gold standard really was a primitive fiat currency anyway, governments would debase coins so they contained less gold in order to expand the money supply for instance. And only a small fraction of coins would be gold anyway, silver was far more common - the Pound Sterling takes it's name from a pound of silver from the easterlings (Germans). Paper money just made it obvious that physical currency was only a representation of wealth and not a fixed unit of wealth itself.
The gold standard is basically a political myth about a system that never really existed. Money is a very abstract concept, and reducing it to physical tokens and easily intuitive rules is appealing to many.
https://wtfhappenedin1971.com/
This was posted to HN and it was quite eye-opening. For those that don’t know, 1971 was when the gold standard was abandoned by Nixon. I don’t know if the graphs are cherry-picked and I hope they were honestly since the US is never going back to the gold standard and it seems to have far-reaching negative effects in every aspect of human life.
To answer your .25 cent milk question it seems to have not been a problem in history and health of the country before 1971. The profits and benefits of the rapidly growing economy have pretty much all gone to the ultra wealthy that are nearest to and in control of the money printer.
This was posted to HN and it was quite eye-opening. For those that don’t know, 1971 was when the gold standard was abandoned by Nixon. I don’t know if the graphs are cherry-picked and I hope they were honestly since the US is never going back to the gold standard and it seems to have far-reaching negative effects in every aspect of human life.
To answer your .25 cent milk question it seems to have not been a problem in history and health of the country before 1971. The profits and benefits of the rapidly growing economy have pretty much all gone to the ultra wealthy that are nearest to and in control of the money printer.
I think this is a gigantic leap. They show a whole bunch of graphs without even advancing a theory as to how abandoning the gold standard caused a decline in, for example, employee compensation growth. Or divorce rates. Or ... obesity rates, really? There's so many graphs on here that it would take forever to dispute all of them, but here's some general points.
1. A lot of these graphs start at 1940 or 1950, showing a change in the trend in the early 1970s. But that was the end of WW2, where Europe was in ruins and rebuilding and America saw a massive increase in prosperity and economic output. That was a pretty unique period, it's only natural for that trend to diminish or change over time.
2. A hell of a lot happened in the late 60s and early 70s, not just abandoning the gold standard. One of these graphs is of the incarceration rate. Do you think we started seeing mass incarceration at that time because we abandoned the gold standard, or do you think it was because of the war on drugs?
3. Some of these graphs are deliberately misleading. One is of the cumulative inflation rate, and seems to show the inflation accelerate in the early 1970s. Except a healthy economy should have a steady inflation rate each year (of around 2% I believe), so this graph is supposed to be exponential! They just picked the right window so that 1971 is the inflection point.
1. A lot of these graphs start at 1940 or 1950, showing a change in the trend in the early 1970s. But that was the end of WW2, where Europe was in ruins and rebuilding and America saw a massive increase in prosperity and economic output. That was a pretty unique period, it's only natural for that trend to diminish or change over time.
2. A hell of a lot happened in the late 60s and early 70s, not just abandoning the gold standard. One of these graphs is of the incarceration rate. Do you think we started seeing mass incarceration at that time because we abandoned the gold standard, or do you think it was because of the war on drugs?
3. Some of these graphs are deliberately misleading. One is of the cumulative inflation rate, and seems to show the inflation accelerate in the early 1970s. Except a healthy economy should have a steady inflation rate each year (of around 2% I believe), so this graph is supposed to be exponential! They just picked the right window so that 1971 is the inflection point.
The change from the gold standard is almost certainly a coincidence. Whether the dollar is backed by gold or government promises doesn't make businesses decide to give less money to their workers and more to their CEOs.
A much more relevant development in the 70s was the switch in economic policy priorities from demand-side to supply-side. Nixon was the first president who prioritized tax cuts, union busting, subsidies, and legalizing outsourcing to cheaper labor markets in China and SEA. Every government since has given corporations a blank check to cut labor costs by any means necessary to prioritize profit.
A much more relevant development in the 70s was the switch in economic policy priorities from demand-side to supply-side. Nixon was the first president who prioritized tax cuts, union busting, subsidies, and legalizing outsourcing to cheaper labor markets in China and SEA. Every government since has given corporations a blank check to cut labor costs by any means necessary to prioritize profit.
Those graphs paint a fair picture of the nature of the crisis, but I am not so keen on their explanation.
Nixon ended gold convertability, but the USD was not on a true gold standard and was in danger of not being able to fulfill this obligation. The standard was Bretton Woods, it was an international framework for finance, and it was the failure of the framework together with the OPEC oil crisis that caused the mess documented in those graphs.
Nixon ended gold convertability, but the USD was not on a true gold standard and was in danger of not being able to fulfill this obligation. The standard was Bretton Woods, it was an international framework for finance, and it was the failure of the framework together with the OPEC oil crisis that caused the mess documented in those graphs.
My rule of thumb for money supply:
adjustable, with a benign regulator > fixed > adjustable, with a corrupt regulator
So, the aim shouldn't be a return to the gold standard or a switch to BTC, but to make sure that central banks can do their job without interference from politicians.
adjustable, with a benign regulator > fixed > adjustable, with a corrupt regulator
So, the aim shouldn't be a return to the gold standard or a switch to BTC, but to make sure that central banks can do their job without interference from politicians.
To the left of that list I'd put "self-adjusting, without needing a regulator."
Hayek argued that a system of competitive privately-issued currencies would achieve that. I'm not qualified to say whether he was correct, but an economy built on cryptocurrencies would be exactly that.
Hayek argued that a system of competitive privately-issued currencies would achieve that. I'm not qualified to say whether he was correct, but an economy built on cryptocurrencies would be exactly that.
Yes. That is called deflation. It also has to do with fractional reserve banking. The fraction of your outstanding dollars that you could actually cover with gold. If no one ever wants to make a run on your bank, you can keep the fraction very low.
I understand the deflation part, but my question really was is it an economy the size of the united states even possible if we stayed on the gold standard.
Not having enough money to transact would definitely have suppressed our economic growth, but then again maybe we would have gotten really good at mining for gold to make up for it
"Really good at mining." This might be good point to compare with BTC. Where huge amounts of electricity is spend on doing essentially useless calculations, outside keeping the system safe and running.
Good at mining would have meant spending good part of our economic output to mine gold and then just storing it somewhere or moving it around...
Good at mining would have meant spending good part of our economic output to mine gold and then just storing it somewhere or moving it around...
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> literally backed by nothing
Backed by $750B in annual military spending
Backed by $750B in annual military spending
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> government fiat money that is backed by literally nothing at all
It would be really nice for people to spend even a few minutes thinking about how money works, or open a textbook even just to learn what you disagree with.
It's tiresome to explain over and over and over again to people how the "full faith and credit of the United States" is not "nothing at all" but in fact a guarantee of great value, at least as good as any on any other security, and one that is quite measurable (by for example comparing the prices of full faith and credit securities with other almost identical securities without this guarantee).
On the contrary, I'd say that it's the cryptocurrencies that _by design_ are based on nothing at all.
It would be really nice for people to spend even a few minutes thinking about how money works, or open a textbook even just to learn what you disagree with.
It's tiresome to explain over and over and over again to people how the "full faith and credit of the United States" is not "nothing at all" but in fact a guarantee of great value, at least as good as any on any other security, and one that is quite measurable (by for example comparing the prices of full faith and credit securities with other almost identical securities without this guarantee).
On the contrary, I'd say that it's the cryptocurrencies that _by design_ are based on nothing at all.
However three years on, crypto still does not have a "killer app" and is 99.99% used for speculation.
The killer app is decentralized, permissionless, open source, and censorship resistant network.
Bitcoin's narrative has had to morph from "digital currency" to "digital gold".
Gold morphed from worthless rocks in the the ground, to coins traded by traveling merchants, to stores of value that were eventually centralized and monopolized by governments.
RE: Tether I don't trust them either, but we need more evidence of this alleged printing. We saw that they did remove the 1:1 peg briefly when Crypto Capital in Panama (?) froze a few hundred million of their USD.
Bitcoin now finds itself a high tech manifestation of the very thing that Satoshi sought to address.
Bitcoin is sound. The centralized exchange layer built on top of it is dirty.
The killer app is decentralized, permissionless, open source, and censorship resistant network.
Bitcoin's narrative has had to morph from "digital currency" to "digital gold".
Gold morphed from worthless rocks in the the ground, to coins traded by traveling merchants, to stores of value that were eventually centralized and monopolized by governments.
RE: Tether I don't trust them either, but we need more evidence of this alleged printing. We saw that they did remove the 1:1 peg briefly when Crypto Capital in Panama (?) froze a few hundred million of their USD.
Bitcoin now finds itself a high tech manifestation of the very thing that Satoshi sought to address.
Bitcoin is sound. The centralized exchange layer built on top of it is dirty.
> The killer app is decentralized, permissionless, open source, and censorship resistant network.
That’s like saying the killer app of the internet is the internet.
The web gives me access to information quicker and easier than going to a library or bookshop. Email and IM means I can communicate with people in other countries quicker and easier than I could by post. Crypto doesn’t change anything.
A few drug dealers and some people living in countries with hyperinflation may care about “permissionlessness” and “censorship* resistance”, but for most people, actual money is far, far more convenient.
* That’s some Orwellian newspeak, btw. If someone defrauds me and a court of law ensures that I am restituted, the reversal of that fraudulent transaction isn’t “censorship” because stealing money isn’t “speech” or “expression”.
That’s like saying the killer app of the internet is the internet.
The web gives me access to information quicker and easier than going to a library or bookshop. Email and IM means I can communicate with people in other countries quicker and easier than I could by post. Crypto doesn’t change anything.
A few drug dealers and some people living in countries with hyperinflation may care about “permissionlessness” and “censorship* resistance”, but for most people, actual money is far, far more convenient.
* That’s some Orwellian newspeak, btw. If someone defrauds me and a court of law ensures that I am restituted, the reversal of that fraudulent transaction isn’t “censorship” because stealing money isn’t “speech” or “expression”.
Digital gold is the kill app. That is enough to justify its market cap.
For example, Chinese can use bit coin to exchange large amount of funds to other currency, although this can only be done in private because the official ban.
For example, Chinese can use bit coin to exchange large amount of funds to other currency, although this can only be done in private because the official ban.
You cannot. There is no exchange from CNY to Bitcoin.
Come on, it was banned, but there is plenty of underground channel... Why is that even needed to be mentioned...
Maybe I should be more clear in the OP.
Maybe I should be more clear in the OP.
There are underground channels for USD - CNY as well haha
CNY buys mining rigs and electricity which makes bitcoins.
> The killer app is decentralized, permissionless, open source, and censorship resistant network.
That's the "how" part, not the "what". What's the killer app implemented using that network? What do we do with it?
That's the "how" part, not the "what". What's the killer app implemented using that network? What do we do with it?
Lots of examples in this thread.
A replacement for gold is one.
A replacement for gold is one.
> A replacement for gold is one.
Gold is relatively stable and has physical backing. BTC does not.
Gold is relatively stable and has physical backing. BTC does not.
Gold is relatively stable and has physical backing.
Up to 4% of China's gold reserves could be fake. Gold fraud article: https://economictimes.indiatimes.com/news/international/worl...
Bitcoin is open source and completely auditable in an instant.
As the price of gold goes up, the quantity supplied goes up. Bitcoin's issuance protocol is fixed and unchangeable unless the network agrees.
The cost of securing or transporting $1b of gold bars is magnitudes higher than the cost of securing $1b of Bitcoin.
Up to 4% of China's gold reserves could be fake. Gold fraud article: https://economictimes.indiatimes.com/news/international/worl...
Bitcoin is open source and completely auditable in an instant.
As the price of gold goes up, the quantity supplied goes up. Bitcoin's issuance protocol is fixed and unchangeable unless the network agrees.
The cost of securing or transporting $1b of gold bars is magnitudes higher than the cost of securing $1b of Bitcoin.
Securing $1 billion of bitcoin? Who needs to secure $827 million of Bitcoin? Securing $937 million of Bitcoin is not a killer app.
In all seriousness, securing the value of Bitcoin is the problem that is not easily solved.
In all seriousness, securing the value of Bitcoin is the problem that is not easily solved.
Bitcoin is bits of data on a network. It does exactly what its supposed to do; a dictionary for strings to integers.
Securing external value to people is not a goal or responsibility of Bitcoin. That's simply a consequence to how we as humans choose to use scarce assets.
Securing external value to people is not a goal or responsibility of Bitcoin. That's simply a consequence to how we as humans choose to use scarce assets.
> Securing external value to people is not a goal or responsibility of Bitcoin.
Fair enough, but then your comparison to physical gold is meaningless. Physical gold is generally used to store value, not to transfer it.
For that purpose, you have paper money (or paper gold such as futures) which is cheap to transfer.
Fair enough, but then your comparison to physical gold is meaningless. Physical gold is generally used to store value, not to transfer it.
For that purpose, you have paper money (or paper gold such as futures) which is cheap to transfer.
Gold has had thousands of years to equalize in value.
Bitcoin is about 12 years old.
Bitcoin is about 12 years old.
Alright, then maybe in a hundred years your gold comparison will be meaningful, but not today.
Disruptive technology is disruptive.
Tell someone from the past to imagine having godlike computing power in your pocket, and they'd say "why would anyone want that?"
Tell someone from the past to imagine having godlike computing power in your pocket, and they'd say "why would anyone want that?"
Bitcoin is relatively stable and has a mathematical backing. Gold does not.
The hurdle for bitcoin is finding a way for people to turn it into a currency they can use. This is where you end up with a centralized exchange layer built on top of it.
I can make a $12,000,000 transaction for $.35 but if I actually want to get the money, I have to pay 2.5% to a legit exchange or take my chances on some janky ass exchange. Why not just transfer the money via ACH and pay the small fee and save myself the headache?
I can make a $12,000,000 transaction for $.35 but if I actually want to get the money, I have to pay 2.5% to a legit exchange or take my chances on some janky ass exchange. Why not just transfer the money via ACH and pay the small fee and save myself the headache?
2.5% is way too much.
I pay 0.15% and the exchange has been around for a decade without ever losing funds. It's even now licensed as a bank in the U.S.
I pay 0.15% and the exchange has been around for a decade without ever losing funds. It's even now licensed as a bank in the U.S.
You can start by asking people to take bitcoin for various transactions. For example, my friends and I all use it settle debts between each other.
The barriers to entry, usage, and understanding are just too high for average Joe. That and how the value of their money fluctuates compared to fiat makes it more difficult to use as a daily currency.
Also, when things go wrong there's nobody to turn to in most cases.
> The barriers to entry, usage, and understanding are just too high for average Joe.
Mentioned in another thread[0], the Phoenix wallet more or less solves this on the Lightning Network.
[0] https://news.ycombinator.com/item?id=25706312
Mentioned in another thread[0], the Phoenix wallet more or less solves this on the Lightning Network.
[0] https://news.ycombinator.com/item?id=25706312
Bet you don't lend one another bitcoin though
In a long enough time frame, people transact with cryptoassets directly and don't need to exchange into fiat. We are early in this development, money as we know it is changing.
Over a long enough time frame the chances that you get hacked, scammed or make a fatal mistake and lose all your cryptos is high. Putting anything more than pocket money in this is idiotic.
What kind of an exchange charges 2.5%?
> The killer app is decentralized, permissionless, open source, and censorship resistant network.
Yes, but what can I do with that other than toot/tweet/twit at other people and buy LSD tabs?
Yes, but what can I do with that other than toot/tweet/twit at other people and buy LSD tabs?
Here are a few projects that use Ethereum to do things that have nothing to do with acquiring chemicals or crypto asset speculation.
https://www.nucypher.com https://filecoin.io https://alice.si https://www.augur.net
https://www.nucypher.com https://filecoin.io https://alice.si https://www.augur.net
I can do all that right now without inserting a power-wasting cryptocoin layer.
Go ahead subscribe to Pornhub with your credit card.
Or donate to Wikileaks with your paypal.
Why would I pay for Porn? But on that note, the PH website still accepts several types of credit cards.
Whatever Wikileaks originally was, it is now a Russian propaganda tool. Go ahead and try to post leaks critical of Russia on Wikileaks, or for that matter, of Donald Trump. Why would I want to donate to a website that is openly seeking the destruction of my country?
Whatever Wikileaks originally was, it is now a Russian propaganda tool. Go ahead and try to post leaks critical of Russia on Wikileaks, or for that matter, of Donald Trump. Why would I want to donate to a website that is openly seeking the destruction of my country?
With Bitcoin you own property that can never be confiscated or debased by any government.
With IPFS you can host and access files that can't be censored. (same level of censorship resistance as torrents)
With Monero you can transact free from surveillance.
The biggest applications on Ethereum right now is decentralized finance, with billions of dollars locked in.
With IPFS you can host and access files that can't be censored. (same level of censorship resistance as torrents)
With Monero you can transact free from surveillance.
The biggest applications on Ethereum right now is decentralized finance, with billions of dollars locked in.
> With Bitcoin you own property that can never be confiscated or debased by any government.
Private keys can be confiscated like anything else. They won't do you much good if you're thrown in prison for not turning them over if legally compelled. Sure you can try to hide your ownership, but my point is that actual cryptocurrencies are only one layer of very deep opsec you need to resist state actors. For the common illegal goods consumer it's unlikely to do much more than provide a false sense of security due to other opsec failures (use of phones, use of cookies, use of mailing addresses, use of non-e2e chat, using a hosted wallet, lack of anonymous vpn, etc etc etc).
> The biggest applications on Ethereum right now is decentralized finance, with billions of dollars locked in.
Interesting use of "dollars." How much is actually Tether? How much is manipulated market cap (through wash trading or more convoluted defi mechanisms)? How much is actually liquid USD?
Private keys can be confiscated like anything else. They won't do you much good if you're thrown in prison for not turning them over if legally compelled. Sure you can try to hide your ownership, but my point is that actual cryptocurrencies are only one layer of very deep opsec you need to resist state actors. For the common illegal goods consumer it's unlikely to do much more than provide a false sense of security due to other opsec failures (use of phones, use of cookies, use of mailing addresses, use of non-e2e chat, using a hosted wallet, lack of anonymous vpn, etc etc etc).
> The biggest applications on Ethereum right now is decentralized finance, with billions of dollars locked in.
Interesting use of "dollars." How much is actually Tether? How much is manipulated market cap (through wash trading or more convoluted defi mechanisms)? How much is actually liquid USD?
A wrench attack will always be the easiest vector. That said, there is no other asset in history that gives you this level of security for such marginal cost. The cost of securing $100 is essentially the same as the cost of securing $100m.
The chances of loosing $100 is essentially the same as the chances of loosing $100m. If you loose your private key nobody can help you recover your money.
I would hope that someone with $100m in crypto is smart enough to not leave their seed words on a piece of paper on their coffee table.
Your exactly correct that nobody can help you recover your money if you lose your keys.
Your exactly correct that nobody can help you recover your money if you lose your keys.
Bitcoins have been confiscated by many governments. A quick Google search reveals many instances of that.
Lets clarify semantics.
Can the government seize Bitcoin directly? No.
Can the government seize your bank account directly? Yes.
Can they threaten you with jail if you don't hand over your Bitcoin? Yes
Can the government seize Bitcoin directly? No.
Can the government seize your bank account directly? Yes.
Can they threaten you with jail if you don't hand over your Bitcoin? Yes
Can the government seize Bitcoin directly? No.
Yes, it can. The U.S. government has in fact seized Bitcoin directly and sold it at auction several times. It is arguably the single largest non-exchange seller of Bitcoin in Bitcoin's history.
Yes, it can. The U.S. government has in fact seized Bitcoin directly and sold it at auction several times. It is arguably the single largest non-exchange seller of Bitcoin in Bitcoin's history.
It can only be taken in these events:
1) Seed phrases are discovered (ie. plaintext document or physical artifact).
2) Seed phrases are handed over by willing party.
If #1 doesn't exist, then #2 is the only option.
1) Seed phrases are discovered (ie. plaintext document or physical artifact).
2) Seed phrases are handed over by willing party.
If #1 doesn't exist, then #2 is the only option.
This is the same as with cash money.
Money can only be seized if the safe is found. And the combination is handed over by a willing party.
The difference is that money is actually more secure because you don't have a public ledger telling you that it exists and who owns it and how much of it they own as you do with the public cryptos like Bitcoin and Ethereum.
Money can only be seized if the safe is found. And the combination is handed over by a willing party.
The difference is that money is actually more secure because you don't have a public ledger telling you that it exists and who owns it and how much of it they own as you do with the public cryptos like Bitcoin and Ethereum.
Cash needs to be accessible to be useful.
Crypto is magnitudes more accessible. I can travel to any country in the world with an encrypted usb drive of my seed words, and no one is wiser. OR even upload a file to the internet and forego carrying anything at all. A government can try to censor transactions belonging to an address, but we don't have good precedent to see how the network will behave. Miners in other jurisdictions have no reason to follow someone else's censorship.
Crypto is magnitudes more accessible. I can travel to any country in the world with an encrypted usb drive of my seed words, and no one is wiser. OR even upload a file to the internet and forego carrying anything at all. A government can try to censor transactions belonging to an address, but we don't have good precedent to see how the network will behave. Miners in other jurisdictions have no reason to follow someone else's censorship.
> Can the government seize Bitcoin directly? No.
A government could seize miners, and given that ~50% of the world's Bitcoin mining capacity appears to be located in one country, that might give them considerable leeway to rewrite the blockchain to their liking.
A government could seize miners, and given that ~50% of the world's Bitcoin mining capacity appears to be located in one country, that might give them considerable leeway to rewrite the blockchain to their liking.
Yes. The solution to this is a software fork.
Did you mean "soft fork", or are you thinking of a different concept I'm not familiar with?
Forks can and have been used to deal with isolated malicious incidents, but do you think they can be successful against an actor in extended control of a substantial part of the hash rate?
Forks can and have been used to deal with isolated malicious incidents, but do you think they can be successful against an actor in extended control of a substantial part of the hash rate?
You can alter the hashing algorithm to one that is more ASIC resistant. Monero did this.
> With Bitcoin you own property that can never be confiscated or debased by any government.
So the killer app for bitcoin is owning bitcoin?
So the killer app for bitcoin is owning bitcoin?
> RE: Tether I don't trust them either, but we need more evidence of this alleged printing. We saw that they did remove the 1:1 peg briefly when Crypto Capital in Panama (?) froze a few hundred million of their USD.
Tether's page (https://wallet.tether.to/transparency) claims $23.6 billion in total assets. Despite their claims to transparency, I see no report of what those assets are, how risky those assets are, or any audit that assets they even own those assets. Their front page has a big link saying "Proof of funds", which leads to an audit published 2½ years ago, claiming only $2.5 billion in cash in two bank accounts with unnamed banks.
For a company that claims to be "always fully transparent," that is shockingly opaque.
Tether's page (https://wallet.tether.to/transparency) claims $23.6 billion in total assets. Despite their claims to transparency, I see no report of what those assets are, how risky those assets are, or any audit that assets they even own those assets. Their front page has a big link saying "Proof of funds", which leads to an audit published 2½ years ago, claiming only $2.5 billion in cash in two bank accounts with unnamed banks.
For a company that claims to be "always fully transparent," that is shockingly opaque.
Especially considering their last auditor walked away from the situation, I'd say the whole project reeks.
I find this a little bit too biased. The Bitcoin universe is waving between a lot of reason why to love bitcoin and it shifts often.
I stopped following the money side of it (atm and sites accepting btc) but a vast majority of btc and cryptos attention right now.. is simply better yearly returns than other kinds of possessions.
I stopped following the money side of it (atm and sites accepting btc) but a vast majority of btc and cryptos attention right now.. is simply better yearly returns than other kinds of possessions.
> The killer app is decentralized, permissionless, open source, and censorship resistant network.
That's not an app. That's meaningless advertising lingo.
That's not an app. That's meaningless advertising lingo.
I’ve been wondering if Tether is really a scam for a long time.
In all these analyses, one key point is missing: arbitrage traders have to make up for the sell pressure on USDT when Tethers are being printed and sold for BTC. Can anyone show me how there is a plausible mechanism/scheme/conspiracy that keeps the USD/USDT exchange rate stable while a crazy amount of illegitimate Tethers are being printed?
Edit: typo and removed link.
In all these analyses, one key point is missing: arbitrage traders have to make up for the sell pressure on USDT when Tethers are being printed and sold for BTC. Can anyone show me how there is a plausible mechanism/scheme/conspiracy that keeps the USD/USDT exchange rate stable while a crazy amount of illegitimate Tethers are being printed?
Edit: typo and removed link.
It's just that conspiracy theories and doom stories are nice to write about. USDT market cap is lower than that of GBTC. So it's not possible that USDT is inflating 90% of the price of Bitcoin.
Most people writing about USDT don't understand how arbitrage markets work, and don't understand that liquid markets are quick to resolve themselves (unlike ponzi schemes where you can hide the missing assets for a long time). Liquid markets will put quick pressure which is why these structures collapse faster (see MtGox)
Most people writing about USDT don't understand how arbitrage markets work, and don't understand that liquid markets are quick to resolve themselves (unlike ponzi schemes where you can hide the missing assets for a long time). Liquid markets will put quick pressure which is why these structures collapse faster (see MtGox)
>USDT market cap is lower than that of GBTC. So it's not possible that USDT is inflating 90% of the price of Bitcoin.
Technically it is possible. You don't need an equal or larger market cap to inflate something else 90%. You just need enough to dominate the trading volume.
As an extreme example, if bid/ask volume is exactly 1 (ie the ONLY trade volume consists of you and 1 other person trading a quantity of 1), then at the minimum, all you need is a bank roll of 1.9x the current unit price, with both you agreeing to the trade it for 1.9x, for the going price per unit to inflate 90%. And since market cap = price per unit × units outstanding, then the market cap also inflated 90%. If the units outstanding was 5000, and the unit price was $1, then the market cap increased $4,500 using only $1.90.
Technically it is possible. You don't need an equal or larger market cap to inflate something else 90%. You just need enough to dominate the trading volume.
As an extreme example, if bid/ask volume is exactly 1 (ie the ONLY trade volume consists of you and 1 other person trading a quantity of 1), then at the minimum, all you need is a bank roll of 1.9x the current unit price, with both you agreeing to the trade it for 1.9x, for the going price per unit to inflate 90%. And since market cap = price per unit × units outstanding, then the market cap also inflated 90%. If the units outstanding was 5000, and the unit price was $1, then the market cap increased $4,500 using only $1.90.
[deleted]
Market caps in cryptocurrencies are an entirely nonsensical fiction. They have no real effect on anything.
Look at trade volumes. Tether is massively bigger than bitcoin and ethereum combined.
Look at trade volumes. Tether is massively bigger than bitcoin and ethereum combined.
As long as tether can provide a small percentage of liquidity on USDT/USD then they (arbitrageurs) can maintain the peg. This can obviously break down, and has in the past. It's all about liquidity...
I'm not sure what arbitrage you're referring to. But more importantly, nobody is selling these freshly printed USDT for USD...that's the whole point. They are selling USDT for BTC.
99% of the USD/USDT trading is fake/wash trading to give the illusion of volume.
99% of the USD/USDT trading is fake/wash trading to give the illusion of volume.
Kraken has USDT/USD markets. I'm sure there are plenty of other places to trade USDT for USD.
https://www.kraken.com/prices/usdt-tether-usd-price-chart/us...
https://www.kraken.com/prices/usdt-tether-usd-price-chart/us...
If tether is functionally doing a fractional reserve scheme, then we should expect a run on the tether bank sooner or later.
If you ignore the URL and read the content of this http://www.tr0lly.com/bitcoin/the-tether-press-and-bitcoins-... it's actually a good theory for what may be happening.
It's speculation, but then without audits and accounts of the exchanges that use Tether, and Tether itself, speculation seems to be about as good an option as there is.
It's speculation, but then without audits and accounts of the exchanges that use Tether, and Tether itself, speculation seems to be about as good an option as there is.
Exactly, I don't say OP is wrong but I need to see how I can
1. buy X for USD
2. buy BTC for X
Shouldn't the price for X then stay the same? (Bought X once, sold X once)
Assuming X drops to 0, wouldn't people that have BTC just use another coin X' to get back to USD?
Assuming company Y creates X out of thin air and buys BTC with it, why doesn't X drop in value? Because arbitrageurs buy it? So arbitrageurs have lots of X? Should I care if they go broke in the process?
1. buy X for USD
2. buy BTC for X
Shouldn't the price for X then stay the same? (Bought X once, sold X once)
Assuming X drops to 0, wouldn't people that have BTC just use another coin X' to get back to USD?
Assuming company Y creates X out of thin air and buys BTC with it, why doesn't X drop in value? Because arbitrageurs buy it? So arbitrageurs have lots of X? Should I care if they go broke in the process?
Because the mechanism to transmit USDT to USD doesn't exist. Tether has never demonstrated a single USDT redemption. All of the trading on an exchange doesn't matter because on USDT exchanges, you never actually have USD. If you trade USDT/USD on Binance, your profits are still actually USDT denominated! There is no proven way to convert USDT to USD except via another crypto (i.e. Binance USDT -> BTC and then Coinbase BTC -> USD) hence this entire topic...
The peg would break down if there was any real convergence mechanism. But there isn't. This isn't a problem until people actually try to exchange these supposedly fungible assets.
The peg would break down if there was any real convergence mechanism. But there isn't. This isn't a problem until people actually try to exchange these supposedly fungible assets.
>Tether has never demonstrated a single USDT redemption
Does that matter when you can withdraw from a USDT exchange and get USD in a bank account, or trade USDT for USD at kraken?
Does that matter when you can withdraw from a USDT exchange and get USD in a bank account, or trade USDT for USD at kraken?
I think it's a waste of time trying to argue with the USDT conspiracy theory crowd. I'm not really sure what's their problem; they clearly never traded the market or used it. Maybe it's a butt-hurt feeling from missing out on this decade best performing assets?
I'll give you a more sensible counter-argument: If you held USDT in the last 4 years (only) and actively generated yield (requires 1 hours work max per week), and periodically withdrew it (1-3 months) my reports show a 120% gain. This means if you bought $100k of USDT 4 years ago, you'd have withdrawn $120k into real dollars and still have $100k of USDT. In this situation, it's impossible to lose even if Tether is worth 0 tomorrow.
Yield have gone considerably down. This means traders now trust USDT more than they did a few years ago. This would also mean that traders who are into risk would not hold USDT, they would rather hold something else to get better yield. If USDT was risky, its total market cap will decrease, as it doesn't make sense to hold into it with low yield. That or the market will quickly collapse.
This can give you an idea (better than a stamped report from any AAA auditing firm) about how strong the USDT position in the market is.
I'll give you a more sensible counter-argument: If you held USDT in the last 4 years (only) and actively generated yield (requires 1 hours work max per week), and periodically withdrew it (1-3 months) my reports show a 120% gain. This means if you bought $100k of USDT 4 years ago, you'd have withdrawn $120k into real dollars and still have $100k of USDT. In this situation, it's impossible to lose even if Tether is worth 0 tomorrow.
Yield have gone considerably down. This means traders now trust USDT more than they did a few years ago. This would also mean that traders who are into risk would not hold USDT, they would rather hold something else to get better yield. If USDT was risky, its total market cap will decrease, as it doesn't make sense to hold into it with low yield. That or the market will quickly collapse.
This can give you an idea (better than a stamped report from any AAA auditing firm) about how strong the USDT position in the market is.
Yes - none of this proves that Tether has any reserves.
It just proves that someone else believes they do...which we already know.
It just proves that someone else believes they do...which we already know.
This is moving the goalposts. I don't think anyone thinks tether has full reserves. They literally admitted that they don't[1]. However your original claim of "you can't redeem USDT" is misleading at best.
[1] wikipedia: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"
[1] wikipedia: "On 30 April 2019 Tether Limited's lawyer claimed that each tether was backed by only $0.74 in cash and cash equivalents"
He said 74% are cash reserves. Meaning, Tether is 1:1 backed by its reserves, of which 74% is cash. The rest could be bonds/loans etc, as long as they're deemed liquid and fair value. I don't know about the latter, just stating facts.
In any case, if indeed (still) true, having their lawyer say that USDTs are backed 74% by cash, makes it arguably safer and more liquid than any US bank, where cash backing your account balance represents a single digit percentage (I would estimate, happy to learn the factual number). Not saying that it shouldn't strive for 100% cash backeding (I think it should be), but noting that if you're concerned about Tether's cash liquidity, you probably should be even more concerned about your bank's chequing account.
In any case, if indeed (still) true, having their lawyer say that USDTs are backed 74% by cash, makes it arguably safer and more liquid than any US bank, where cash backing your account balance represents a single digit percentage (I would estimate, happy to learn the factual number). Not saying that it shouldn't strive for 100% cash backeding (I think it should be), but noting that if you're concerned about Tether's cash liquidity, you probably should be even more concerned about your bank's chequing account.
I feel like most people think of what you're referring to as trading Tether, and "redeeming USDT" as actually exchanging the USDT for the fiat that is supposedly backing it.
Everybody realizes that for the individual turning tether into fiat both of these amount to the same thing, but they are not the same thing for the system as a whole at all. Ultimately the only way that tether as a company can maintain the peg is by buying their own token with the reserve funds if market won't (there are obviously different mechanisms they could use to do this, either via the exchanges or with the seller directly trading with them). If they don't have access to enough reserve funds then the peg will eventually fail.
Everybody realizes that for the individual turning tether into fiat both of these amount to the same thing, but they are not the same thing for the system as a whole at all. Ultimately the only way that tether as a company can maintain the peg is by buying their own token with the reserve funds if market won't (there are obviously different mechanisms they could use to do this, either via the exchanges or with the seller directly trading with them). If they don't have access to enough reserve funds then the peg will eventually fail.
That was after how many years of Tether insisting that they had 1:1 reserves, talking about audits thereof, threatening lawsuits against people who said they didn't?
... and many many crypto-fans naysaying anyone who didn't believe them.
... and many many crypto-fans naysaying anyone who didn't believe them.
Since they can print X and they peg it to USD, it won't change in price itself, but nothing can assure the driving force of BTC price is actual demand.
When central banks peg their currencies to others, that means they buy the foreign currency if their own currency is overvalued in comparison, or sell foreign currency to buy local curerncy in the case of undervaluation.
You say that a peg breaks if the Central Bank doesn't have the exchange reserves anymore to uphold a peg.
Where does Bitfinex take the money from to buy tether to prevent it from devaluing? Alternatively, who else buys tether, arbitrageurs?
You say that a peg breaks if the Central Bank doesn't have the exchange reserves anymore to uphold a peg.
Where does Bitfinex take the money from to buy tether to prevent it from devaluing? Alternatively, who else buys tether, arbitrageurs?
You're missing the entire premise: where can I go sell my USDT directly for USD? Show me where.
Unlike your example where this an existing market that a peg has to be supported, there simply isn't a fungible USDT/USD market.
Unlike your example where this an existing market that a peg has to be supported, there simply isn't a fungible USDT/USD market.
> You're missing the entire premise: where can I go sell my USDT directly for USD? Show me where.
https://trade.kraken.com/charts/KRAKEN:USDT-USD
https://trade.kraken.com/charts/KRAKEN:USDT-USD
>does not have a "killer app" and is 99.99% used for speculation
You could argue speculation is the killer app. I'm not a fan but it's hard to deny it's a huge business and some people seem to like it. Kind of like Las Vegas in a way.
You could argue speculation is the killer app. I'm not a fan but it's hard to deny it's a huge business and some people seem to like it. Kind of like Las Vegas in a way.
It definitely has a killer app. Probably not a big enough app to justify these prices, but one nonetheless.
As Stripe, PayPal, Visa, Gofundme, Patreon, et. al. shut down avenues of payments for legal, but unpopular purchases, BTC is the obvious workaround.
Vendors of firearms, pornography, legal funds for unpopular causes, dissident content creators, etc have become increasingly estranged from the "normal" payments market in the last few years. BTC is the killer app for this.
As Stripe, PayPal, Visa, Gofundme, Patreon, et. al. shut down avenues of payments for legal, but unpopular purchases, BTC is the obvious workaround.
Vendors of firearms, pornography, legal funds for unpopular causes, dissident content creators, etc have become increasingly estranged from the "normal" payments market in the last few years. BTC is the killer app for this.
Privacy coins are far more suited for skirting regulations. If that's the killer app, you would see mass adoption of Monero, not BTC
If BTCs killer app is criminal transactions, then regulation is guaranteed.
> Vendors of firearms, pornography, legal funds for unpopular causes, dissident content creators
Neither pornography, nor legal funds for unpopular cause (think WikiLeaks), or dissident creators are criminal. At least not in the US or Europe. But they are still blocked by the main payment processing companies.
Neither pornography, nor legal funds for unpopular cause (think WikiLeaks), or dissident creators are criminal. At least not in the US or Europe. But they are still blocked by the main payment processing companies.
The theory and reality don’t match.
Drugs are likely the number one things bought using crypto as currency.
Firearms and pornography can be bought with dollars if you’re using crypto to buy them or other unpopular goods or services, you are veering dangerously close to black markets, which invite regulation.
Drugs are likely the number one things bought using crypto as currency.
Firearms and pornography can be bought with dollars if you’re using crypto to buy them or other unpopular goods or services, you are veering dangerously close to black markets, which invite regulation.
Right, but I'm specifically referring to legal, but repressed transactions.
Is it illegal to transfer value from person A to person B without the middleman?
In many cases, yes. It's not the "middleman" that is required, but reporting the transaction to the government is.
If avoiding reporting a transaction is the goal does committing the transaction to a public blockchain really bypass this? All activity is pseudonymous and in the clear.
Consider these cash examples:
A parent gives his child 5 USD to buy some sweets in the local shop.
A couple gives another couple 150 USD as a wedding gift.
A painter gets 200 USD for painting a house.
A parent gives his child 5 USD to buy some sweets in the local shop.
A couple gives another couple 150 USD as a wedding gift.
A painter gets 200 USD for painting a house.
And we seem to be creating more and more dissidents everyday
Regulation just shifts to exchanges. Bitstamp already ask for a ridiculous amount of information regarding source of funds.
> it's a huge business
Some people make lots of money of it, no doubt.
I'd say to qualify something as a business, there should be value creation somewhere along the line. With BTC, I see mainly redistribution of value, along with destruction of resources.
Some people make lots of money of it, no doubt.
I'd say to qualify something as a business, there should be value creation somewhere along the line. With BTC, I see mainly redistribution of value, along with destruction of resources.
Too late to edit my original comment but a lot of people pointing to the "peg" as proof that Tether is legitimate.
The only peg that exists is the one whereby you should be able to go to Tether Inc and redeem USDT for USD 1:1. That peg has never ever been demonstrated (publicly).
All the other "pegs" are just cash trading. If I trade USDT/USD on Binance...I don't actually have USD. Even on that pair, my USD profit/loss are denominated in USDT.
For anyone who disagrees with the above - please show me market where I can go sell my USDT directly for USD.
The only peg that exists is the one whereby you should be able to go to Tether Inc and redeem USDT for USD 1:1. That peg has never ever been demonstrated (publicly).
All the other "pegs" are just cash trading. If I trade USDT/USD on Binance...I don't actually have USD. Even on that pair, my USD profit/loss are denominated in USDT.
For anyone who disagrees with the above - please show me market where I can go sell my USDT directly for USD.
> For anyone who disagrees with the above - please show me market where I can go sell my USDT directly for USD.
Genuinely curious, as someone who has never used Binance nor USDT:
Why is the "directly" part here significant? If I can USDT (Binance) -> USD (Binance) -> BTC (Binance) -> BTC (Coinbase) -> USD (Coinbase) -> USD (My Bank), then whats the difference other than a few extra steps?
Genuinely curious, as someone who has never used Binance nor USDT:
Why is the "directly" part here significant? If I can USDT (Binance) -> USD (Binance) -> BTC (Binance) -> BTC (Coinbase) -> USD (Coinbase) -> USD (My Bank), then whats the difference other than a few extra steps?
There are easier paths, such as:
USDT -> kraken[1] -> USD -> your bank
or even
USDT -> bitfinex[2] -> your bank
[1] https://trade.kraken.com/charts/KRAKEN:USDT-USD
[2] yes they do allow fiat withdraws https://support.bitfinex.com/hc/en-us/articles/213919309-Fia...
USDT -> kraken[1] -> USD -> your bank
or even
USDT -> bitfinex[2] -> your bank
[1] https://trade.kraken.com/charts/KRAKEN:USDT-USD
[2] yes they do allow fiat withdraws https://support.bitfinex.com/hc/en-us/articles/213919309-Fia...
nice in theory but practically if you try to withdraw from kraken you often get a plethora of errors, including "this function is currently disabled". this happened during the last run and this happened this week.
Apart from the fact that there are transaction costs and time delays (it'll take about half an hour after you bought BTC on Binance that you can sell them on Coinbase), what guarantees that the BTC price is the same on Coinbase and Binance?
Well, arbitrage! But suppose BTC it is much higher on Binance. You'd then take USD and transfer them to Coinbase:
USD (Coinbase) -> BTC (Coinbase) -> BTC (Binance) -> USDT (Binance) -> ??
Now you need to take these USDT and turn them into USD, to keep the arb running. But that is precisely what doesn't work.
So: the chain you outline is NOT a way to "directly sell USDT for USD", as links can break down.
Well, arbitrage! But suppose BTC it is much higher on Binance. You'd then take USD and transfer them to Coinbase:
USD (Coinbase) -> BTC (Coinbase) -> BTC (Binance) -> USDT (Binance) -> ??
Now you need to take these USDT and turn them into USD, to keep the arb running. But that is precisely what doesn't work.
So: the chain you outline is NOT a way to "directly sell USDT for USD", as links can break down.
It's basically the difference between a fiat currency and one backed by something.
For example, something vaguely analogous would be:
[Setting: The Olden Days] GP: "I'm concerned because nobody has ever tried to take USD to the government and directly get silver/gold for it." You: "Why is the "directly" part here significant? If I can USD (My Pocket) -> USD (My Brokerage) -> Gold (My Brokerage) -> Gold (My Pocket), then whats the difference other than a few extra steps?"
The difference is that we never tested to see if the USD is actually backed by real gold.
For example, something vaguely analogous would be:
[Setting: The Olden Days] GP: "I'm concerned because nobody has ever tried to take USD to the government and directly get silver/gold for it." You: "Why is the "directly" part here significant? If I can USD (My Pocket) -> USD (My Brokerage) -> Gold (My Brokerage) -> Gold (My Pocket), then whats the difference other than a few extra steps?"
The difference is that we never tested to see if the USD is actually backed by real gold.
You can't USD Binance. That's my point.
Kraken.com has an actual USDT/USD pair you can trade and use actual hard currency.
Yes, you can trade them there. However, there is no mechanism imposed by Kraken to keep the price close to 1. It is purely supply and demand. Nothing prevents the price of USDT from collapsing (apart from arbitrage predicated on exchanging USDT back into USD).
> However three years on, crypto still does not have a "killer app" and is 99.99% used for speculation
With all due respect, this is completely wrong - crypto has the same killer app it has for years, and that app is _crime_.
Whether you're buying drugs, paying anonymous extortioners, accepting bribes, money laundering, or tax evasion, cryptocurrency is the go-to choice for electronic funds transfer for your modern criminal.
With all due respect, this is completely wrong - crypto has the same killer app it has for years, and that app is _crime_.
Whether you're buying drugs, paying anonymous extortioners, accepting bribes, money laundering, or tax evasion, cryptocurrency is the go-to choice for electronic funds transfer for your modern criminal.
The crypto killer app is evading China's currency controls. Pay for mining hardware and electricity in renminbi, transfer cryptocurrency to foreign countries, exchange for convertible fiat hard currency (dollars, euros, etc.).
Worth noting that those dollars and euros come from the people buying bitcoins.
And there is no obvious place for further money to come from once they want to cash back out.
And there is no obvious place for further money to come from once they want to cash back out.
>Bitcoin's narrative has had to morph from "digital currency" to "digital gold".
This narrative was an intentional morphing by various actors within the space (Blockstream) who believed raising the blocksize to allow higher throughput would cause 'centralisation'. Instead they want people to use layer 2 solutions such as blockstreams own federated product Liquid.
This narrative was an intentional morphing by various actors within the space (Blockstream) who believed raising the blocksize to allow higher throughput would cause 'centralisation'. Instead they want people to use layer 2 solutions such as blockstreams own federated product Liquid.
As explained by blockstream co-founder Greg Maxwell in [1], the blocksize is constrained in order to ensure a steady backlog of fee paying transactions, that allow bitcoin to remain secure in the long term when block subsidy becomes insignificant.
[1] https://bitcointalk.org/index.php?topic=5306354.0
[1] https://bitcointalk.org/index.php?topic=5306354.0
>that allow bitcoin to remain secure in the long term when block subsidy becomes insignificant.
this line of reasoning is silly. To match the current block subsidy with the current block size limit when miner subsidy runs out the average transaction fee will need to be >$127.
$45mil daily revenue / 350,000 txs per day
OR, you could increase the block size limit to 10mb, allowing 3.5mil txs per day, or 100mb allowing 35mil txs per day. Then the average fee paid per tx is significant lower.
The reason this was argued against by blockstream was because a bigger blocksize means more storage is needed by the miner and more txs means better hardware and bandwidth to process them, effectively pricing out normal people from running full nodes.
Essentially, the ability for normal people to send a transaction cheaply is being sacrificed so that normal people can setup a full node. Counter intuitive imo.
this line of reasoning is silly. To match the current block subsidy with the current block size limit when miner subsidy runs out the average transaction fee will need to be >$127.
$45mil daily revenue / 350,000 txs per day
OR, you could increase the block size limit to 10mb, allowing 3.5mil txs per day, or 100mb allowing 35mil txs per day. Then the average fee paid per tx is significant lower.
The reason this was argued against by blockstream was because a bigger blocksize means more storage is needed by the miner and more txs means better hardware and bandwidth to process them, effectively pricing out normal people from running full nodes.
Essentially, the ability for normal people to send a transaction cheaply is being sacrificed so that normal people can setup a full node. Counter intuitive imo.
> normal people can setup a full node
This argument was really silly too because people can afford higher capacity drives, and better internet connection according to Moore's Law
This argument was really silly too because people can afford higher capacity drives, and better internet connection according to Moore's Law
> when miner subsidy runs out the average transaction fee will need to be >$127.
Stein's Law:
"If something cannot go on forever, it will stop."
https://en.wikipedia.org/wiki/Herbert_Stein#Stein's_Law
Stein's Law:
"If something cannot go on forever, it will stop."
https://en.wikipedia.org/wiki/Herbert_Stein#Stein's_Law
I don't understand why you're being downvoted. Anybody who was here before 2017 know what happened.
Did you copy/paste this from 2017? :D
The fact that the above still remains true 3 years later is pretty damning.
It also suggests things will go on and we'll be in much the same situation in years going forward.
No it does not - that's an invalid inductive conclusion.
There are clear deadlines that may change everything (apparently Jan 15th might be one of them, from the twitter thread). Justice takes time, but trials do eventually come to a conclusion. If that conclusion is to kill the mechanism that pumps BTC, then all bets are off.
There are clear deadlines that may change everything (apparently Jan 15th might be one of them, from the twitter thread). Justice takes time, but trials do eventually come to a conclusion. If that conclusion is to kill the mechanism that pumps BTC, then all bets are off.
As Keynes famously said, "Past performance is a guarantee of future results"
1 BTC will still be 1 BTC after the Tether scam and scammers are all history.
This is true. It's also the tremendous irony of bitcoin evangelists narrative that fiat is worthless yet constantly touting every ATH (which is priced in that supposedly worthless fiat). Who cares what BTCUSD is if USD worthless?
And then you realize that this is pure speculation and the most ardent supporters are just praying for the greater fool theory to rain good fortune on them.
You need look no further than Coinbase, supposed beacon of our crypto future, IPO'ing and raising money in...that worthless green piece of paper known as the US Dollar.
And then you realize that this is pure speculation and the most ardent supporters are just praying for the greater fool theory to rain good fortune on them.
You need look no further than Coinbase, supposed beacon of our crypto future, IPO'ing and raising money in...that worthless green piece of paper known as the US Dollar.
The vast, vast majority of "bitcoin evangelists" couldn't care less about the actual mechanics of Bitcoin. They don't care that it was created as a digital F-You to fiat currency, and they don't care that it enables you to be your own bank. Just look at /r/bitcoin. It's 99% price/hodl memes, and 1% posts about the protocol & enhancements to the protocol itself.
For bitcoin protocol discussion there is the Development & Technical Discussion [1] on bitcointalk.
Some general cryptocurrency technical discussion can be found on r/CryptoTechnology [2]
[1] https://bitcointalk.org/index.php?board=6.0
[2] https://www.reddit.com/r/CryptoTechnology
Some general cryptocurrency technical discussion can be found on r/CryptoTechnology [2]
[1] https://bitcointalk.org/index.php?board=6.0
[2] https://www.reddit.com/r/CryptoTechnology
In the decades-old tradition of foss collaboration, there is also [email protected], which is quite good.
https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-d...
https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-d...
> You need look no further than Coinbase, supposed beacon of our crypto future, IPO'ing and raising money in...that worthless green piece of paper known as the US Dollar.
is it possible to do an ipo in crypto?
is it possible to do an ipo in crypto?
...you mean like on one of the many many crypto exchanges?
An ICO is just an IPO by a different name. There are also crypto stock exchanges.
But more importantly, even if it weren't possible, why would they ever sell their shares for worthless legacy money? Unless...
An ICO is just an IPO by a different name. There are also crypto stock exchanges.
But more importantly, even if it weren't possible, why would they ever sell their shares for worthless legacy money? Unless...
You're not wrong, it's just that nobody cares about BTC itself, but only about its value relative to USD.
Crypto is not a currency but an investment product; can we please just accept that and talk about it for what it is?
Crypto is not a currency but an investment product; can we please just accept that and talk about it for what it is?
"Nobody" is an exaggeration. There is a big community of enthusiasts who enjoy cryptocurrencies for what they are and enable, not for their USD value in the markets.
What do they enable?
Is what they enable worth $40.000 to the enthusiasts?
Is what they enable worth $40.000 to the enthusiasts?
> What do they enable?
I won't make the case for cryptocurrencies here, have a look at ethereum.org for instance.
> Is what they enable worth $40.000 to the enthusiasts?
I'm not denying that the current price hike and media attention has little to do with any other aspect than "decentralized ponzi"/dollar escape. Was just correcting a false statement.
I won't make the case for cryptocurrencies here, have a look at ethereum.org for instance.
> Is what they enable worth $40.000 to the enthusiasts?
I'm not denying that the current price hike and media attention has little to do with any other aspect than "decentralized ponzi"/dollar escape. Was just correcting a false statement.
And twenty-five years on, 1 Beanie Baby = 1 Beanie Baby.
Can't you literally make more beanie babies?
No, only counterfeits.
Did they pledge not to make any more, or did they just stop making them with no commitment either way?
Perhaps we can go back to buying a pizza for 1 BTC when this is all over.
It was 10,000 BTC for 2 pizzas: https://bitcointalk.org/index.php?topic=137.msg1195#msg1195. One bitcoin used to buy you 0.0002 pizzas. Now it buys 1600.0000 pizzas.
It's called hyperdeflation.
It's called hyperdeflation.
Not going to happen. It's a mindshare thing. If there are 10 million people who think I may as well have a bit of my portfolio in bitcoin that gives it value and that's probably not going away in a hurry.
If anything it'll get worse as it goes from 1 million to 10 million to 100 million. Back when 1 bitcoin = 1 pizza there were perhaps 1000 people into it?
If anything it'll get worse as it goes from 1 million to 10 million to 100 million. Back when 1 bitcoin = 1 pizza there were perhaps 1000 people into it?
I'll happily sell you a pizza for 1 BTC today if you want.
That's gonna be the killer app, low-cost global payments, finally we can accept international payments from non-crypto customers without ridiculous SWIFT or PayPal fees...
https://jimmymow.medium.com/announcing-strike-global-2392b90...
Most global payments are transactions, not cash transfers, and the transacting parties have banking relationships that make those transfers low cost and strictly superior to Bitcoin.
As a freelancer based in EU working on some US projects, I'm forced to pay 5.5% fee to PayPal or some fix fee to the banks (SWIFT payment).
Plus conversion fee from USD to EUR (or my local currency).
That's too high for just a simple thing as receiving money from different country. Really looking forward for that Strike Global.
That's too high for just a simple thing as receiving money from different country. Really looking forward for that Strike Global.
> I'm forced to pay 5.5% fee [..]
> Plus conversion fee from USD to EUR [...]
> a simple thing as receiving money from different country
Moving money between currencies has never been easier, or cheaper. I would humbly suggest you're doing it wrong.
Moving money between currencies has never been easier, or cheaper. I would humbly suggest you're doing it wrong.
TransferWise?
Use Revolut
kraken significantly increased their transaction fees so there goes that dream
>Bitcoin's narrative has had to morph from "digital currency" to "digital gold
"Gold's narrative has had to morph from currency to store of wealth" Circa 1971
"Gold's narrative has had to morph from currency to store of wealth" Circa 1971
> Bitcoin's narrative has had to morph from "digital currency" to "digital gold".
M. Saylor is preaching this it seems. It's just a better asset (less supply, no mass~)
M. Saylor is preaching this it seems. It's just a better asset (less supply, no mass~)
The killer app of Bitcoin is Ransomware.
I agree that a Tether reckoning is coming, but point #10 of that thread is the most important: it could be weeks, months or _years_ before it's fully corrected, so be super super super careful about using Tether as a reason to short Bitcoin...
"The market can remain irrational longer than you can remain solvent"
"The market can remain irrational longer than you can remain solvent"
It's even worse than that. Shorting TSLA is dangerous because of the above. But it's mitigated by people purchasing shares with real fiat. They have a natural incentive to not be absurd: whether or not $800/share is absurd is a matter of opinion...but everyone would agree that $1m/share is absurd.
Tether has no such limitation. All the exchanges are complicit in this, wash trading is rampant, and there's an de facto central bank run by actual criminals. There is absolutely zero reason why iFinex can't take bitcoin to $100k or $1m or whatever they like. They only have opportunity costs.
The only thing keeping them in check right now is the appearance of legitimacy. If they were to overdo it, people might actually sell, which is not what they want. So until their legitimacy is tested (Jan 15) they will probably responsibly grind this higher. But on the last day, I expect billions and billions of USDT issuance so that they can run stops on every short in the market, collecting their last few shekels before the music stops and they vanish to an island somewhere.
Tether has no such limitation. All the exchanges are complicit in this, wash trading is rampant, and there's an de facto central bank run by actual criminals. There is absolutely zero reason why iFinex can't take bitcoin to $100k or $1m or whatever they like. They only have opportunity costs.
The only thing keeping them in check right now is the appearance of legitimacy. If they were to overdo it, people might actually sell, which is not what they want. So until their legitimacy is tested (Jan 15) they will probably responsibly grind this higher. But on the last day, I expect billions and billions of USDT issuance so that they can run stops on every short in the market, collecting their last few shekels before the music stops and they vanish to an island somewhere.
Wait what’s the January 15th date?
Bitfinex and Tether have till the 15th of January to submit documents to the New York state attorney general about their financial relationship. The shortfall of $850m was allegedly printed by Tether and given to Bitfinex to cover up the losses Crypto Capital created. It is speculated Bitfinex and Tether can't submit any documents without revealing their cover-up. This will result in the conclusion that Tether isn't backed 1:1 by USD by a lot of investors and will results in more investigation by the attorney general. Tether is unaudited at the moment, meaning no one checked the bankroll of Tether if there really is $23b USD there.
https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_...
https://www.reddit.com/r/CryptoCurrency/comments/ksdfne/why_...
The thing is $850m isn't actually that much money. The big exchanges made on the order of several billion dollars profit during the last bubble; presumably they are also making that much in this one.
It's not about the $850m per se, it's about the deep suspicion that Tether does not have anywhere near the $23 billion in reserves they claim to.
Sounds like Wirecard and they went down 90% in a week and 99% in total within two weeks. Popcorn time.
Jan 15 is the next court date where apparently iFinex will have provided all the required documents to the NYAG.
If the NYAG doesn't like what's in there I guess it may go badly.
The courts document list is https://iapps.courts.state.ny.us/nyscef/DocumentList?docketI...
If you look at the latest one, it mentions the 15th.
If the NYAG doesn't like what's in there I guess it may go badly.
The courts document list is https://iapps.courts.state.ny.us/nyscef/DocumentList?docketI...
If you look at the latest one, it mentions the 15th.
If they provide documents January 15th, I would expect at least a few weeks before we get some information. That will be interesting to follow.
Tether has printed almost double of its amount just BEFORE Bitcoin price jump. It's the biggest pump and dump scheme ever, made by organized crypto-mafia. I doubt this will continue for long.
OP gives no proof that Tether is not holding 1:1 reserves. There is, however, a good proof that they do: Tether has held the 1:1 beg pretty well recently. Bitcoin price dropped to $4.000 last year and Tether exchange rate has held pretty well. It is important to mention that USDT is still liquid despite the lack of USD on/off-ramps. People regularly sell USDT on the offline market, and can exchange to USDC on many exchanges.
> But Tether is printing so much money.
So is USDC, and the price of Bitcoin is going higher. This means Bitcoiners have lots of value in Bitcoin and some of them are going to convert that value to USD. They are mainly using USDT for that, for whatever reason.
> Tether printing press is driving Bitcoin price.
Wrong. My proof for that is "where is the premium to buy Bitcoin". In a very liquid market (which for the most part, crypto is), prices should be the same up to the costs (transaction and banking fees). Prices have been higher in Coinbase during this run. As I am typing right now, Coinbase prices are 50-80 dollars higher for Bitcoin. GBTC is even more ridiculous with 10-15% premium on price (but also GBTC is less liquid/arb-able). This signifies that demand is coming from US retail and institutional investors.
> Tether is holding USD as securities/derivatives/whatever.
All of them are. See: https://omarabid.com/usd-stable-coins
> But Tether is printing so much money.
So is USDC, and the price of Bitcoin is going higher. This means Bitcoiners have lots of value in Bitcoin and some of them are going to convert that value to USD. They are mainly using USDT for that, for whatever reason.
> Tether printing press is driving Bitcoin price.
Wrong. My proof for that is "where is the premium to buy Bitcoin". In a very liquid market (which for the most part, crypto is), prices should be the same up to the costs (transaction and banking fees). Prices have been higher in Coinbase during this run. As I am typing right now, Coinbase prices are 50-80 dollars higher for Bitcoin. GBTC is even more ridiculous with 10-15% premium on price (but also GBTC is less liquid/arb-able). This signifies that demand is coming from US retail and institutional investors.
> Tether is holding USD as securities/derivatives/whatever.
All of them are. See: https://omarabid.com/usd-stable-coins
> It is important to mention that USDT is still liquid despite the lack of USD on/off-ramps.
USDT is only liquid BECAUSE there is no redemption mechanism (or at least not one that has ever been demonstrated). If Tether came and said "sure we'll redeem these fully backed Tethers for USD 24/7/365" you would quickly find yourself with a liquidity crisis.
USDT is only liquid BECAUSE there is no redemption mechanism (or at least not one that has ever been demonstrated). If Tether came and said "sure we'll redeem these fully backed Tethers for USD 24/7/365" you would quickly find yourself with a liquidity crisis.
>USDT is only liquid BECAUSE there is no redemption mechanism (or at least not one that has ever been demonstrated).
For the bystanders here, I've made a reply to a comment similar to this in sibling thread: https://news.ycombinator.com/item?id=25686965
For the bystanders here, I've made a reply to a comment similar to this in sibling thread: https://news.ycombinator.com/item?id=25686965
If there is a USD to USDT match, where are the audits?
Is that relevant? I'm not arguing against the claims that tether is shady, I'm only arguing against the outrageous claims that you can't convert USDT back to USD that some tether opponents claim.
Well ofcause you can. A pyramid scheme keeps paying out profits to the chumps right up to the point when it doesn't.
The argument here isn't that Tether has no cash on hand, it's that if enough people pull out, they hit the the bottom of the non 1:1 reserve and everyone else left holding will zero out. If you have 1 kg of gold and start selling papers giving people claim to that 1kg of gold, nothing will prevent you from seeling 1000 claims, making it seem like you're holding a ton of gold for people when looking at the market cap, but if 2 people come and ask you for their 1kg of gold and you don't have enough of the cash you got seeling claims on hand and an oppotunity to buy gold quickly, then from one day to the next 999 claims are worthless.
This is of cause not a big risk in the industry normally because markets are regulated and those who hold gold or other assets backing claims go through audits.
Naturally Tether can't go through an honest audit because even though they might be holding enough cash to cover a decent amount of the market, it would expose them for lying over time, which would still hurt their business tremendously.
The argument here isn't that Tether has no cash on hand, it's that if enough people pull out, they hit the the bottom of the non 1:1 reserve and everyone else left holding will zero out. If you have 1 kg of gold and start selling papers giving people claim to that 1kg of gold, nothing will prevent you from seeling 1000 claims, making it seem like you're holding a ton of gold for people when looking at the market cap, but if 2 people come and ask you for their 1kg of gold and you don't have enough of the cash you got seeling claims on hand and an oppotunity to buy gold quickly, then from one day to the next 999 claims are worthless.
This is of cause not a big risk in the industry normally because markets are regulated and those who hold gold or other assets backing claims go through audits.
Naturally Tether can't go through an honest audit because even though they might be holding enough cash to cover a decent amount of the market, it would expose them for lying over time, which would still hurt their business tremendously.
You seem to be spending 3 paragraphs re-arguing that tether is shady, when I already said that wasn't the point I was arguing. A argument in favor of tether shouldn't be taken as a sign that I support them wholeheartedly.
> USDT is only liquid BECAUSE there is no redemption mechanism
This isn't necessarily true, as in that event, although possible, wouldn't necessarily have happened. Much like banks with limited liquidity can survive for a long time. To your point, it's confusing how they managed to thrive after admitting that they were lying about being backed 1:1.
Edit: I haven't been paying too much attention to tether in ages. It looks like they're now offering redemption of $100k+ at a minimum of $1000 a pop?
This isn't necessarily true, as in that event, although possible, wouldn't necessarily have happened. Much like banks with limited liquidity can survive for a long time. To your point, it's confusing how they managed to thrive after admitting that they were lying about being backed 1:1.
Edit: I haven't been paying too much attention to tether in ages. It looks like they're now offering redemption of $100k+ at a minimum of $1000 a pop?
People can sell USDT for crypto, USDC or offline. If Tether didn't have good reserves, the price will diverge from 1:1.
No, instead of just stating it, explain to me.
Tether's reserves only matter when people try to redeem Tethers. This is currently not possible.
So it is purely a trust game right now, and everyone has an incentive to trust (or turn a blind eye) that Tether is playing by the rules.
Tether's reserves only matter when people try to redeem Tethers. This is currently not possible.
So it is purely a trust game right now, and everyone has an incentive to trust (or turn a blind eye) that Tether is playing by the rules.
> Tether's reserves only matter when people try to redeem Tethers. This is currently not possible.
This is why being liquid and freely trade-able matters. Tether is fully redeemable if you can trade it against other crypto/stable coins. Want to redeem USDT? exchange it to USDC and then withdraw to your bank account.
This is why being liquid and freely trade-able matters. Tether is fully redeemable if you can trade it against other crypto/stable coins. Want to redeem USDT? exchange it to USDC and then withdraw to your bank account.
No, trading is not redeeming. The fact that you will buy it from me or swap me USDC does not prove that they have any reserves.
So again I ask - how do we have any proof that Tether has the reserves they claim they do?
So again I ask - how do we have any proof that Tether has the reserves they claim they do?
Somebody will need to take the counter-trade (the arbitrage dude) and unless he can redeem to close the circle, he is going to stop.
USDT are redeemable to your bank account if you have a good sizable balance (talking 7-8 figures). You'll get it deposited from some of their offshore shell companies. But you didn't hear it from me :)
USDT are redeemable to your bank account if you have a good sizable balance (talking 7-8 figures). You'll get it deposited from some of their offshore shell companies. But you didn't hear it from me :)
No, they don't. There doesn't need to be an arbitrage. If you have 10 USDT and I give you 9.90 USD for that...nothing else needs to happen.
But the degree that this is happening pales massively in comparison to the billions that are sat on exchanges and recycled.
Tether would be the first legitimate billion dollar operation where people have to say things like "but you didn't hear it from me".
But the degree that this is happening pales massively in comparison to the billions that are sat on exchanges and recycled.
Tether would be the first legitimate billion dollar operation where people have to say things like "but you didn't hear it from me".
> No, they don't. There doesn't need to be an arbitrage. If you have 10 USDT and I give you 9.90 USD for that...nothing else needs to happen.
I'm not an expert, so I might be wrong (seriously, not sarcastically). I _think_ this is technically arbitrage even though you never complete the loop.
I'm not an expert, so I might be wrong (seriously, not sarcastically). I _think_ this is technically arbitrage even though you never complete the loop.
I’m a hedge fund trader. It’s not an arbitrage. It’s the furthest thing from an arbitrage.
It's arbitrage if you can close the loop with little or no risk. Preferably immediately if you already have a buyer lined up. Otherwise, you incur more risk -- you might be caught holding the bag when the music stops.
If Tether Ltd. had at any point in time made any significant USDT -> USD redemptions that outweighed the new USDT given out to new buyers, we should have seen that by a significant number of Tethers being destroyed. Looking at the historic Tether market cap on CoinMarketCap - which is practically equal to all non-destroyed tethers due to USDT being pegged to the USD - however does not reveal any significant drop in Tether market cap ever that could be an indication of actual redemptions. And I refuse to believe that in all of Tethers' history, with all of Bitcoins' ups and downs, there has never been a period in which people weren't pulling more money out of the crypto ecosystem than other people were putting fresh money in. I would expect that to be the case in most of the Bitcoin deflation phases.
Posting this again: https://coinmarketcap.com/currencies/tether/
They did redeem from 2.8bn to 1.7bn. Which is like 40% of their total value at the time. Is that significant enough?
They did redeem from 2.8bn to 1.7bn. Which is like 40% of their total value at the time. Is that significant enough?
Ah yeah, you got me. Though I don't really count that as good evidence for an actual "redemption" since it apparently was burning Tethers that came from Bitfinex: https://www.coindesk.com/tether-just-burned-500-million-usdt...
And since Bitfinex is the owner of Tether Ltd., there is unfortunately no outsider that could credibly confirm to have actually received any USD in exchange for those burned Tethers. Bitfinex might just as well have sold Bitcoins from its own stash (or from customer wallets) to others for USDT and then burned those USDT in order to stabilize the USDT/USD price which wasn’t exactly holding up well at that time. If they had actually printed more USDT than they have USD in the past, this would be a smart move in order to distribute the "missing" funds more evenly across multiple crypto coins in their custody, which makes it less likely for them to run out of one of them and thus makes it less likely for the alleged scam to come to light.
And since Bitfinex is the owner of Tether Ltd., there is unfortunately no outsider that could credibly confirm to have actually received any USD in exchange for those burned Tethers. Bitfinex might just as well have sold Bitcoins from its own stash (or from customer wallets) to others for USDT and then burned those USDT in order to stabilize the USDT/USD price which wasn’t exactly holding up well at that time. If they had actually printed more USDT than they have USD in the past, this would be a smart move in order to distribute the "missing" funds more evenly across multiple crypto coins in their custody, which makes it less likely for them to run out of one of them and thus makes it less likely for the alleged scam to come to light.
I mostly agree with your skepticism on USDT driving BTC price, but I disagree with this:
> There is, however, a good proof that they do: Tether has held the 1:1 beg pretty well recently.
All this proves is that they have something in reserve, not that it is 1:1 backed. Most modern banking operates on a fractional reserve system, but when I take cash out of my bank account I get a cash dollar 1:1 with what they debit my account; they don’t prorate it for the amount of reserve they have.
> There is, however, a good proof that they do: Tether has held the 1:1 beg pretty well recently.
All this proves is that they have something in reserve, not that it is 1:1 backed. Most modern banking operates on a fractional reserve system, but when I take cash out of my bank account I get a cash dollar 1:1 with what they debit my account; they don’t prorate it for the amount of reserve they have.
> but when I take cash out of my bank account I get a cash dollar 1:1 with what they debit my account; they don’t prorate it for the amount of reserve they have.
Now try taking out 50 million or more, you'll face same difficulties.
This tether nonsense comes up every few months, still adamantly holding the 1:1.
Not mentioning that it's not the single dollar peg option in crypto space anymore, plenty of other options USDC, Dai.
Now try taking out 50 million or more, you'll face same difficulties.
This tether nonsense comes up every few months, still adamantly holding the 1:1.
Not mentioning that it's not the single dollar peg option in crypto space anymore, plenty of other options USDC, Dai.
> Now try taking out 50 million or more, you'll face same difficulties.
Sure but that’s my point. The fact that my small volume transactions go through without friction is not proof that the system is not fractional reserve. In the case of a (properly run) bank the value still exists but isn’t liquid; in the case of USDT we don’t know without an audit.
Sure but that’s my point. The fact that my small volume transactions go through without friction is not proof that the system is not fractional reserve. In the case of a (properly run) bank the value still exists but isn’t liquid; in the case of USDT we don’t know without an audit.
That's good for 97% of the time, but not for the 3% where prices either crashes or goes way-up (volatility blackswan). These stressful situations tests the 1:1 peg. (which is why I mentioned the $4000 price crash). They probably have 1. good reserves ratios and 2. very liquid assets as reserve.
Lets pretend Tether has no backing what so ever. They could still defend the peg 1:1 completely. How? Well if someone wants to sell a bunch of tether, they simply print even more tether, use that to buy crypto on exchanges, and sell that crypto to anyone willing to buy it that generates dollars to pay of the person selling their tether. But that also leves them with the tether that was sold back to dollars, which they can then buy more crypto with an either just hold or also sell to generate dollars. The visuals of this from an outside ends up looking effectively like there was just ton more new money coming into the system when in fact the exchanges and new money took a hit, and the money printing people just raised their perceived holding without backing. That is to say, that in this case the event of someone wanting out looks like the market is rising. You can keep this going as long as your un-backed coin can be exchanged for other liquid crypto.
As long as they have a blindly trusted money money printing machine, they can use it to defend the illusion that it's printing real money. This is thes standard playbook for a pyramid scheme. You use new money to keep the illusion of a big holding and you can keep that going as long as the illusion holds.
As long as they have a blindly trusted money money printing machine, they can use it to defend the illusion that it's printing real money. This is thes standard playbook for a pyramid scheme. You use new money to keep the illusion of a big holding and you can keep that going as long as the illusion holds.
The difference between having 1:1 backing and “pretty good” reserves is that if they claim (as they do) to be 1:1 backed and it were to come out that they were not, it could spark a “run on the bank” type scenario for everyone to get their money out while they can.
It's not like it didn't happen before (it happened twice), and their rate diverged from the 1:1. Actually, their rate wasn't that super stable until very recently. The reason why I think they are fully backed is that the crypto-market yield for USD in the last few years have been crazy. So unless you are planning an exit scam, you can't go broke. Even if they are losing money to move the money, or they screw up here or there (get accounts blocked), they can still come on top.
> OP gives no proof that Tether is not holding 1:1 reserves.
Other than, you know, they themselves admitting under oath that they did not.
Other than, you know, they themselves admitting under oath that they did not.
> OP gives no proof that Tether is not holding 1:1 reserves.
I'm fairly certain that _Tether's_ lawyer said, in court, that their reserves were closer to 0.74.
I'm fairly certain that _Tether's_ lawyer said, in court, that their reserves were closer to 0.74.
There's a lot of bots doing arbitrage between exchanges though. If one diverges significantly from the other, the bots will eat up the difference, I don't think you can make any claims about where the demand is coming from based on this?
Bots will arbitrage up to the transaction costs. (the price is not worth arbing if it is a small difference). Some exchanges, sometimes, lead the price and this can be visible if you are actively trading (you'll notice that the arb bots are selling in one exchange and buying in the other, aka: bearish exchange trailing the market).
The proof is that Tether almost never deleted any of its tokens, even when Bitcoin dropped significantly, e.g. from $10k to $5k in 2020. Does it mean that no one wanted their USD back from Tether organization? I highly doubt it.
>4) How the scam works:
>Tether can print infinite amounts of (worthless) $USDT.
>They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump.
>Notice how during the months they stopped printing Tether, the market moves sideways or drops significantly.
>This graph also shows the extent to which USDT plays a role in Bitcoin's price action over the years.
I don't get it. This doesn't really prove anything either way. Sure it could be the case that they're printing USDT backed by nothing and using it to by cryptos, but it could very well be the case that they're printing the USDT in response to real deposits from people who want to get into crypto. Since USDT accounts for a significant portion of the crypto market, it'd be more suspicious for price to go up without a corresponding large amount of USDT being printed, because that would mean prices are going up without more money being poured into the market.
>Tether can print infinite amounts of (worthless) $USDT.
>They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump.
>Notice how during the months they stopped printing Tether, the market moves sideways or drops significantly.
>This graph also shows the extent to which USDT plays a role in Bitcoin's price action over the years.
I don't get it. This doesn't really prove anything either way. Sure it could be the case that they're printing USDT backed by nothing and using it to by cryptos, but it could very well be the case that they're printing the USDT in response to real deposits from people who want to get into crypto. Since USDT accounts for a significant portion of the crypto market, it'd be more suspicious for price to go up without a corresponding large amount of USDT being printed, because that would mean prices are going up without more money being poured into the market.
Exactly my issue with OP's argument.
If BTC price rises, trade volume grows, increasing demand for stablecoins due to their utility as a low-volatile alternative to fiat to bypass legislation. You would EXPECT this pattern to arise. Note also how OP does not show a graph of trade volume/buy-sell volume which would potentially show that it is used as claimed.
I still think Tether is extremely shady for refusing audits and dubious backing. I avoid it like the plague and hope others are as smart.
If BTC price rises, trade volume grows, increasing demand for stablecoins due to their utility as a low-volatile alternative to fiat to bypass legislation. You would EXPECT this pattern to arise. Note also how OP does not show a graph of trade volume/buy-sell volume which would potentially show that it is used as claimed.
I still think Tether is extremely shady for refusing audits and dubious backing. I avoid it like the plague and hope others are as smart.
Yes, and every exchange has 'money market' which means the cash reserves that hold user's deposits. Most exchanges use a simple database to hold these balances and there's no way to audit them. Every exchange can 'print' money in their database if they want. Tether is better because it offers some transparency into this side of the market.
Yes, you're right. The point is without oversight or transparency we can't really know whats going on.
"It could be" that they have $2.5 billion dollars hidden somewhere but they don't want to show it to anyone or have it audited.
"It could be" that if you send me $1 million, I'll make you live forever. You should try it and see.
"It could be" that if you send me $1 million, I'll make you live forever. You should try it and see.
I dont understand how the OP knows/can prove that they are printing tether during the times that btc went up. Is there any more info on that part? It looks to me like they just drew lines under a graph and said tether is printing.
Can someone please explain to me how Tether is "injected" into Bitcoin? The entire argument seems to hinge on this but it is not (as far as I can see) explained.
Are people accepting Tether in trade for BTC under the assumption that Tether will always be exchanged 1:1 for USD when this is not actually the case?
EDIT: The answer seems to be yes Tether is 1-to-1 with "I O U $1" and enough people are accepting these IOUs in exchange for BTC that the market is moving because of this.
That last part ("the market is moving because of this") seems so unbelievably stupid to me that I don't actually believe it.
Are people accepting Tether in trade for BTC under the assumption that Tether will always be exchanged 1:1 for USD when this is not actually the case?
EDIT: The answer seems to be yes Tether is 1-to-1 with "I O U $1" and enough people are accepting these IOUs in exchange for BTC that the market is moving because of this.
That last part ("the market is moving because of this") seems so unbelievably stupid to me that I don't actually believe it.
So far the explanation I’ve come across goes as follows: someone creates tether. They use this tether to buy bitcoin, which drives up the prices of bitcoin. The more they buy, the more value their purchased bitcoin has. The trick seems to be that generating this tether should decrease the value of tether, however since everyone thinks its a stablecoin that is backed by usd 1:1, its value remains the same. The worst is that the purchased bitcoin increases in value, so technically they could sell that bitcoin for usd, then use that usd to temporarily back their printed tether...
(This is my understanding of the situation and from the reading the explanations of other people, but please take this with a grain of salt, im not sure if everything is true)
(This is my understanding of the situation and from the reading the explanations of other people, but please take this with a grain of salt, im not sure if everything is true)
I've gathered basically this same explanation but it still makes no sense.
Are people trading BTC for "Land for sale on the moon" too?
This sounds like exchanges handing out IOUs instead of money when their patrons try to cash out.
Are people trading BTC for "Land for sale on the moon" too?
This sounds like exchanges handing out IOUs instead of money when their patrons try to cash out.
It’s not individuals buying Tether from Bitfinex and then buying Bitcoin that causes this. It is Bitfinex as an organization ‘printing’ free money and using it to pump the market.
>Bitfinex as an organization ‘printing’ free money and using it to pump the market.
How?
How?
like I mentioned above, it is speculated that they are the ones who are printing the tether, then use that to buy bitcoin. They are then probably hoping that whoever receives tether for selling their bitcoin does not immediately want usd, but instead is happy with the tether as it is 'backed 1:1'. (Again, I have to stress that this is a theory i read somewhere on the internet, while lots of things add up, it may also be completely off.)
They 'pump the market' because buying bitcoin increases its scarcity, thus raising the price.
They 'pump the market' because buying bitcoin increases its scarcity, thus raising the price.
> But who is selling their (temporarily) valuable bitcoin for worthless tether instead of USD?
You're asking what the utility of stablecoins is: Stablecoins are widely used as a legislatively advantageous on- and off-ramp for the whole crypto market.
Off-ramp: If people want to sell BTC or other volatile tokens because they want to realize profits, the obvious thing would be to sell for fiat (USD/EUR). But due to taxation and legislation this is often difficult. Stablecoins like Tether provide the utility of a low-volatility currency that fiat would fill. Main advantage is bypassing legislation.
This use is so common there is jargon for "Tethering up".
There also exist many debit cards that allow paying with stablecoins, increasing utility. The rise of DeFi and money markets for stablecoins also provides a good return on stablecoins while in theory being low-volatility.
On-ramp: If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation limiting the buying of a specific token or use of exchanges. This use is less common, I would wager.
Of course, for any of this to be actually useful Tether has to remain the same price. If Tether starts to deviate significantly from the 1USD peg, a liquidity crisis cuold be triggered.
Personally, I haven't trusted Tether since the first BitFinex scandals and avoid it like the plague. For my stablecoin needs, I use something that is audited and over-collateralized like DAIv2.
You're asking what the utility of stablecoins is: Stablecoins are widely used as a legislatively advantageous on- and off-ramp for the whole crypto market.
Off-ramp: If people want to sell BTC or other volatile tokens because they want to realize profits, the obvious thing would be to sell for fiat (USD/EUR). But due to taxation and legislation this is often difficult. Stablecoins like Tether provide the utility of a low-volatility currency that fiat would fill. Main advantage is bypassing legislation.
This use is so common there is jargon for "Tethering up".
There also exist many debit cards that allow paying with stablecoins, increasing utility. The rise of DeFi and money markets for stablecoins also provides a good return on stablecoins while in theory being low-volatility.
On-ramp: If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation limiting the buying of a specific token or use of exchanges. This use is less common, I would wager.
Of course, for any of this to be actually useful Tether has to remain the same price. If Tether starts to deviate significantly from the 1USD peg, a liquidity crisis cuold be triggered.
Personally, I haven't trusted Tether since the first BitFinex scandals and avoid it like the plague. For my stablecoin needs, I use something that is audited and over-collateralized like DAIv2.
> If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation
That alone should be a red flag.
I know there are a lot of narratives about people in repressive governments using Bitcoin to take their meager savings out of the country or carrying their net worth across borders in mind wallets, but Tether isn't targeting these people.
Tether has very high minimum purchases. They cater (supposedly) to extremely wealthy clients who, for whatever reason, would rather use a questionable intermediary instead of going straight to any one of the major financial institutions offering BTC to purchase their bitcoin. If you had told me in 2015 that it was difficult to purchase BTC as an institution, I would have believed you. In 2021, there isn't much reason to do end-runs around regulations unless you're deliberately trying to launder money and/or dodge taxes.
That alone should be a red flag.
I know there are a lot of narratives about people in repressive governments using Bitcoin to take their meager savings out of the country or carrying their net worth across borders in mind wallets, but Tether isn't targeting these people.
Tether has very high minimum purchases. They cater (supposedly) to extremely wealthy clients who, for whatever reason, would rather use a questionable intermediary instead of going straight to any one of the major financial institutions offering BTC to purchase their bitcoin. If you had told me in 2015 that it was difficult to purchase BTC as an institution, I would have believed you. In 2021, there isn't much reason to do end-runs around regulations unless you're deliberately trying to launder money and/or dodge taxes.
> That alone should be a red flag.
That's not the primary use (by dollar volume, it is also helpful to streamline participation in the entire crypto ecosphere regardless of local regulations).
But Tether's for market making. Arbitrators need a way to transfer USD denominated amounts between exchanges to operate.
On top of market making, you'll have smallish (7-8 figure USD) trading shops running strategies across multiple cryptos that just don't have fiat ramps, or they want to tap into volume across exchanges that don't have fiat ramps. If you're one of these customers, you can get in touch with Tether and make redemptions, but you probably don't need to do that anyway because you're working through a prime broker.
This activity doesn't care if the market's bull or bear, so it continues to grow over time in either trend.
That's not the primary use (by dollar volume, it is also helpful to streamline participation in the entire crypto ecosphere regardless of local regulations).
But Tether's for market making. Arbitrators need a way to transfer USD denominated amounts between exchanges to operate.
On top of market making, you'll have smallish (7-8 figure USD) trading shops running strategies across multiple cryptos that just don't have fiat ramps, or they want to tap into volume across exchanges that don't have fiat ramps. If you're one of these customers, you can get in touch with Tether and make redemptions, but you probably don't need to do that anyway because you're working through a prime broker.
This activity doesn't care if the market's bull or bear, so it continues to grow over time in either trend.
This sounds incredibly illegal. I can't imagine trading like this is wanted by legislators and even if Tether is currently backed 1:1 there is no way that legislators will allow this to keep happening eventually crashing the entire Tether currency into the ground.
US legislators are indeed talking stablecoin restrictions because of this.
But who is selling their (temporarily) valuable bitcoin for worthless tether instead of USD?
Many exchanges eschew fiat due to regulation. So you can only exchange crypto for stable coin crypto there.
Do they even allow exchanging tether for USD? I dont think they do
Tether does not, but you can trade USDT/USD pair on kraken.com
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Nonsense. If this were the case then tether could not trade at par.
It could, if the major exchanges accept that it does and continue to back that notion...
I suppose this could work as long as you don't print too much. Let's say you have $10M USD in deposits. You can print $20M in USDT as long as you're reasonably sure that on average, people don't withdraw 50% of their deposits. This gets tricky though because USDT is used by multiple exchanges, so I'm not sure what exactly would happen if everyone withdraws their deposits not in USD, but in USDT to another exchange. They'd all need to be in on the conspiracy with some sort of settlement system to transfer money between them.
I'm not a finance or a crypto expert, so don't take my word on it. But many people way smarter than me have been trying to prove this hypothesis for years.
Bitfinex doesn't exactly have a reputation that deserves any trust, so I wouldn't put it past them.
I think there is a good reason Coinbase does not allow trading Tether.
Bitfinex doesn't exactly have a reputation that deserves any trust, so I wouldn't put it past them.
I think there is a good reason Coinbase does not allow trading Tether.
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(narrator) tether could not trade at par
Let's say you think Bitcoin is going to crash (or you're a trader and just think it's going to go down). Obviously you want to sell your bitcoin, but also postulate that you don't have a connection to a real bank (KYC and all that), so you can't actually turn your Bitcoins into dollars. So you sell your Bitcoins for Tethers. Then Bitcoin goes down, and eventually you buy them back using Tethers.
Do most people even believe that Tether is backed 1:1? Or are they just playing along because it's in their interest?
All we can be sure of is that the money put into tether is greater or equal to the money taken out.
If people didn't believe it, they would sell (either for BTC or real dollars), and if enough people did that then tether would collapse.
My suspicion is there are enough dormant tether holders that the above will never occur, even if there have been some substantial fraud losses.
If people didn't believe it, they would sell (either for BTC or real dollars), and if enough people did that then tether would collapse.
My suspicion is there are enough dormant tether holders that the above will never occur, even if there have been some substantial fraud losses.
There's a lot of room for delayed fraud, same as when banks fail.
Imagine I secretly remove the contents of everyone's safe deposit boxes.
I get rich selling what I stole, but no one is any poorer until much later when they try to cash out their treasures and realize they are gone. USDTether is an empty safe deposit box.
Imagine I secretly remove the contents of everyone's safe deposit boxes.
I get rich selling what I stole, but no one is any poorer until much later when they try to cash out their treasures and realize they are gone. USDTether is an empty safe deposit box.
My argument is if some people aren't regularly looking in their safe deposit box, the fraud might never cause a collapse.
The New York Attorney General is going to look into the box on January 15.
Yeah that sort of language annoys me and is often a sign the writer doesn't really understand what's going on. There are two possible phenomena:
Legit: US$ are sent to tether, tethers are issued in exchange 1:1 and then used to buy bitcoin. This will tend to raise the price of bitcoin but only as long as people are sending real US$
Illegit: tether insiders just issue tethers without US$ backing, use them to buy bitcoin and probably try to sell the bitcoins at a profit becoming million/billionaires in the process. Sky's the limit really - you can issue crypto tokens in any amount though it could all collapse if people want to swap their tethers back to US$ and there aren't enough there.
>They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump.
Means use the tether to buy BTC etc in exchange for tethers which will tend to raise prices if there are more buyers than sellers and people seeing the price rising will cause them to buy more.
Legit: US$ are sent to tether, tethers are issued in exchange 1:1 and then used to buy bitcoin. This will tend to raise the price of bitcoin but only as long as people are sending real US$
Illegit: tether insiders just issue tethers without US$ backing, use them to buy bitcoin and probably try to sell the bitcoins at a profit becoming million/billionaires in the process. Sky's the limit really - you can issue crypto tokens in any amount though it could all collapse if people want to swap their tethers back to US$ and there aren't enough there.
>They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump.
Means use the tether to buy BTC etc in exchange for tethers which will tend to raise prices if there are more buyers than sellers and people seeing the price rising will cause them to buy more.
The thing I don't understand about the "Illegit" method is that it relies on people accepting USDT for BTC and then not cashing them out to real USD. Because if the company is printing USDT it wouldn't have the cash to pay the people trying to cash out USDT. So to allow this to happen you would need a people to be holding a huge amount of USDT.
People do hold USDT. I hold some myself. If you are going to buy crypto again it saves the hassle and expense of converting into fiat money and back again.
The majority of exchanges can't actually hold fiat money due to regulatory issues.
Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.
The majority of exchanges can't actually hold fiat money due to regulatory issues.
Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.
Why USDT and not USDC or DAI? Don't you feel like holding USDT makes you complicit in whatever shit is going on?
Also, I would be very, very weary of using an centralized exchange that "can not hold fiat". With the layer-2 projects that are coming now (take a look at loopring or Stakenet), you can transact as much as you want, no gas fees and exchange fees are about the same as any CEX.
Also, I would be very, very weary of using an centralized exchange that "can not hold fiat". With the layer-2 projects that are coming now (take a look at loopring or Stakenet), you can transact as much as you want, no gas fees and exchange fees are about the same as any CEX.
Because way more exchanges offer USDT trading. USDC / DAI are both fairly new, and aren't offered as trading pairs nearly as frequently.
Coinbase offers DAI, plus you can exchange DAI for any ERC20 token on a dex.
Right, and coinbase offers USDC as well. The problem is the long tail of exchanges overseas that only offer USDT.
But why should you care about these fringe exchanges when (a) you know they are not trustworthy and (b) there are decentralized alternatives where you can trade pretty much any token you'd like to hold?
If the problem that these exchanges only offer $LOCAL_CURRENCY <-> USDT as on-ramp, what's stopping you to:
What I am missing?
If the problem that these exchanges only offer $LOCAL_CURRENCY <-> USDT as on-ramp, what's stopping you to:
1. make the on-ramp via USDT
2. buy ETH
3. withdraw to your own wallet
4. Trade on Uniswap/Curve/1inch/Loopring/Stakenet to anything you want; (Wrapped) BTC, USDC, DAI, any ERC20...
What I am missing?
Still, they do exist now. And again, if an exchange only offers USDT as on-ramp that should be a massive signal against its trustworthiness.
I somewhat agree, but it's also a chicken and the egg problem - everyone uses USDT as the primary pair because everyone wants it, and everyone wants it because that's what every other exchange offers. Exchanges can offer another stablecoin, but it's likely to have very little volume.
In what way is Tether not a fiat currency?
Ironically Tether, whose quantity appears to be determined by however much the small private entity that runs it decides to create, appears to be a much purer example of 'fiat' currency than most national currencies have been for most of the last half century (quantity determined in a decentralised manner by the balance of supply and demand for credit at a base interest rate a centralised body periodically updates to hit a [decentralised market-driven] fixed target rate of inflation)
Investopedia has:
>Fiat money is a government-issued currency that isn't backed by a commodity such as gold.
Tether fails the government-issued bit.
>Fiat money is a government-issued currency that isn't backed by a commodity such as gold.
Tether fails the government-issued bit.
In what meaningful way is Tether not a fiat currency?
It is meaningful, because a large part of crypto culture seems to be based around hand-waving and selling you an underdog no-big-government empower-the-people story
You can’t redeem Tether — that’s a core part of the fraud, they have “banking issues” and had them for years. You can sell it on an exchange but the Tether organisation have prevented any redemption of USD from USDT for years. Anybody turning USDT into USD is selling their USDT.
So you can't trade USDT for USD at all (eg. third party exchange trades, or withdrawing from an USDT exchange directly), or is it only that you can't trade USDT for USD by going through Tether Limited?
Though when you sell your USDT for euro or whatever on Kraken say, the tether org must step in and buy to keep the price at US$1. So they effectively redem if not directly.
When is tether org involved in this?
From your example the only thing that happened is that now you hold x euros and Kraken holds x amount of USDT.
Unless Kraken goes to Tether org and asks "hey I got these USDTs, please give me the USD" no redemption has occurred.
That some people can in effect transact USDT for fiat via other mechanisms (like your example above) says nothing about Tether org backing or reserves.
Until you go to Tether org with your USDT's and ask them for USD you won't know if they have the reserves.
From your example the only thing that happened is that now you hold x euros and Kraken holds x amount of USDT.
Unless Kraken goes to Tether org and asks "hey I got these USDTs, please give me the USD" no redemption has occurred.
That some people can in effect transact USDT for fiat via other mechanisms (like your example above) says nothing about Tether org backing or reserves.
Until you go to Tether org with your USDT's and ask them for USD you won't know if they have the reserves.
The reason tether stays at $1 is because the tether org or their delegates buy or sell to keep it there. They have to or the whole thing would become untethered as it were.
Plenty of companies redeem USDT for USD. I myself worked at a company that redeemed billions of dollars. The FUD on HN is approaching delusional levels.
And what does the company do with those USDT? If the money printing theory is correct, companies like yours would be the ones counteracting any sell-pressure on USDT.
If the theory is not correct, companies like yours would see an at least equal buy-side demand for USDT, bringing real USD into the system.
I mean, does the company hold (increasingly?) large USDT positions on their balance sheet (and would therefore be the ones in the hole if Tether loses the peg), or is the company able to get actual dollars out of Tether inc. in exchange for those tokens?
I mean, does the company hold (increasingly?) large USDT positions on their balance sheet (and would therefore be the ones in the hole if Tether loses the peg), or is the company able to get actual dollars out of Tether inc. in exchange for those tokens?
I worked at Circle https://www.theblockcrypto.com/post/48857/former-head-of-cir...
That article was published in December 2019, when $4B of Tether had been issued in total, and covers an unspecified earlier period.
Are you sure that the $20B of Tether issued since then have an identical origin story?
Are you sure that the $20B of Tether issued since then have an identical origin story?
https://tether.to/faqs/
> Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users. Exceptions to these provisions may be made by Tether, in its sole discretion, for entities that are: Established or organized outside of the United States or its territorial or insular possessions; and, Eligible Contract Participants pursuant to U.S. law.
> An Eligible Contract Participant includes a corporation that has total assets exceeding $10,000,000 and is incorporated in a jurisdiction outside of the United States or its territories or insular possessions. This will be the principal basis upon which we will continue to do business with selected U.S. persons.
Basically, it looks like they only provide on and off ramps for large clients outside the US. Given their history, I am betting they might not want to reveal where they store their assets, and don't want to deal with US regulators (but not sure this is working).
> Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users. Exceptions to these provisions may be made by Tether, in its sole discretion, for entities that are: Established or organized outside of the United States or its territorial or insular possessions; and, Eligible Contract Participants pursuant to U.S. law.
> An Eligible Contract Participant includes a corporation that has total assets exceeding $10,000,000 and is incorporated in a jurisdiction outside of the United States or its territories or insular possessions. This will be the principal basis upon which we will continue to do business with selected U.S. persons.
Basically, it looks like they only provide on and off ramps for large clients outside the US. Given their history, I am betting they might not want to reveal where they store their assets, and don't want to deal with US regulators (but not sure this is working).
So as source for the claim that you "can't redeem tether", you are linking to something that says you can redeem tether?
Tell you what: you give me $100, I'll give you back a cooldude coupon. I have sole discretion as to whether I'll redeem this coupon when you hand it back to me.
Question: Would you say you can redeem this coupon? It's possible I might decide to give you back your money, after all.
Question: Would you say you can redeem this coupon? It's possible I might decide to give you back your money, after all.
> something that says you can redeem tether
Tether, in its sole discretion, may choose to redeem tether, as long as you're a corporation with over 10m USDT incorporated outside the US.
I'd say that's not an ironclad guarantee that you can redeem tether.
Tether, in its sole discretion, may choose to redeem tether, as long as you're a corporation with over 10m USDT incorporated outside the US.
I'd say that's not an ironclad guarantee that you can redeem tether.
When did I say I was providing a source for not being able to redeem tether? I'm just linking to information that I found useful when forming an opinion on the matter.
Yes, I worked at a company that had an entity outside the US that minted and redeemed tethers. This is how it works.
Yep, AFAIK Tether is used by several exchanges that have problems getting direct banking relationships, as a on-ramp for funds.
Tether originally promised that they were 1-2-1 backed with actual currency reserves, but had to abandon that statement when it became apparent they'd lost a load of money to Crypto Capital.
Tether still claim to be 1-2-1 backed with "investments" but there has never been a completed 3rd party audit of that claim, so it literally has to be taken on trust.
Tether originally promised that they were 1-2-1 backed with actual currency reserves, but had to abandon that statement when it became apparent they'd lost a load of money to Crypto Capital.
Tether still claim to be 1-2-1 backed with "investments" but there has never been a completed 3rd party audit of that claim, so it literally has to be taken on trust.
Minor point, but seeing "1-2-1" in your comment is strange to me. I've only ever seen it as "1:1" or "1-to-1".
Thanks for pointing that out. I thought "1-2-1" was some jargon I was missing.
They can buy BTC with the newly minted coins.
This makes zero sense. Why not just use USD?
The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?
The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?
It really comes down to what kind of loans Tether has accepted. They haven't disclosed this information.
If Tether gave out a significant amount of USDT for Bitcoin without backing it in some other way, it means Tether isn't actually backed by the USD. Even if they lent out Tether for USD, they might have used BTC as collateral/risk assessment.
The fear is that Thether is held up by a loan of BTC and BTC is held up by in some part by the stability of Tether.
If Tether gave out a significant amount of USDT for Bitcoin without backing it in some other way, it means Tether isn't actually backed by the USD. Even if they lent out Tether for USD, they might have used BTC as collateral/risk assessment.
The fear is that Thether is held up by a loan of BTC and BTC is held up by in some part by the stability of Tether.
Some exchanges have no traditional banking ties at all, so you have to send them some for of crypto in order to use them. It's also easier and quicker to move tether from one exchange to another than it is to receive a USD transfer and resend it to another, and that's ignoring regulatory issues.
This does nothing to explain the purpose of Tether.
If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
Maybe you do buy BTC on Exchange B.
Then you transfer to Exchange A and sell, and what do you get when you sell? Tether.
The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require.
Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets.
The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.
Then you transfer to Exchange A and sell, and what do you get when you sell? Tether.
The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require.
Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets.
The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.
seems like a constant long term rise in BTC valuation is what keeps them backstopped in turn, then. well that and conveniently reliable outages in the middle of every major BTC sell-off.
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Yes, if the company Thether has full control of its tokens they can print them and don't back them with anything (as the author says their reserves are not public)
Tether is the liquidity solution to the lank of United States Dollar withdrawal ie, a bank account.
No bank, no problem! Tether on Wayne,Tether on Garth.
But seriously, this old news. All of these stable coins and alt coins are just big pools of liquidity to swim in.
No bank, no problem! Tether on Wayne,Tether on Garth.
But seriously, this old news. All of these stable coins and alt coins are just big pools of liquidity to swim in.
The graphs show a strong correlation between printing of USDT and the Bitcoin price rising, but it's not clear to me which one triggers the other.
Interestingly, USDC seems to follow similar minting patterns, and they post quarterly audits of their books / are much better regulated.
Interestingly, USDC seems to follow similar minting patterns, and they post quarterly audits of their books / are much better regulated.
They are better regulated and therefore less risky than Tether, which raises the interesting question, Why is USDC circulation only 20% of Tethers...
Have you considered the fact that "better regulated" might not be an advantage for someone using it as a capital flight tool? A big value proposition of Tether as an on-ramp is its discretion.
Abolutely I have, I also think that regulators in places like the USA are very likely to crack down on any company providing that kind of service :)
The most likely threat to Tether as a currency (IMO), is that one or more large countries outlaws its use, and/or decides to prosecute its owners...
The most likely threat to Tether as a currency (IMO), is that one or more large countries outlaws its use, and/or decides to prosecute its owners...
Don't put too much hope on that. The only country that would realistically single Tether out to "outlaw" it would be the US.
They may do so, but even then they won't be able to stop the redeeming process from taking place abroad. That may mark the beginning of a slow decent, but no threat to current holders of the token IMO.
Could be a first-mover advantage for Tether and the fact that there haven't really been alternatives for a long time. Even if there are now, people are slow to catch on...
I agree, and it does surprise me, but I think it's a mix of 1. tether has been around a lot longer and is on a lot more exchanges 2. tether is.. less well controlled by US regulators and hence better for.. questionable exchanges to list.
Challenge there is that it doesn't fit the narrative that Tether give about the demand being from "institutional investors". That kind of customer tends (IMO) to be very risk averse.
Of course it is possible that Tether are getting custom, but not the kind that wants to leave a bank trail. But if that's the case they're going to fall foul of the regulators sooner or later...
Of course it is possible that Tether are getting custom, but not the kind that wants to leave a bank trail. But if that's the case they're going to fall foul of the regulators sooner or later...
> Challenge there is that it doesn't fit the narrative that Tether give about the demand being from "institutional investors"
Market makers and trading shops with 7-8 figure funds playing with riskier cryptos or trying to tap worldwide volume.
It's not MicroStrategy and Mass Mutual Insurance using Tethers
Market makers and trading shops with 7-8 figure funds playing with riskier cryptos or trying to tap worldwide volume.
It's not MicroStrategy and Mass Mutual Insurance using Tethers
> They are better regulated
You just answered your own question.
You just answered your own question.
Almost as if crypto is mostly about investment speculation and gambling, and not so much about actually useful assets.
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When the Bitfinex’d posts came out in 2017, I found them fairly convincing. It seems likely there is something not quite right at Bitfinex and Tether. But I have yet to see any evidence that the scale of “not right” is so large as is frequently claimed. These critiques never seem to address the most parsimonious explanation for periods of increased Tether issuance, which is that they are driven by genuine demand for bitcoin, and much of that demand is routed via Tether.
There is ample evidence of the sketchiness of the people behind Bitfinex. But there is also a simple explanation for the behavior of bitcoin and Tether in 202 that involves no conspiracies. Many hodlers bought during the March crash because they saw it as an opportunity to buy at a discount (I am one of these people). The crash coincided with events that should drive up the price of bitcoin over the longer term. Specifically, the creation of trillions of new dollars and what many saw as a new era of much looser monetary and fiscal policy. The idea that demand for hard currencies is increased is totally consistent with this.
Compared to 2017, I now believe there is a smaller chance of total tether insolvency and a larger chance of significant but not catastrophic shenanigans.
There is ample evidence of the sketchiness of the people behind Bitfinex. But there is also a simple explanation for the behavior of bitcoin and Tether in 202 that involves no conspiracies. Many hodlers bought during the March crash because they saw it as an opportunity to buy at a discount (I am one of these people). The crash coincided with events that should drive up the price of bitcoin over the longer term. Specifically, the creation of trillions of new dollars and what many saw as a new era of much looser monetary and fiscal policy. The idea that demand for hard currencies is increased is totally consistent with this.
Compared to 2017, I now believe there is a smaller chance of total tether insolvency and a larger chance of significant but not catastrophic shenanigans.
> These critiques never seem to address the most parsimonious explanation for periods of increased Tether issuance, which is that they are driven by genuine demand for bitcoin, and much of that demand is routed via Tether
The bigger question is: Why are so many institutions using Tether to purchase 7-8 figures of bitcoin at a time instead of simply engaging with any of the well-known institutions who will facilitate the purchase directly? What do all of these buyers possibly gain by using an intermediary currency and funneling all of their money through the Tether company first?
The only explanation I can come up with is that Tether is being used to skirt financial regulations or launder money, which doesn't bode well for Tether either.
The bigger question is: Why are so many institutions using Tether to purchase 7-8 figures of bitcoin at a time instead of simply engaging with any of the well-known institutions who will facilitate the purchase directly? What do all of these buyers possibly gain by using an intermediary currency and funneling all of their money through the Tether company first?
The only explanation I can come up with is that Tether is being used to skirt financial regulations or launder money, which doesn't bode well for Tether either.
> The only explanation I can come up with is that Tether is being used to skirt financial regulations or launder money, which doesn't bode well for Tether either.
Could it not be possible that cryptocoins has become a massive world wide gambling area? People betting on the prices going up or down, moving their assets between floating cryptos and Tether.
Could it not be possible that cryptocoins has become a massive world wide gambling area? People betting on the prices going up or down, moving their assets between floating cryptos and Tether.
> The only explanation I can come up with is that Tether is being used to skirt financial regulations or launder money, which doesn't bode well for Tether either.
This may well be true. But it also seems to be the case that for a long time, Tether was the only game in town, and institutions built integrations around it. Someone starting out now might not build on Tether.
This may well be true. But it also seems to be the case that for a long time, Tether was the only game in town, and institutions built integrations around it. Someone starting out now might not build on Tether.
I agree that USDT is fishy and it may be behind a large percentage of the gains in BTC and the other coins.
However, there is also another possible explanation. When investors want to buy BTC they first to go Binance and ask for USDT in exchange for USD. Binance creates new USDT for them. Then they use the USDT to buy BTC (reverse causality). Just saying it's possible, but I believe Jacob Oracle to be right.
However, there is also another possible explanation. When investors want to buy BTC they first to go Binance and ask for USDT in exchange for USD. Binance creates new USDT for them. Then they use the USDT to buy BTC (reverse causality). Just saying it's possible, but I believe Jacob Oracle to be right.
> When investors want to buy BTC they first to go Binance and ask for USDT in exchange for USD. Binance creates new USDT for them. Then they use the USDT to buy BTC (reverse causality).
But why sell them USDT first and then sell them BTC in exchange for the USDT?
Why not just sell them BTC directly? That's the issue.
But why sell them USDT first and then sell them BTC in exchange for the USDT?
Why not just sell them BTC directly? That's the issue.
The liquidity in BTCUSDT on binance is much higher so you're less likely to encounter slippage. You have to also remeber non US customers that use exchanges, for them it makes a lot of sense to exchange their native currency to USDT.
Can binance "create new USDT" or do they need to ask Tether to create it for them, exchanging USD?
Don't they share the same owners?
There is one question to ask here: "Why is so much of the volume in BTC driven by USDT trades?", i.e. what exactly is so great about Tether that we're supposed to believe everyone is actually buying it?
It is supposed to be a stablecoin. That's meant to be exceedingly boring. Tether is anything but boring, with all kinds of intrigue, lack of transparency about its reserves, law suits and so on.
There are a bunch of other stablecoins out there that just seem like better propositions, so why does crypto price action continue to be primarily driven by inflows from Tether?
It is supposed to be a stablecoin. That's meant to be exceedingly boring. Tether is anything but boring, with all kinds of intrigue, lack of transparency about its reserves, law suits and so on.
There are a bunch of other stablecoins out there that just seem like better propositions, so why does crypto price action continue to be primarily driven by inflows from Tether?
Might be good to get patio11's take on this. He's predicted the last 5 tether collapses.
I would trust Tether more if it ever had meaningful outflows in dollar terms, had $1bn or so in the last crash (https://coinmarketcap.com/currencies/tether/) but has been generally on an upward march, not what you would expect from a stable coin
Let's say you believe that Tether is a complete fraud and will crash the market at some point. How do you take advantage of this? I'm not myself trading, but I would be interested to know how that kind of short works in practice. From what I understand, that's what bitcoin futures can be used for?
kraken supports shorting tether against USD
Cboe ended their bitcoin futures. As such there’s no way to bet on a bitcoin collapse that I know of, in a less risky options-like way.
Shorts (if they exist) would be extremely risky, as you owe more if bitcoin rises.
Shorts (if they exist) would be extremely risky, as you owe more if bitcoin rises.
CME Group still offers Bitcoin futures, along with options: https://www.cmegroup.com/trading/bitcoin-futures.html
CME has fairly liquid futures
https://www.theblockcrypto.com/data/crypto-markets/futures/a...
https://www.theblockcrypto.com/data/crypto-markets/futures/a...
There's many bitcoin derivative exchanges which allow you to short, in addition to the CME's contract.
Bitmex, Huobi, etc.
Bitmex, Huobi, etc.
Isn't this pretty much the same as taking a loan at a bank and buying bitcoins? Couldn't the "bubble" be explained by extremely low interest rates?
Banks create money out of thin air when you take a loan. The only difference is they destroy that newly created money when you pay the loan back (but keep the interests).
See : https://positivemoney.org/how-money-works/banking-101-video-...
Banks create money out of thin air when you take a loan. The only difference is they destroy that newly created money when you pay the loan back (but keep the interests).
See : https://positivemoney.org/how-money-works/banking-101-video-...
So, lets assume this is price manipulation is true.
If they print tether, and buy BTC/USDT on an exchange than someone else has to go long the other side (USDT/BTC). When 600 mil of USDT was printed and was used to purchase 600 mil of BTC/USDT, then who purchased 600 mil USDT/BTC.
It doesn't make sense that people who want to cash out of BTC at a certain price level will cash out through USDT because there is no exchange to redeem USDT to USD directly. You have to cash out through USD/BTC or USD/ETH.
There are arbs traders who maintain the peg the USD/USDT, but arbs traders will always attempt to have a net 0 position, it doesn't make sense for them to hold tether either. Defi flash loans like AAVE and byz offer 0 collateral loans. If they are not using flash loans, then they will post collateral with USD (as this is presumably how they want profits) to short whatever ticker they need to short for the arb play.
If bitfinex and tether keep printing tether, someone is holding all this tether. A lot of this is probably held in defi liquidity pools and AMM pools, but the total reserves in these exchanges (Compound, curve, dydx...) is far less than the 600 million printed.
Perhaps the same institutions printing are the last holders, but Why would tether and bifinex hold their tether if it is truly a scam? I am confused as to who the last holders of tether are, if people are swapping tether for BTC and BTC for USD. Most people that buy tether (other than people supplying liquidity pools) do so to swap to another token for a real potential of gains, since Tether will never gain in value significantly with a 1:1 peg.
It doesn't make sense that people who want to cash out of BTC at a certain price level will cash out through USDT because there is no exchange to redeem USDT to USD directly. You have to cash out through USD/BTC or USD/ETH.
There are arbs traders who maintain the peg the USD/USDT, but arbs traders will always attempt to have a net 0 position, it doesn't make sense for them to hold tether either. Defi flash loans like AAVE and byz offer 0 collateral loans. If they are not using flash loans, then they will post collateral with USD (as this is presumably how they want profits) to short whatever ticker they need to short for the arb play.
If bitfinex and tether keep printing tether, someone is holding all this tether. A lot of this is probably held in defi liquidity pools and AMM pools, but the total reserves in these exchanges (Compound, curve, dydx...) is far less than the 600 million printed.
Perhaps the same institutions printing are the last holders, but Why would tether and bifinex hold their tether if it is truly a scam? I am confused as to who the last holders of tether are, if people are swapping tether for BTC and BTC for USD. Most people that buy tether (other than people supplying liquidity pools) do so to swap to another token for a real potential of gains, since Tether will never gain in value significantly with a 1:1 peg.
Why hasn't anyone forked tether? What happened to the tether issued on bitcoin cash blockchain through omni after the fork of bitcoin?
A tether fork can be 'backed by tether.' The issuer of forked tether would accept 1 tether for one new tether fork. this issuer immediately sells tether to get the risk off their books through an exchange while liquidity exists. When redeeming the tether fork ppl can either get back tether or ~ 1 us dollar. So you effectively have front running the inevitable tether bank run. Sure they have to put trust in this new tether fork. You can steal tether's customers that are worried and since the feds seem to have a blind eye towards a company that isn't a bank and is most likely practicing fractional reserve lending, you let the free market 'regulate' tether.
A tether fork can be 'backed by tether.' The issuer of forked tether would accept 1 tether for one new tether fork. this issuer immediately sells tether to get the risk off their books through an exchange while liquidity exists. When redeeming the tether fork ppl can either get back tether or ~ 1 us dollar. So you effectively have front running the inevitable tether bank run. Sure they have to put trust in this new tether fork. You can steal tether's customers that are worried and since the feds seem to have a blind eye towards a company that isn't a bank and is most likely practicing fractional reserve lending, you let the free market 'regulate' tether.
Bernie Madoff ran the same alleged scam for years, including giving interest to people in the fund. It would be even easier to run with a non-interest-bearing fund and you'd never even notice the money was missing unless there was a bank run.
I'm no expert but wouldn't it make sense that Tether has to mint new USDT pegged to the price of BTC? If BTC price increases, regardless of what reason, the next buyer has to somehow have more USDT than there previously was in the system.
- B buys 1USDT for 1USD
- BTC sale at 1USDT from A to B
- person B now lists their BTC for 3USDT
- if person C now wants to buy this BTC for 3 USD, there has to be an additional 3 USDT minted
Given new influx of money keeps happening to buy BTC, more and more USDT needs to be printed. Meaning, extra USDT is printed BEFORE the price increases. Because it's required to buy. Doesn't explain why it's seldom burned. Nobody ever cashes out?
- B buys 1USDT for 1USD
- BTC sale at 1USDT from A to B
- person B now lists their BTC for 3USDT
- if person C now wants to buy this BTC for 3 USD, there has to be an additional 3 USDT minted
Given new influx of money keeps happening to buy BTC, more and more USDT needs to be printed. Meaning, extra USDT is printed BEFORE the price increases. Because it's required to buy. Doesn't explain why it's seldom burned. Nobody ever cashes out?
What a ridiculous Twitter thread showing absolutely no causality between Tether and Bitcoin. You might as well show that SpaceX rocket launches coincide with a rise in Bitcoin prices.
There was a successful SpaceX launch yesterday, and Bitcoin went over $40,000 for the first time. In 2020, SpaceX had its best year ever for successful launches and returns of the first stage, perfectly coinciding with Bitcoin's meteoric rise in value. So Bitcoin must be tied to successful SpaceX launches.
There was a successful SpaceX launch yesterday, and Bitcoin went over $40,000 for the first time. In 2020, SpaceX had its best year ever for successful launches and returns of the first stage, perfectly coinciding with Bitcoin's meteoric rise in value. So Bitcoin must be tied to successful SpaceX launches.
Upvote this gentleman for being the final trinity-piece in this mystery! HN-user Speednet is 1/3 rd of bitcoin's success!
I can see I've been downvoted. I must have made a mistake. Bitcoin prices are actually tied to Elon Musk's rising wealth, not SpaceX launches.
To people who think Tether manipulates Bitcoin price: How do you explain Bitcoin doing so well on Coinbase when Tether is NOT ACCEPTED on Coinbase???
If BTC's price is manipulated anywhere, the market adjusts for it everywhere.
That makes no sense. Again, how can someone manipulate Bitcoin on Coinbase with Tether when Tether is NOT accepted?
Scenario:
Eth is $400 on Coinbase, Bitcoin is $12000 on Coinbase
Print 1,000,000 Tether
Buy $1,000,000 of Eth on an exchange that supports Tether
Sell $1,000,000 of Eth on Coinbase
Buy $900,000 (arbitrary post-sale amount from selling Eth) of Bitcoin on Coinbase
Another scenario:
Bitcoin is $12000 on Coinbase
Bitcoin is $12000 on another exchange that supports Tether
Print 1,000,000 Tether
Buy $1,000,000 of Bitcoin on the exchange that supports Tether
Bitcoin is now $12050 on another exchange
Coinbase price of BTC rises as arbitrage bots and manual traders purchase cheaper Bitcoin on Coinbase and sell it for profit on the other exchange until prices equalize
Eth is $400 on Coinbase, Bitcoin is $12000 on Coinbase
Print 1,000,000 Tether
Buy $1,000,000 of Eth on an exchange that supports Tether
Sell $1,000,000 of Eth on Coinbase
Buy $900,000 (arbitrary post-sale amount from selling Eth) of Bitcoin on Coinbase
Another scenario:
Bitcoin is $12000 on Coinbase
Bitcoin is $12000 on another exchange that supports Tether
Print 1,000,000 Tether
Buy $1,000,000 of Bitcoin on the exchange that supports Tether
Bitcoin is now $12050 on another exchange
Coinbase price of BTC rises as arbitrage bots and manual traders purchase cheaper Bitcoin on Coinbase and sell it for profit on the other exchange until prices equalize
I still don't see that artificially inflating coinbase bitcoin. plus only bitfinance would be able to print/create tether. also, there's no evidence that companies what you claim they could do.
>I still don't see that artificially inflating coinbase bitcoin.
I don't know how to explain it any more clearly to you.
>plus only bitfinance would be able to print/create tether
Yes, but whoever controls the printing could then use the Tethers on any exchange that supports them.
>also, there's no evidence that companies what you claim they could do
You asked for an explanation of how it could be done, not evidence.
I don't know how to explain it any more clearly to you.
>plus only bitfinance would be able to print/create tether
Yes, but whoever controls the printing could then use the Tethers on any exchange that supports them.
>also, there's no evidence that companies what you claim they could do
You asked for an explanation of how it could be done, not evidence.
The explanation is clear, but I just don't see it as being particularly convincing.
Sure, I didn't ask for evidence. Now, I am. Where's your evidence?
Sure, I didn't ask for evidence. Now, I am. Where's your evidence?
>The explanation is clear, but I just don't see it as being particularly convincing.
Why not?
>Sure, I didn't ask for evidence. Now, I am. Where's your evidence?
You need to specify what exactly you want evidence for. Then you need to google it, because that's what I'm going to do, assuming you want evidence of something like arbitrage.
Why not?
>Sure, I didn't ask for evidence. Now, I am. Where's your evidence?
You need to specify what exactly you want evidence for. Then you need to google it, because that's what I'm going to do, assuming you want evidence of something like arbitrage.
It does make sense. The price of BTC in USD is roughly the same on every exchange. If some exchanges allow USD and USDT interchangeably, the BTC price can be driven up by trades that are conducted in USDT. The price on Coinbase will adapt to that.
how will Coinbase "adapt"? it's a walled garden.
Individuals and bots will take advantage of the price discrepancies between exchanges by purchasing BTC on the cheaper exchange, sending the BTC to the more expensive exchange and selling it. As long as its possible to do this different exchanges normally stay within a few % of each other.
I mean...arbitrage? Isn't that obvious?
I still don't quite understand how they can manipulate the price.
The price of a USDT is 1 dollar. They give out new USDT for $1 a piece.
Sure, they may be spending these dollars elsewhere, thus holding a fractional reserve. Sure this may illegal and get them in trouble.
But this doesn't effect the dollar value for which these USDT's and thus Bitcoins are traded.
As long as a USDT is $1, nobody is manipulating the price.
The price of a USDT is 1 dollar. They give out new USDT for $1 a piece.
Sure, they may be spending these dollars elsewhere, thus holding a fractional reserve. Sure this may illegal and get them in trouble.
But this doesn't effect the dollar value for which these USDT's and thus Bitcoins are traded.
As long as a USDT is $1, nobody is manipulating the price.
>The price of a USDT is 1 dollar. They give out new USDT for $1 a piece.
If this were the case, Tether would be back by cash. But it isn't: they claim it's backed by cash, cash-equivalents and receivables from loans, including loans to affiliated entities (or some similar language).
So, for example: they could create 1M USDT and immediately loan it to their associated crypto-hedge-fund (for zero interest). The hedge-fund promises to repay that loan in USD (creating 'reserves' for USDT), and immediately places buy orders for Bitcoin; generating demand for Bitcoin that will raise the price.
If this were the case, Tether would be back by cash. But it isn't: they claim it's backed by cash, cash-equivalents and receivables from loans, including loans to affiliated entities (or some similar language).
So, for example: they could create 1M USDT and immediately loan it to their associated crypto-hedge-fund (for zero interest). The hedge-fund promises to repay that loan in USD (creating 'reserves' for USDT), and immediately places buy orders for Bitcoin; generating demand for Bitcoin that will raise the price.
The author is saying there are more tokens in circulation than dollars in their reserve.
They print additional usdt, that are not backed by dollars, and buy bitcoin with them.
Scams always work on the way up. Madoff operated a Ponzi scheme for 17 years before running out of money. He simply used his bank account to pay off anyone who wanted to withdraw. As long as more total money flows in than flows out of the system, it doesn't fall apart.
The entire narrative around BTC is "HODL", and the only thing people really do with it is buy and hold. Money is flowing into the system, so there's room for scams to operate undetected within those margins.
The entire narrative around BTC is "HODL", and the only thing people really do with it is buy and hold. Money is flowing into the system, so there's room for scams to operate undetected within those margins.
Not the Tether price, but that's not what the article is about; the article is that they print USDT and use it to buy BTC, increasing demand and causing the BTC price to go up. No dollars involved, not directly.
Well, what if you use those reserves to buy bitcoin on your own exchange?
> I still don't quite understand how they can manipulate the price.
They largely can't (especially that a good fraction of Bitcoin is now held by institutional investors). But it makes up for a good story.
They largely can't (especially that a good fraction of Bitcoin is now held by institutional investors). But it makes up for a good story.
> The price of a USDT is 1 dollar. They give out new USDT for $1 a piece.
That's circular logic isn't it? USDT is $1 USD and $1 USD is 1 USDT, therefore it is "stable".
That sentence in and of itself is meaningless.
That's circular logic isn't it? USDT is $1 USD and $1 USD is 1 USDT, therefore it is "stable".
That sentence in and of itself is meaningless.
Would we not expect this same pattern if Tether was printed in response to money coming in?
Meaning yes, they don't have USDT 100 % fully backed, but they aren't printing it out of thin air either.
What surprises me are the incredible volumes in USDT -- why would anyone ever use USDT instead of USDC, DAI or BUSD? All of them are much more transparent and less risky.
Meaning yes, they don't have USDT 100 % fully backed, but they aren't printing it out of thin air either.
What surprises me are the incredible volumes in USDT -- why would anyone ever use USDT instead of USDC, DAI or BUSD? All of them are much more transparent and less risky.
Sometimes it's just a practical matter
The exchange I use only has instruments with USDT pairs (BTC/USDT, ETH/USDT), not with USDC.
The exchange I use only has instruments with USDT pairs (BTC/USDT, ETH/USDT), not with USDC.
Let me cite https://tether.to/legal/
"Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all."
The twitter thread is utterly fatuous, and another post this morning on reddit laid it out pretty well:
> This is just dumb but I'll lay it out anyway: The NY AG issued the first Tether subpoena in Dec 2017. The AG got the financial info, found that tether was fully backed by dollars, and that the Tether company lent some of those dollars to the Bitfinex company, which is the basis of the NY AG lawsuit. Bitfinex has since issued tokens to cover the loan.
To say that the NY AG got the subpoena info (which would require more evidence than an audit and be under penalties of perjury as well) found no backing and let them continue a ponzi is to say that the NY AG is part of the conspiracy. So enough with the tin foil hattery.
https://www.reddit.com/r/BitcoinMarkets/comments/ksvlc3/dail...
> This is just dumb but I'll lay it out anyway: The NY AG issued the first Tether subpoena in Dec 2017. The AG got the financial info, found that tether was fully backed by dollars, and that the Tether company lent some of those dollars to the Bitfinex company, which is the basis of the NY AG lawsuit. Bitfinex has since issued tokens to cover the loan.
To say that the NY AG got the subpoena info (which would require more evidence than an audit and be under penalties of perjury as well) found no backing and let them continue a ponzi is to say that the NY AG is part of the conspiracy. So enough with the tin foil hattery.
https://www.reddit.com/r/BitcoinMarkets/comments/ksvlc3/dail...
Here is ThreadReaderApp link for more readable version:
https://threadreaderapp.com/thread/1346133062204198917.html
https://threadreaderapp.com/thread/1346133062204198917.html
One thing the author and I agree on:
When Tether falls, it's going to make a very big noise.
When Tether falls, it's going to make a very big noise.
Here's a good write-up about the issues with Tether from a few years ago:
https://tonyarcieri.com/the-tether-conundrum
https://tonyarcieri.com/the-tether-conundrum
Why do people still use tether when decentralized stable coins like DAO now exist? Seems super risky to have USDT when you could simply exchange if for DAO and hold that instead.
Surely the only way to keep the valuer of tether stable is to "print" more of it whenever its value starts to increase? Otherwise it wouldn't be always worth $1.
That or provide on and off ramps that users can use to arbitrage any deviations from a value of $1.
Which they cannot do because 1) they don't have any banking and 2) they cannot allow redemptions which would risk a run on their reserves (to the degree those exist at all).
Except they do allow redemptions: https://app.tether.to/app/signup
Nobody in the history of crypto has ever demonstrated this. Not a single person.
Nobody in the history of crypto has ever attempted it or no one has ever demonstrated it? It seems improbable no one has ever attempted it. And there's no reason to demonstrate if it is successful. So I'd argue the lack of failed demonstrations is evidence that it works.
They would have to destroy some too at some point otherwise the price would go down? Do they do that?
Not sure if trolling but why would Tether ever be worth more than $1? Printing USDT is not the same is issuing new fully backed USDT.
Tethers only value is as a proxy for the dollar, as such it can only ever be worth a dollar. The exceptions are when a market is crashing people would rather have dollars, and we will see prices above a dollar due to high demand - though the intrinsic value should never change.
When market crashes Tether prices go below a dollar because dollars get (relatively) expensive.
Permabears’ final hope is that tether is a scam, because if that fails they have nothing to grasp onto to explain bitcoin’s rise other than legitimate demand.
Even if Tether is a scam, it still seems like the market for Bitcoin scams is infinite, so I'm not sure how much difference it makes.
Not true since coinbase doesn't accept tether. so, how do you explain bitcoin's rise on coinbase exchange without tether??
While correlation is not causation, correlation is evidence for causation... and there's a lot of correlation in those graphs.
Correlation is definitely not evidence for causation. Also, if you reverse the cause and effect, what analysis do you get? When BTC prices are in the rise, it’s because people are putting money into crypto currencies. When people are putting money into crypto, some of that money is probably going into tether, so there’s more demand for tether, so Bitfinex increases the supply. With this reasoning, we get exactly the same graph with a totally different meaning.
> Correlation is definitely not evidence for causation.
Try telling this to climate change activists
Try telling this to climate change activists
It literally is not.
Correction: Correlation is evidence for causation. It's weak evidence, and generally speaking, stronger correlation isn't more evidence.
There's a gradual process to go from hypothesis to theory to fact, and to get there, you need several types of independent evidence. Correlational evidence is okay as one of those.
A correct statement is that correlation is not proof of causation (no matter how strong).
Types of evidence:
* Correlation
* Theoretical basis / strong hypothesis
* Extrapolation
* Interpolation
* Small-scale well-controlled experiments (lab setting)
* Large-scale less controlled experiments (real-world setting)
* Anecdotes
* ... and so on
You want several of those before you start to believe anything, and some are stronger than others. Correlation isn't fundamentally weaker than most of those, though; all of those carry their own methodological issues. The number of times you can have a large-scale perfectly-controlled preregistered randomized control trial with no confounding effects is exceptionally rare (some medical trials, and a few other settings).
There's a gradual process to go from hypothesis to theory to fact, and to get there, you need several types of independent evidence. Correlational evidence is okay as one of those.
A correct statement is that correlation is not proof of causation (no matter how strong).
Types of evidence:
* Correlation
* Theoretical basis / strong hypothesis
* Extrapolation
* Interpolation
* Small-scale well-controlled experiments (lab setting)
* Large-scale less controlled experiments (real-world setting)
* Anecdotes
* ... and so on
You want several of those before you start to believe anything, and some are stronger than others. Correlation isn't fundamentally weaker than most of those, though; all of those carry their own methodological issues. The number of times you can have a large-scale perfectly-controlled preregistered randomized control trial with no confounding effects is exceptionally rare (some medical trials, and a few other settings).
But it is
There are several algorithms that calculate the causal structure from correlations: PC, GES, FGS, FCI
They are proven to be asymptotically correct
There are several algorithms that calculate the causal structure from correlations: PC, GES, FGS, FCI
They are proven to be asymptotically correct
>"...correlation is evidence for causation"
Yeah...that's not how it works.
Yeah...that's not how it works.
I assume you've conflated evidence and proof?
Causation may be evidence for correlation. But the reverse is simply not true.
The part I don't understand:
Say the SEC takes on Tether and it falls. Why then does BTC and the crypto markets crash?
Say the SEC takes on Tether and it falls. Why then does BTC and the crypto markets crash?
Because Tether's utility is as a legislatively advantageous on- and off-ramp for the whole crypto market.
Off-ramp: If people want to sell BTC or other volatile tokens because they want to realize profits, the obvious thing would be to sell for fiat (USD/EUR). But due to taxation and legislation this is often difficult. Stablecoins like Tether provide the utility of a low-volatility currency that fiat would fill. Main advantage is bypassing legislation.
This use is so common there is jargon for "Tethering up".
There also exist many debit cards that allow paying with stablecoins, increasing utility. The rise of DeFi and money markets for stablecoins also provides a good return on stablecoins while in theory being low-volatility.
On-ramp: If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation limiting the buying of a specific token or use of exchanges. This use is less common, I would wager.
Because of this wide-spread use of Tether, it's collapse would cause a liquidity crisis: people want to but cannot sell their Tethers for other tokens/fiat. Tether goes down from it's 1USD peg, triggering a run on Tether as people try to swap it as much as they can for anything else, driving down the price further. Meanwhile noone is willing to buy Tether. The theory proposed by OP, is that panic in the already volatile crypto market ensues, people exit for fiat where they can driving down prices everywhere. Trust in the whole market will be obliterated.
Personally, I haven't trusted Tether since the first BitFinex scandals and avoided like the plague. For my stablecoin needs, I use something that is audited and over-collateralized like DAIv2.
Off-ramp: If people want to sell BTC or other volatile tokens because they want to realize profits, the obvious thing would be to sell for fiat (USD/EUR). But due to taxation and legislation this is often difficult. Stablecoins like Tether provide the utility of a low-volatility currency that fiat would fill. Main advantage is bypassing legislation.
This use is so common there is jargon for "Tethering up".
There also exist many debit cards that allow paying with stablecoins, increasing utility. The rise of DeFi and money markets for stablecoins also provides a good return on stablecoins while in theory being low-volatility.
On-ramp: If people want to buy a certain token they first go into Tether. This is usually for bypassing local legislation limiting the buying of a specific token or use of exchanges. This use is less common, I would wager.
Because of this wide-spread use of Tether, it's collapse would cause a liquidity crisis: people want to but cannot sell their Tethers for other tokens/fiat. Tether goes down from it's 1USD peg, triggering a run on Tether as people try to swap it as much as they can for anything else, driving down the price further. Meanwhile noone is willing to buy Tether. The theory proposed by OP, is that panic in the already volatile crypto market ensues, people exit for fiat where they can driving down prices everywhere. Trust in the whole market will be obliterated.
Personally, I haven't trusted Tether since the first BitFinex scandals and avoided like the plague. For my stablecoin needs, I use something that is audited and over-collateralized like DAIv2.
Because suddenly most of the bitcoin demand would stop which would make the price drop
Wait I don't get it, it's not fully backed but it's still backed somewhat right? I thought it was only a chunk of USD that was missing? Or did they completely abandon the usd backing?
If it's still somewhat backed and just that chunk of usd that remains unaccounted for, printing tether isn't exactly a scam? People trade their usd for printed tethers and use that to buy bitcoin, so it's still essentially people exchanging usd for bitcoin
If it's still somewhat backed and just that chunk of usd that remains unaccounted for, printing tether isn't exactly a scam? People trade their usd for printed tethers and use that to buy bitcoin, so it's still essentially people exchanging usd for bitcoin
no-one knows how backed it is. iFinex claim it's 100% backed. They may, or may not, be telling the truth.
The question is do you believe that billions of dollars are flowing into an unaudited stablecoin when other, audited, stablecoins exist...
The question is do you believe that billions of dollars are flowing into an unaudited stablecoin when other, audited, stablecoins exist...
In 2019 Tether's lawyer was talking about 74% backed by cash and "short-term securities".
Edit: I forgot to add the link, here it is https://www.bloomberg.com/news/articles/2019-04-30/tether-sa...
Edit: I forgot to add the link, here it is https://www.bloomberg.com/news/articles/2019-04-30/tether-sa...
Enough with these manipulation controversies. Been hearing this for 3+ years
Anyone know the source of Jacob's chart in part 5 of his thread?
can someone explain to me how a district court can sue someone? shouldn't this be the SEC or something?
This narrative has been dead for years.
Or perhaps USDT is created as BTC price increases to ensure exchange liquidity of USDT, allowing it to to stay very close to $1
The net effect is the same though; the company behind Tether is printing money from nothing and selling it for USD or BTC (which can be sold for USD more reliably).
This is a qanon-style conspiracy theory going on for years now. Just follow the money: tethers are freely traded vs USD on multiple markets, including anonymous exchanges. If the conspiracy theory were right, the price of 1 Tether would be less than 1 USD. Meanwhile, it's very close to 1.00 USD on all the exchanges.
Can anyone recommend a business bank replacement for Azlo, which is also shutting down?
I'm planning on giving BlueVine a try: https://www.bluevine.com/checking/
Relay looks interesting too: https://relayfi.com/business-banking
Relay looks interesting too: https://relayfi.com/business-banking
They just minted another 300,000,000, here are the latest whale mints:
https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...
https://twitter.com/search?q=%22minted%20at%20Tether%20Treas...
Can someone post a real analysis? Are we supposed to believe this guy because he's a "Finance Major" with 5k followers and he posted a few graphs??
And meanwhile another 600 million has just been printed by them today. And a few hours later bitcoin price went up. Amazing daily coincidences.
I've said it before and I'll say it again:
It’s mysterious how Bitcoiners hate the Fed printing money but they get awfully quiet with Tether printing money when it helps prop up the price.
It’s mysterious how Bitcoiners hate the Fed printing money but they get awfully quiet with Tether printing money when it helps prop up the price.
I'm kinda glad BTC is up, this means I can do an exit with break even or a little profit. I just sold half my crypto assets on the two exchanges I have an account on, I just hope I can have the money transferred out before they become insolvent when the next great crash happens.
While I don’t doubt that Tether was used to manipulate the Bitcoin price upwards, at the same time I believe Bitcoin Futures were/are being used to suppress the Bitcoin price as well.
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[0]: https://www.equities.com/news/how-do-bitcoin-futures-affect-...
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[0]: https://www.equities.com/news/how-do-bitcoin-futures-affect-...
"Suppress" is not the right word because that would imply that the price is wrong. There is nothing wrong with shorting a market. If the short is wrong, she loses money. The market remains balanced and often short squeezes are responsible for large bull runs.
Tether however isn't balanced. There is no risk. There is no offsetting liability in the market for the Tether they create (unlike with a short future, which has an offsetting long side).
Tether however isn't balanced. There is no risk. There is no offsetting liability in the market for the Tether they create (unlike with a short future, which has an offsetting long side).
But banks have been in the wrong in how they used futures to suppress prices of precious metals like gold. A quote from the linked article:
> Precious metals markets have long since been subject to manipulation by large banks. Several banks have admitted wrongdoing and faced fines for manipulating gold prices. Many believe that the prices of gold and silver have been kept artificially low through the use of leveraged paper contracts.
>Dr. Paul Craig Roberts, the former economic advisor for the Reagan administration, has written extensively about this subject.
>In his view, some of the biggest banks in the world have been working to suppress the price of gold in Western markets for many years. They accomplish this through creating so-called “naked shorts” out of thin air (the term vapor contract term we’ve been using is analogous to a naked short).
>A naked short is simply a contract that allows an institution to place a sell order for a particular asset without having any ownership of the asset.
>In other words, it allows a bank to flood the market with fake sell orders, creating downward market pressure. Given that banks can create these shorts to the moon without any accountability, they can keep the price down at a level more or less of their choosing for quite some time.
Especially the last alinea seems to reflect some of the things you said about Tether actually.
> Precious metals markets have long since been subject to manipulation by large banks. Several banks have admitted wrongdoing and faced fines for manipulating gold prices. Many believe that the prices of gold and silver have been kept artificially low through the use of leveraged paper contracts.
>Dr. Paul Craig Roberts, the former economic advisor for the Reagan administration, has written extensively about this subject.
>In his view, some of the biggest banks in the world have been working to suppress the price of gold in Western markets for many years. They accomplish this through creating so-called “naked shorts” out of thin air (the term vapor contract term we’ve been using is analogous to a naked short).
>A naked short is simply a contract that allows an institution to place a sell order for a particular asset without having any ownership of the asset.
>In other words, it allows a bank to flood the market with fake sell orders, creating downward market pressure. Given that banks can create these shorts to the moon without any accountability, they can keep the price down at a level more or less of their choosing for quite some time.
Especially the last alinea seems to reflect some of the things you said about Tether actually.
How about USD price manipulation? How much of the USD being created by the FED is back by their reserves?... Is this scam sustainable? What effect would a Fed collapse have on Bitcoin's price? I'm going to wager that the Fed scam has a far larger impact on the USD price of BTC than this article's claims on tether fraud or collapse and its not even close.
Tether’s only reason for existing is trading for crypto so that’s not a fair comparison.
This is propaganda from a competing altcoin.
Just like "Jacob Oracle" did on Twitter, you're gonna have to provide at least some proof of your accusation. Now this is not conclusive in any way, but the user has "Investing in #Bitcoin" listed in their Twitter biography, hinting that they have more to lose if Bitcoin loses it's price, rather than gain, so seems they don't have anything but fairness to win with this. But wouldn't be the first time someone lied on the internet.
Point still stands, proof or GTFO.
Point still stands, proof or GTFO.
Where is the proof of whether or not Tether was actually injecting unbacked tokens?
The tweet author just assumed bitcoin spikes were being pumped by Tether, basically they got the graph and put lines on it. Do you call that proof?
I don't have any inclination towards the tweets author being right or wrong, I simply know too little about it. But at least they are providing something to try to back up their claim. If it's true or not will ultimately be up to law enforcement, if it comes to that.
My point was that the tweets author is trying to back up their claim while DJBunnies did absolutely nothing to try to back up theirs.
My point was that the tweets author is trying to back up their claim while DJBunnies did absolutely nothing to try to back up theirs.
Indeed, show the proof of manipulation or GTFO
However three years on, crypto still does not have a "killer app" and is 99.99% used for speculation. Bitcoin's narrative has had to morph from "digital currency" to "digital gold".
But in the depths of the March panic, Tether jumped the shark in order to backstop the entire crypto ecosystem, and they can never put that genie back in the bottle. Much like the Fed who cannot stop monetizing US deficits for fear of letting yields explode, the Tetheral Reserve must continue to print USDT in order to support prices. Exchanges cannot let this fail since the vast majority do not have access to the bonafide banking system and thus scrappy users must devise "fiat onramps".
There are many theories about why, the predominant one being that iFinex know they are screwed, and are making one last cash grab before presumably disappearing. This sounds fairly reasonable if the entire operation is indeed a sham, but it means there is effectively no upper bound to BTC prices because the denominator in 90% of the market (USDT) is effectively zero.
Tether has become too big to fail. Bitcoin now finds itself a high tech manifestation of the very thing that Satoshi sought to address.