It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.
Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tame in comparison and I'm sure it's just the cost of moving money to arbitrage.
If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course.
Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.
coinmarketcap/coingecko are generally not very reliable for evaluating the stability of stablecoin pegs
most liquidity tends to aggregate on dexes like Curve, which is also where you could have seen the whole LUNA/UST debacle play out in real time as large actors swapped out of UST into USDC/USDT/DAI
That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, which gave lower returns in exchange for that supposed safety, wasn't.
The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.
This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.
> We take the 00:00Z price each day for 365 days and then average it
Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke.
> holds its price above a $0.98 average
When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg.
Suggest a better methodology crisscross, I'm happy to listen. The problem with $1 flat is that anyone can sign up and manipulate it over time, holding it a fraction of a cent under isn't hard for a moment each day. Constantly maintaining a few cents under each day is much, much harder, feel free to go look through historic charts of what it costs to sell tether for USD over the last few years.
All it takes is a few days of near zero in the next year to win the wager. Isn't that what patio11 has said would happen for what 4 years now?
I'm offering a chance to capitalise on such deep knowledge, surely that's a no-brainer choice for someone so convinced that Tether is done for?
> holding it a fraction of a cent under isn't hard for a moment each day
It shouldn't be. Not for a dollar-pegged asset. Fractions of a cent on billions of dollars, dollars easily lent and borrowed every day, every minute, is millions of dollars a year for an arbitrageur [1].
Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.
> what patio11 has said would happen for what 4 years now?
Four years isn't long. At the first sign of tight markets, the damn thing fell apart to the tune of 5%.
> that's a no-brainer choice for someone so convinced that Tether is done for?
People are shorting Tether [2].
The problem is counterparty risk. When Tether busts, you want someone on the other side who isn't all in on crypto. That's not easy.
[1] Coinmarketcap shows $0.9989 for 1 Tether, an 11 bp spread. Call money is 2.75% [1], or around 75 bps per day; too expensive. But the repo rate is 80 bps [2]; less than a basis point a day. Borrow a billion against collateral, buy one billion Tether, redeem it for one dollar each and pay back the loan. You'll make, round trip, a $1mm profit [c]. In one day. Unless we're arguing there would be $1mm transaction costs for this trade, one must ask why nobody is doing it.
> Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.
Legally, IRDs and futures trade/settle on a few centralized exchanges with maybe one CCP (at least going by clarusft numbers on monthly dv01 volumes [some products way trade more on different venues compared to others], esp compared to all the places USDT trades) with many times rehypothicated US treasuries or other gov bonds behind it all, scheme blows up occasionally (was fun watching 30 year UST's trade ~30 bps under 75% of SOFR txs for a month before sept 2019 'surprise' fireworks happened).
> … buy one billion Tether
With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream. Maybe you can market make over the course [unknown amount] of time and pick it up on cex/dex's at/under $0.9989, but good luck trying that everyday (esp on chain where you will need to split that over many address all the time or addr tracking algos will front run if the MEV bots dont get you on every tx).
Shit show all around, ones just more concealed from the public and "regulators" than the other…
> With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream.
Slippage for an arbitrageur is price correction to the market. I made a math error in my comment: call money at 2.75% is less than a basis point a day. The trade makes money with no collateral.
I--me!--could call my broker and borrow $10mm at 5.75% (call money + 300 bps, because I'm not a billionaire) by lying and saying it wasn't for trading, buy 10 million Tethers for 0.9987, redeem them and pay back the loan the next day to turn an $11,425 profit.
I'm not going to do this. Because in that interval between buying and redeeming, an interval I'm sure would be marred by unnecessary delays--with my borrowing cost the trade breaks even between days 8 and 9--there is more than a 1 in 875 chance that Tether blows up [a]. (In other words, I'm betting, by not doing this trade, that Tether has no more than a few years to its name.)
[1] 1 / (11,425 / $10mm), the 11,425 being about $10mm - [$10mm * 0.9987] - [$10mm * {(2.75% + 3%) / 365} * 1 day]
Is it not well known that the Lehman International (London) book turned the all history record yield when finally unwound by the liquidators, and made LB fundamentally solvent at the death?
Edit: solvent at crisis time. LBI wasn't linked to onshore information systems.
The problem wasn't solvency. It was liquidity. The point of bank regulation is to ensure that banks can survive small bouts of illiquidity and remain solvent through major ones.
> Are any of you willing to back up any of these bold sentiments with actual money? Or are you just like the rest? All words, no soul?
If you are so sure of this then let us make a Real bet. 50 million sounds good yes? And if you don't have 50 million we can simply bet your entire net worth.
It's a real offer and am willing to part with it if I'm wrong. Please don't make a mockery of it
I am happy enough with what was proposed and am not being facetious, was wagered directly to the person who wrote the article a few others after that.
Don't see anyone daring to take up the challenge, just low effort and frankly low-tier commentary that doesn't belong on this website in response. I will offer it to you as well since you seem keen. Any amount up to $5000 USD.
It's not much in the scheme of things to prove oneself right yes? I'm happy to have it all donated to charity which you can claim as tax deductible if that so pleases. Or are we not even talking about Tether anymore and just something else, something deeper that lurks within the unsettled anger of all these comments?
I'm happy to discuss terms. Over one year I don't see any risk to this bet at all. And it seems the people I'm offering to feel the same way, as they are running away terrified from it.
I offer you the same deal, $5000 USD 1:1 that Tether maintains the peg above $0.98 for the next year averaged at the UTC 00:00 USDT/USD price on Kraken everyday.
We both keep it with an intermediary who invests in something that attempts to maintain a semblance of keeping up with inflation.
One year from now we tally up the score and the correct person wins. You only need a few days of tether collapsing to win this bet.
It's a simple wager that surely makes sense for those with all these strong words and bravado in here.
Thats breaking the peg though! Tether says its 1 to 1 with the pegged fiat currency. It doesn’t say its .98-1.01. There are pegs that do this sort of range based pegging but Tether is not claiming that.
Tether's claim is that verified users can redeem USDT for USD 1:1 at https://tether.to/. Exchanges like Kraken are secondary markets and Tether does not claim anything about them.
"Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. 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."
Oh, and don't forget the fees:
"Fee per fiat withdrawal: The greater of $1,000 or 0.1%"
Given that the other crypto people offering “keep me honest” bets are offering 5:1, 10:1, and 25:1, on better terms, no, that’s not interesting, but I’ll write you a free option to laugh about me over the Internet if it turns you you’re right.
Why does it mean that? If I'm 50% sure an event will occur, but someone will offer me worse odds than that (I.e. better payout) why would I take 1:1 odds?
Because that is not what happened. Grimburger did not offer (from his point of view) worse odds than 1:1. And patio11 refused 1:1 because it was apparently not interesting to him.
Now one could take that as a salesmans tactic to try and extract better odds from Grimburger but at that point the monetary aspect would become the focus and not the wager itself. A wager between two people who are in it for the sport and both sure of their positions should carry 1:1 odds. One could ask for a lower amount or refuse completely on monetary grounds but not request odds in ones favor.
Yup exactly. But other bets (surely they are not betting on the exact same thing with just different odds and even if they were they) don't influence the chances of this bet. These are independent events. Either you think you are likely to win or not. To refuse 1:1 odds on the grounds that you could make more money somewhere else means either A: you do it for the money and not the sport or B: don't have enough money to wager on all these bets but then he should ask for a lower amount or refuse with that reasoning. Maybe I am missing some other possible explanation? The reason of refusal is very important to understanding the motivation behind it.
If there are two people offering you a bet:
Person A offers you 5:1 odds in your favor saying that a random dice throw will yield a number small than 3.
Person B offers you 1:1 odds in your favor saying that a random number chosen between 1 and 10 will yield a number bigger than 6.
Thinking about the wager with Person B is independent of the wager with Person A. When deciding which bet to engage in the answer is both because in both cases you should be convinced that your chances of winning are >50%. Refusing the second bet would lower your overall expected winnings.
25:1 is not _worse_ odds. He wants me to pay $125,000 if he wins the bet, yet if he loses he gives me $5,000. Surely you can see what that says about the level of confidence here.
The emperor is clearly not wearing any clothes.
There's lame horses that get better odds in races than what is being offered to me if Tether collapses (and even recovers in a few days after that) right now.
The peg just needs to collapse for a tiny fraction of the next year for them to win this wager. Why wouldn't anyone take such a guaranteed profit? :)
And to be fair I doubt it's the loss of money that scares Patrick, it's the USDT/USD price on May 21st 2023.
It's not the money, it's the principle. I'm over listening to Tether stuff after all these years on this website, personally don't think much of the people behind finex but am more than certain the peg will hold up just fine this decade.
You're American, I'm Australian, there really shouldn't be any problem here with finding a 3rd party intermediary, though I'm not sure about US laws on these sorts of p2p wagers.
You truly want to get $125,000 in return for my $5000 bet on tether maintaining the peg? Surely that says something about your faith in them asking 25:1 that they go under in the next year? I'm sort of tempted at the offer of 1/5th of that, as unfair as it seems.
Happy to do it if we each donate to the charity of the other's choice? 1:1? You can keep the tax benefit.
If it's about the principle, shouldn't you be rallying against a company that has not been able to prove that has the reserves that it claims to have?
Keeping the peg is the least of the problems. If they somehow showed up tomorrow and said "Listen, we finally ran an audit and we found out that we really have only $0.90 for every minted USDT. But given that the small print says that we are allowed to return whatever we want, whenever you want, we decided that everyone will get a 10% haircut, ok?", you would bet that the market would shake for a week or two, but most of them would just scream Finally! and continue gambling what was left on the next project.
The real problem is that all that comes with that lack of transparency: the market manipulation, the cop-out to become a unregulated central bank, the inability for others to make a true assessment of the health of the market.
Tether basically took all the work from the cypherpunks and turned into a Casino that can't even be properly audited. They can manage to keep the peg for 20 more years for all I care, but each day they are still around is another day wasted that could be used for more meaningful things.
I'd be interested in that bet for $1000 if it were simply a binary "USDT will be below $0.98 at midnight GMT one year from today", without the averaging part.
