It's a big deal from the standpoint that tether stepped in, printed ~ a billion USDT over the past three days, and prevented further plunging. Someone should investigate that...
Reminder, if you're invested in crypto long term, you'd better say a prayer every night that Tether is actually backed by ~$180B of liquidity.
Does anyone actually believe that Tether is backed by anything? I know there are at least a few companies that have to pretend Tether is backed by something. But I can't really believe anyone saying it. It'd be sort of like if someone just declared Madoff never really ran Ponzi scheme. It was just a big misunderstanding.
Furthermore does it even really matter if Tether is backed by anything? My understanding is they've always maintained an absolute veto on any redemption. So tehter could be backed by Trillions in assets and it'd be irrelevant.
Tether holds closer to 200B USD reserves (customer money) and keeps all interest on that, it's a ridiculously good business. Jeopardizing that in any way would be absurd.
Just assuming treasury returns they're making more than 7B USD profit a year with just a couple of employees.
You're assuming that the 200bn is all customer money. This is very doubtful to me considering that many times Tether magically starts minting billions of new coins to buy Bitcoin whenever Bitcoin prices start falling
You're also assuming that they make 7bn in profit per year just by keeping this rdiciulously large amount of money in a bank, but their own notation says that only 105bn is held as US treasury bills. The rest of the money is effectively invested, whether in gold or bitcoin or corporate bonds or loans. All subject to going down aswell as up.
Luckily for the cryptocurrency sector, Tether makes it so ridiculously hard to turn Tether into money that their bullshit probably won't be discovered for a long time, so the make believe valuations of bitcoin can stay as they are
The potential reward for putting it in something riskier is enormous. You and I might consider $7 billion/year to be plenty and there's no point in chasing higher returns, but we tend not to be the sort of person who is in the position to control a fifth of a trillion dollars in the first place. Investing it in something riskier to make more money would be foolish but it's also something that's been done many times before.
Tether is the defacto central bank for Bitcoin. Since iFinex isn't a country, doesn't have a GDP, and doesn't have a military, MMT doesn't really apply to them. So yes, it's very important, especially during a significant Bitcoin contraction. Tether represents 8% of Bitcoin's (liquid) market cap, and BTC's market cap is already overly inflated due to wash trading.
A reasonably common belief among people who have studied the issue is that Tether was at one point unbacked (see NY AG report), and likely fudged their numbers a bit through the use of corperate paper which was plausibly worth $1 but practically could be bought for less than $1, but they have since made enough through various investments that they could now plausibly be fully backed.
And to be fair, given basically all of the fraudulent companies that managed to pass audits, the fact that they won't even bother is a pretty strong signal.
But hey, ultimately it's just gonna blow up the economy at some point, but we'll be fine right? Right?
A tether truther, in this day and and age? 2017 called...
The passing of GENIUS act marks one of, possibly the largest banking regulatory changes in the US. The stablecoin industry is very legitimate, has very firmly established guardrails and rules, and tether is working fast to become fully compliant.
This "TeTheR iS a SySTEmiC RiSK tO eVEryThiNG" mentality is fully dead. Tether is compliant in a regulated industry, tether is backed, and tether is quickly running away with the entire market.
A company actively navigating a huge regulatory change is not the same as a flagrant scam hiding in plain sight.
I don't know why I'm bothering to reply. Tether truthers are modern day financial luddites, willingly blind and ignorant of the sea change taking place in plain sight after the passing of GENIUS.
I don't have a dog in this fight. I don't much care about crypto and know pretty much nothing about Tether beyond the fact that they have a USD-linked coin, plus what I just read on Wikipedia. "They're on the up-and-up because they say they're going to be complying with US law in the future" just isn't a very convincing argument.
> I don't know why I'm bothering to reply. Tether truthers are modern day financial luddites, willingly blind and ignorant of the sea change taking place in plain sight after the passing of GENIUS.
Well they must be regulated somewhere, right? Where are the reports from regulators that all is OK, or at the very least an audit.
And if you can't get one of the Big 4 to sign off on your finances, then you have big big problems. Even Wirecard and Enron managed that.
Assuming it happened, if Tether didn't de-peg due to this then it was probably the right thing to do. If they printed it and bought BTC in the dip they are massively ahead since BTC already regained a third of what it lost in the wipe.
1. Bloomberg Businessweek — “Anyone Seen Tether’s Billions?” (Cover Story, Oct 2021) — a deep investigation into Tether’s backing, counterparties, and leadership. www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether
Apologies, I meant about them printing the money Friday. Trying to understand the relationship with them stabilizing bitcoin prices somehow but also why everyone is worried about USDT and it being "real"
Tether's backing / solvency become more important when it's a major provider of crypto liquidity.
If liquidity is generated by many participants, the failure of one doesn't impact the underlying asset.
If liquidity is concentrated in one participant, it increases the potential volatility of the asset, as that participant's failure can drastically limit liquidity and leave the asset open to bigger price swings.
That said, even at $1B, Tether is a smaller portion of the BTC market than it was historically.
> Reminder, if you're invested in crypto long term, you'd better say a prayer every night that Tether is actually backed by ~$180B of liquidity.
As a long-term holder of Bitcoin I do not see why I should lose any sleep due to Tether risks. Why should I care even if it de-pegs?
On the liquidation itself: leveraged bets gone wrong will get liquidated, whether the bets were on stocks, currencies, Treasuries, crypto or grain futures. BoJ, for example, regularly makes rapid large buys to shake out leveraged yen speculators. I do not see anything concerning or unusual with this week's crypto shakeout. My 2c.
Presumably you should care because tether is (per the OP argument) pushing the value of the entire crypto ecosystem up and the Bitcoin price is a primary beneficiary of that.
Fair, but there are so many things pushing the Bitcoin price up and down: approvals and rejections of various ETFs, tax law changes around the world, corporate adoption and lack thereof, successes and failures of L2 networks, etc. And each of those can cause comparable long-term movement in the BTC than tether's or altcoin's adoption or collapse.
As a long-term BTC holder my primary reason is protection against debasement. It is a volatile asset, historically with 50-80% drawdowns from time to time. But as long as I think it still serves as a hedge against debasement I am happy to hold a portion of my net worth it in.
Growing up, I have seen fiat go worthless twice in my life: once the government zeroed out previous money overnight, once it hyperinflated fiat by over 1000x in two years. An 80% temporary drop is peanuts compared to that.
There was a flash crash down to ~$104K that wiped out leveraged traders. Liquidation cascades are relatively uncommon and the last one was in 2021 IIRC.
The wild moves occurred on alt coins, some went down 80%.
Mr. President's own World Liberty Financial for example went down from 18c to even 6c in an instant.
it happened really fast so a lot of positions were liquidated automatically by force, rather than voluntarily by the user. that's really the main distinction
The real story here is insider trading and corruption by people close to President Trump, who knew, down to the exact minute, when to short BTC and ETH.
BTC, meanwhile, being a scarce asset, will recover as fiat supply increases with time.
Yeah insider traders opening new accounts just over 1 day before, putting tens of millions into those accounts as shorts and stopping right before the president's announcement (to the second in some cases) meaning they walked away with hundreds of millions...
It's obvious, it's out in the open, and nobody will prosecute it.
Yeah, the commotion is a bit silly. "The crash" basically brought the price of BTC to the level it was comfortably at two weeks ago.
I think disproportional media interest in last two weeks of appreciation and "the crash" is a failed attempt to finally kickstart this BTC bull or bear market. Somebody is getting impatient with last two years of steady growth.
I don't really see the move Friday as a huge deal (in the scope of the Wild West crypto is), looks like business as usual.