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> They only need to have made 2% on those other investments and the 2% lost on crypto is irrelevant.

A quarter of their investments are commercial paper, which hasn't averaged as high as 2% yield since a brief period in March 2020. Actual cash of course has 0% yield. US Treasuries (sub 1-year), which make up nearly half their assets, also hasn't hit 2% yield any time recently. So no, they aren't recouping their loss on cryptocurrency.

> I think people fail to notice how similar a (non-fraud) tether model is to a traditional bank: you take short term deposits, you make long term loans, and you hope to have enough capital on hand to deal with any runs. Given the liquidity of modern capital markets, it's very rare for the fed to have to bail out small deposit banks. So it's reasonable to assume the same will apply to tether.

One of the reasons why banks rarely have to be bailed out is because there are stringent regulations on bank holdings. For example, a minimum tier 1 capital ratio, the amount of equity that needs to be held to cover unexpected asset shortfalls. This requirement is I believe 10%, and based on the evidence Tether has produced, Tether's tier 1 capital ratio is... 0%. It should also be noted that Tether is perilously close to insolvent, with (claimed) assets about 100-101% of total liabilities; most financial institutions prefer to be at least ~110-115% of total liabilities.

Compare Tether to banks if you want to, just be aware that it just makes Tether's financials look even worse in comparison.



Slightly lower actually according to https://en.m.wikipedia.org/wiki/Capital_requirement, though the exact figure doesn’t matter that much. The 10% figure in your mind was probably the old reserve requirement, which was recently eliminated in the US.


Don't mistake me for a tether fan. I don't pretend to know if it will work or if it moral or if it's all a scam. I don't own any.

I'm just laying out the maths...

And to be clear, they only need to make 2% total to cover their crypto loses. If the average tether coin exists for 18 months before being redeemed, 1.5% per annum will net them 2.2% over that period and they're golden.

That extra 0.2%, for a $10bn withdrawal is 2million USD in profit right? Not bad split equally between 5 employees, for a month with massive crypto loses and 10bn in net withdrawals...


Cash has a negative yield, because rats and other vermin nibble on it.


Close. Cash has a negative yield once savings exceed investments because any additioan investment in physical capital will produce capital that rats and other vermin nibble on. If the yield is stuck at 0% then the physical capital is gone but the money is still there, leasing to inflation. Since money is a claim on the production of other people, it would be wholly absurd to distort the market by forcing the interest rate to never fall below zero as this does not deal with the rat problem. In fact it makes it worse because holding onto money let's you avoid costs associated to rat damage and therefore it fools our brain into thinking we have something that really isn't there anymore, the rats ate it. So instead, to prevent rats from eating our physical capital, we decided to produce none and leave a portion of the population unemployed. As it is illegal to trade without money the division of labor breaks down, people can no longer feed themselves because it is illegal for them to do so. The masses get angry at the rich because they took all the remaining opportunities while simultaneously pretending to be the heroes with their philanthropy.




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