It amazes me every time I look at $USDT and see it hasn't collapsed to zero yet. The flow of Tether inbound is the only thing keeping Bitcoin from its natural price of about $5. (3 BTC for a Pizza was the price back in the day at PS:1 in Chicago)
Tether prevails because betting against tether is not profitable. It could be, but the people you could bet against would go bankrupt if tether collapsed so you'd have no way to collect on your winning bet.
So I read this explanation from Matt Levine a few weeks ago and it sounded convincing.
But now I’m wondering, that was because the collateral you post against your short was assumed to be posted with the entity you borrowed the Tether from.
But can’t people make deals where they post collateral with a proper bank, and then if the counterparty goes bankrupt you just pay the estate back worthless Tether and keep the dollars posted with the reputable bank?
I’m not involved in these types of dealings so perhaps this is a silly question but I would have thought this was how things were done.
You’re gonna have a real hard time finding someone to take the opposite side of that bet using fiat money in any size. Crypto insiders generally know Tether is a fraud and further haven’t got the fiat liquidity to make such a bet
No, Tether has prevailed because 1 USDT has remained redeemable for approximately 1 USD since inception. That's it. More entities shorting USDT would not change that fact.
So, by all means, find a venue to short USDT. Build one if it doesn't exist. If lucrative enough, you will likely find parties willing to take the other side of that bet.
Ah yes, "I've personally not seen any _credible_ evidence of anyone withdrawing funds from Wells Fargo, so that means it's never happened". How do you think exchanges are able to function if they can't redeem USDT for USD?
Pretty easily, if they match a buyer/sellers. That’s literally what exchanges do.
Redemption is when Tether the entity is the buyer - aka someone takes USDT and goes to Tether the entity and gets dollars for it, 1-1. That’s what seems to never happen, except perhaps for specific Tether insiders. Though the ones I’ve seen claiming they’ve done so (SBF being the prominent one), are far from credible sources now.
If some random person wants to give me $1 for my nominal $1 of USDT, that’s cool - and that happens on exchanges regularly right now.
That depends on market perception, etc. though and has only the potential connection to perceived ability to redeem. Which has been kept sustained, as you can see by this thread.
By comparison, Verifying someone can deposit and withdraw cash from Wells Fargo is pretty easy. Just stand in any of their branches for an hour or two, and you’ll have tons of evidence. Something no one has of Tether still, after all this time.
When there's bear market in crypto dollars flow away from the whole ecosystem. The fact that tether keeps price in such condition means that they must be buying back tether. There's no other mechanism that could prop up its price in such conditions.
The market cares not what you think the value of an asset should be. By default, at some instant, the market is right. If you disagree, there are instruments with which you can express said disagreement and earn a profit for being correct.
By the way, the flow of Tether inbound is the flow of market participants purchasing USDT with cash equivalents. So sure, "the flow of dollars into the stock market is the only thing keeping META from its natural price of $5" is a statement anyone can make.
Maybe this is a good learning experience, and you could use it to update your beliefs about financial markets? If you're directionally and quantitatively wrong about some prediction for many years, it's very likely you are missing something.
How have I been wrong? The NYAG and the CFTC have now definitively proven me right.
Letitia James says:
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
The CFTC says:
> As found in the order, Tether held sufficient fiat reserves in its accounts to back USDT tether tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.
How exactly am I wrong? And please be specific. It's something they paid significant quantities of penalties over.
The shit I've been saying is literally in government PDF form now.
Actually a good example, you should look at the actual losses incurred by investors in Madoff's fund. It would probably be educational if you think tether could "go to zero".
Here's Terra Luna price today: https://www.coinbase.com/price/terra-luna. Clearly, it is above zero (it's $0.000170 for those curious.) I think I would be happy to concede one USDT is worth definitely above $0.000170 while also maintaining it's worth definitely below $1.
Another important lesson is to look at Luna and understand the difference between it and tether. Luna was highly leveraged and had essentially no collateral with exogenous value. Tether is sketchy and potentially fraudulently under collateralized, but clearly has substantial USD collateral.
Terra was an algorithmic stablecoin (ie not really a stablecoin). It can't be compared to Tether.
There were fundamental flaws with how Terra worked. A reductive way to describe it is, Terra was backed by Luna. Luna's price was determined by the market. Luna's supply was infinite. The price would go down if market demand didn't keep up with supply increases. Doomed from the beginning.
