[HN Gopher] Bitfinex and Tether required to end all trading acti...
___________________________________________________________________
Bitfinex and Tether required to end all trading activity with New
Yorkers
Author : dgellow
Score : 483 points
Date : 2021-02-23 12:55 UTC (10 hours ago)
(HTM) web link (ag.ny.gov)
(TXT) w3m dump (ag.ny.gov)
| jkhdigital wrote:
| Honestly, this is kind of a nothingburger. The press release
| seems to merely reinforce what was an open secret in the
| cryptocurrency world, which is that Bitfinex and Tether have
| played fast and loose with whatever reserves they received for
| their Tether issuance. Which is, of course, utterly unremarkable
| to anyone who knows anything about how financial sausage is
| really made.
|
| Bitfinex and Tether are shady. Caveat emptor, and carry on
| hodling.
| TrackerFF wrote:
| If they are shady, then it's high time to employ and enforce
| regulations - if they can't regulate themselves, then someone
| else has to.
|
| Arguing that this is old news, and that a small minority has
| been "in the know" doesn't hold much water either - the crypto
| scene has long since become mainstream, and as such, attracted
| regular masses.
|
| In the end, it boils down to consumer protection.
| PragmaticPulp wrote:
| It's more important than that. Cryptocurrency proponents have
| been trying to downplay the Tether situation for years.
|
| One of the common dismissals was the idea that if what Tether
| was doing was truly fraudulent, some government institution
| would step in to intervene. Proponents pointed to the lack of
| intervention as a signal that Tether was operating above board.
|
| This also reveals new facts and numbers about the scale of what
| has been going on. We still don't know the full story, but it's
| clear that reality is even worse than we thought.
| jkhdigital wrote:
| I don't disagree that Tether is likely a big fraud, but my
| point is that _even the regulated financial system_ is full
| of questionable accounting and long-running, undiscovered
| fraud. Remember Bernie Madoff? His fraud lasted _17 years_
| before falling apart.
|
| It would be nice if Tether eventually falls apart too, but
| the world will never run out of fraudsters and hucksters.
| saalweachter wrote:
| The innovation of Bitcoin is that it is a _decentralized_
| Ponzi scheme.
|
| Bernie Madoff's scheme fell apart because it was
| centralized, and so, once you arrested Madoff, it was over.
| The end.
|
| There's no one at the center of Bitcoin. There are big
| players, sure, but they are all replaceable. It's happened
| before and it will happen again. And each time one exchange
| or big player is arrested, shut down, or slinks away having
| stolen enough money to sate themselves, someone new can
| seamlessly slip in and start hyping Bitcoin and taking a
| percentage from the new rubes without missing a beat.
|
| I honestly don't think it will ever go away, completely,
| for good, no matter how often it booms and busts. When I'm
| in a nursing home I'm going to be getting calls from boiler
| rooms trying to convince me to move my retirement savings
| into Bitcoin, I'm convinced.
| varispeed wrote:
| Almost every currency is a ponzi scheme - that does not
| only apply to crypto.
| saalweachter wrote:
| Wombats poop cubes -- they stack them to mark their
| territory.
| mumblemumble wrote:
| Bernie Madoff's fraud was big and awful, but, if the
| allegations about Tether are true, then (edit: for the
| purposes of this particular discussion) comparing the two
| is a category error. Madoff's fraud never raised any
| questions about whether the exchange rate between USD and
| some other currency was legitimate.
| teknopurge wrote:
| I did not see any data in that post that is new. The latest
| news this-year is that Tether paid-off the remaining balances
| of borrows/loans from other asset classes to make the USD
| holdings whole. The only way to tell is an independent 3rd-
| party audit, which would bring some finality to this
| discussion.
| owenmarshall wrote:
| Considering the meteoric rise of BTC is tied so deeply to
| Tether issuances, it sounds an awful lot like you're trying to
| convince us the emperor really has clothes.
| sekai wrote:
| > Considering the meteoric rise of BTC is tied so deeply to
| Tether issuances
|
| Got evidence for that? Because printing USDT after BTC went
| up is not a manipulation, but a liquidity boost.
|
| Let's not forget that USDT isn't the only stablecoin in town,
| it's ratio is actually decreasing, all the way from 3k to
| 50k.
| owenmarshall wrote:
| As a matter of fact,
|
| https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903
| jkhdigital wrote:
| Correlation is not causation. And your mental model of how
| the cryptocurrency markets work is likely way too simplistic
| --did you know that cryptocurrency perpetual swap derivatives
| clear over $350B in daily volume?
|
| Pretend for a moment that Tether pulls a Nixon, and closes
| the "dollar window" ending redeemability. Then what would be
| the difference between Tether and e.g. the BitMEX XBTUSD
| perpetual swap contract? Just think about it for a while.
| gzer0 wrote:
| Editing my response because OP has edited theirs- putting
| my original comment out of context.
| jkhdigital wrote:
| Go read more economics. And maybe trade some financial
| derivatives, lose some real money and see how that
| sharpens your mind.
| [deleted]
| cool_dude85 wrote:
| Ending redeemability? Can you redeem a tether for a USD
| today?
| BelenusMordred wrote:
| Yes, certainly can, right here:
| https://www.kraken.com/prices/usdt-tether-usd-price-
| chart/us...
|
| You can also short it if you are convinced Tether is
| going to collapse.
| cool_dude85 wrote:
| Sorry, trading it for a dollar isn't the same as
| redeeming it for a dollar.
| sekai wrote:
| You can easily withdraw USD/EUR you got from trading in
| USDT.
| [deleted]
| mamon wrote:
| You're missing the point: _trading_ means that you have
| to find someone willing to do the trade with you. If no
| one wants to buy your Tethers then you 're doomed.
| _Redeeming_ is completely different - the issuer of your
| asset has a legal obligation to buy them from you (or at
| least that 's how it should work for assets that aren't
| scam).
| NelsonMinar wrote:
| This is not "utterly unremarkable". Rational investors don't
| buy investments whose very basis is a lie. It's only
| unremarkable to cryptocurrency gamblers who've already accepted
| everything they're doing is a slow motion scam.
| cbhl wrote:
| If I'm reading the settlement correctly, Bitfinex will now have
| even _less_ USD to back Tethers, since they 'll have to wire an
| $18,500,000 transfer to the State of New York.
| ardy42 wrote:
| But if there are 34 billion tethers, $18 million is like a
| rounding error.
| charcircuit wrote:
| Tether is over collateralized. If they paid that $18.5M from
| their collateral it would still be over collateralized by
| $145.9M https://wallet.tether.to/transparency
| raiyu wrote:
| Looks like Tether is taking the settlement as an agreement of no
| wrong doing and that no tether coins were issued without backing.
|
| https://tether.to/tether-and-bitfinex-reach-settlement-with-...
| PragmaticPulp wrote:
| They're moving the goalposts.
|
| The issue was that they didn't have the money at some point,
| but they continued operating as if they did. I'd be even more
| concerned if they think this is okay now. Tether isn't useful
| if they're only backed at time of issue.
|
| They also printed the majority of Tethers after this 2019
| lawsuit.
| kryogen1c wrote:
| LOL
|
| "Contrary to online speculation, after two and half years there
| was no finding that Tether ever issued tethers without backing,
| or to manipulate crypto prices."
|
| I like how they say "this report doesnt include wrong-doing"
| instead of saying "we didnt do anything wrong"
| cwhiz wrote:
| Meanwhile, daily Tether volume is $170B. The entire crypto
| ecosystem is reliant upon the Tether scam.
| cdiddy2 wrote:
| no its not. that is bad data from no name exchanges lying about
| their volume
| cwhiz wrote:
| Ha. The exchange reporting the highest volume is... Bitfinex.
| I believe you that Bitfinex would lie.
|
| Coinbase is reporting $210 billion daily volume.
|
| Is every market lying? Or are you just personally wrong?
| codehalo wrote:
| But Coinbase doesn't trade Tether. What is the point you
| are trying make here?
| cdiddy2 wrote:
| where on earth are you seeing coinbase doing $210 billion
| daily volume? Coinbase has only done 94 billion of volume
| for the month of February so far
|
| monthly volumes by exchange:
| https://www.theblockcrypto.com/data/crypto-
| markets/spot/cryp...
| cwhiz wrote:
| I didn't say Coinbase was doing $210 billion 24h volume.
| I said Coinbase is reporting that Tether had $210 billion
| 24h volume. It's right there on the Coinbase tether page.
|
| https://www.coinbase.com/price/tether
| cdiddy2 wrote:
| ya that is wrong. not sure where coinbase is getting
| their data from.
|
| keep in mind the total crypto market cap is 1.5 triilion.
| so tether alone doing 200b is an absurd statement. Total
| daily volume across all exchanges is only just getting to
| 50b these days
| cwhiz wrote:
| "Every exchange and crypto market reporting Tether volume
| is wrong."
|
| Some person on the internet, with no source to back the
| claim.
| cdiddy2 wrote:
| I posted my source 3 comments up.
| cdiddy2 wrote:
| This isn't directly related, but you may find these
| interesting.
|
| Fake volume related to a recent Tether piece in the WSJ:
| https://medium.com/@nic__carter/assessing-bitcoins-
| liquidity...
|
| Bitwise presentation to the SEC regarding fake volume
| among exchanges: https://www.sec.gov/comments/sr-
| nysearca-2019-01/srnysearca2...
| stefan_ wrote:
| Feels like the NYAG preferred to take an easy win over fully
| exposing the fraudulent scheme. But I guess in the grand scheme
| of things it's better to get $18M for state coffers now than be
| another bag holder when Tether inevitably combusts.
| PragmaticPulp wrote:
| This particular lawsuit started in 2019 and was narrowly
| scoped. They don't have infinite jurisdiction over Tether's
| global operations.
| dgellow wrote:
| Something to note: they only had data from 2017 to 2019. Tether
| printed the majority of their coins in 2020/2021.
| NelsonMinar wrote:
| I bet they pinkie-swear those new coins are really really
| backed by dollars this time.
| olalonde wrote:
| The hypocrisy. Tether was pushed to the "darkest corners of the
| financial system" *because* of regulators. It seems they tried
| their best to remain solvent and didn't steal cash reserves. But
| regulators made their life hard at every turn. If you care about
| protecting USDT holders, maybe stop interfering with their
| operations and stop seizing their funds? And now, they have to
| submit regular reports to the NY regulators while being banned
| from doing any business in NY? I doubt many USDT holders are very
| happy today about the NYAG's attempts to protect them.
| aplummer wrote:
| From the article:
|
| > Bitfinex and Tether recklessly and unlawfully covered-up
| massive financial losses to keep their scheme going and protect
| their bottom lines," said Attorney General James. "Tether's
| claims that its virtual currency was fully backed by U.S.
| dollars at all times was a lie
|
| Are you claiming this is false and they paid the 18.5m penalty
| for not lying about USD reserves?
| olalonde wrote:
| Part of their USD reserves were frozen by regulators in
| Poland and Portugal. It is debatable whether having funds
| frozen by regulators can be de accurately described as
| sustaining "massive financial losses". Sure, they could have
| been more transparent about what was going on. But so far, it
| seems that all their issues originate from regulators making
| it impossible for them to run a legitimate business, not
| fraudulent intentions (which is what they are often accused
| of).
| aplummer wrote:
| Your statements don't align with the claims in the article.
| It says they lost (as in, "where is it") almost a billion
| dollars and said they still had it, while knowing they
| didn't.
|
| Bad situation but honest: Legal. Bad situation but
| dishonest: Illegal.
| olalonde wrote:
| The announcement by the Attorney General is quite biased
| and doesn't tell the full story. For a better
| understanding, I invite you to read the official
| settlement agreement[0] and Tether's (obviously biased)
| take on it[1]. It seems that Bitfinex funds were frozen
| by government agencies and that Tether temporarily
| provided a line of credit to Bitfinex while awaiting for
| the funds to be released. The line of credit was repaid
| in full as of January 2021, according to the settlement.
|
| I'm not saying Bitfinex/Tether acted irreproachably, they
| surely could have been a bit more transparent about what
| was going on. But I have some empathy for them. They
| wouldn't have been put in that difficult situation if it
| weren't for the insanely restrictive regulatory
| environment that made it impossible for them to obtain
| banking relationships.
|
| [0] https://ag.ny.gov/sites/default/files/2021.02.17_-_se
| ttlemen...
|
| [1] https://tether.to/tether-and-bitfinex-reach-
| settlement-with-...
| qertoip wrote:
| According to the agreement with NYAG Tether admitted _no_
| wrongdoing. The statement: https://tether.to/tether-and-bitfinex-
| reach-settlement-with-...
| hmcdona1 wrote:
| I'm so confused why everyone just blindly believes Tether is this
| whole big conspiracy. I am by no means defending the organization
| but let's just take a step back here:
|
| > Where does the funding come from to print tether?
|
| When they mint 1 Tether they sell it on an exchange for $1. They
| don't need anyone to upfront lock up $1 and then also sell it for
| $1...
|
| Are stablecoins not just essentially an interest free loan to the
| minter? That's why hundreds of them are popping up all over the
| place. Minters can go invest that money however conservatively
| they want and just rack up free interest on billions. Why the
| hell would they NOT print more if there is demand. Consequently,
| why the hell would they need to participate in any illegal
| activity when the can print interest free loans whenever they
| want?
|
| Yes, ideally you'd prefer someone with this position to be
| overcollatorized and not simply ensure $1 = 1 tether. But that is
| the risk you take holding that stablecoin. Pick up DAI if you
| want an overcollatorized asset.
|
| I just don't see the incentive for some of the other arguments
| out there - many imply they are just printing it and selling it
| for $0 I guess? Or is the argument they just siphon the money to
| another organization? Because that would be a more valid concern.
| There just seems to be this assumption that somehow someone is
| fronting or magically creating value from nothing. No, the market
| is by buying newly minted Tether on exchanges. That's where the
| funding comes from. How is this not obvious?
|
| There is probably a lot more depth to this topic than I am aware
| of, but some of the top upvoted comments here just seem to be
| spewing nonsense.
|
| tldr; If a stablecoin minter sells a newly minted coin for
| $1...then by definition there is now $1 available to back that
| coin. Stop conspiring where the funds are coming from. The worry
| should be how they are investing said collateral backing the
| coins from there.
| eightysixfour wrote:
| > When they mint 1 Tether they sell it on an exchange for $1.
| They don't need anyone to upfront lock up $1 and then also sell
| it for $1...
|
| According to the argument against Tether, your first principal
| here is wrong. In this argument, Tether mints a USDT and trades
| with someone who has bitcoin or other crypto and wants a
| stablecoin. What the trader believes they are getting is a coin
| which is 1:1 backed by USD. In this situation, it is not.
|
| Tether gets bitcoin. Tether can then print _more_ USDT which
| they trade for bitcoin at a higher price. They would then have
| an infinite money cheat for buying crypto assets (as long as
| people believe a USDT = $1) which enables them to drive the
| price of crypto upward.
|
| Tether claims that the pattern is "Someone gives us USD, we
| give them Tether, they trade for whatever they want", _this was
| provably false_ at some points in time.
| christiansakai wrote:
| Does this mean that Tether is not buyable by NYers in Coinbase
| and Gemini?
| TacticalCoder wrote:
| Gemini offered/offers USDT?
| christiansakai wrote:
| Oh actually maybe only Coinbase
| charcircuit wrote:
| No, Coinbase has their own stable coin USDC.
| nickthemagicman wrote:
| This is why I like Stellar Lumens. The exchange is built in!
| [deleted]
| labrador wrote:
| "Junk" bonds seemed like an appropriate term for questionable
| bonds back in the 1980's... By the same logic, cryptocurrencies
| should be called Junk currencies
| Tangokat wrote:
| This is the important part going forward:
|
| "Tether must offer public disclosures, by category, of the assets
| backing tethers, including disclosure of any loans or receivables
| to or from affiliated entities. The companies will also provide
| greater transparency and mandatory reporting regarding the use of
| non-bank "payment processors" or other entities used to transmit
| client funds."
|
| So from now on Tether must be backed 1:1 and provide
| transparency. This should severely limit the risk of Tether
| blowing up the crypto ecosystem.
| rtrdea wrote:
| Bitfinex isn't an American company. This is ridiculous
| Spooky23 wrote:
| What's ridiculous?
|
| That the company's home jurisdiction allowed them to defraud
| the public?
| robjan wrote:
| It's not even clear where the company is physically located.
| It's a Hong Kong company but all of the addresses here are
| just virtual offices and shell companies.
| bonzini wrote:
| The full title ends with "Illegal Activities in New York", not
| sure why it was removed.
| dgellow wrote:
| Because it's too long for HN (I instead replaced "Attorney
| General" by "NYAG", not ideal but an ok compromise IMHO)
| im3w1l wrote:
| "Bitfinex banned from New York."
|
| Edit: I'm getting downvoted but I went soft on him. You
| know what, I'll say it. The choice of which words to retain
| (virtual currency trading platform??) and which to drop (in
| New York) is really bad and veering into suspicious, seems
| like it's trying to stir up panic.
| dgellow wrote:
| It's the title of the linked press release, with a minor
| change to fit the maximum length required for HN
| submissions.
| im3w1l wrote:
| You make it sound like they have been taken down
| globally. That's not a "minor change".
| dgellow wrote:
| How would the New York attorney general shut down the
| company globally? That doesn't make sense. But feel free
| to contact dang or other moderators and ask for a change
| of the title if you think that can be improved.
| im3w1l wrote:
| People here are from every part of the world. Many wont
| know what a "NYAG" is or what powers they have, in fact I
| bet quite a few Americans don't know either.
|
| Oh well.. the new title is good.
| kasey_junk wrote:
| Note the headline should add "in New York" or the like.
| GavinMcG wrote:
| Do you expect to get away with illegal activity when you travel
| abroad?
| jobigoud wrote:
| A lot of people do. For example driving over the speed limit
| because they can't be fined.
| arberx wrote:
| Have no idea why ycombinator is so salty towards anything crypto.
|
| Yes, tether was wrong when they said USDT was backed by "US
| Dollars". But, the conclusion is USDT is backed by something, the
| likes of which is probably a fractional reserve.
|
| Case is resolved, with Tether admitting no fault.
| Clewza313 wrote:
| "Backed by something"! It sounds so reassuring when you phrase
| it that way.
| arberx wrote:
| That was the conclusion of the AG.
|
| Case is moot. Tether is definitely sketch, but it's not this
| massive money laundering/conspiracy HN thinks it is.
| FireBeyond wrote:
| "Partially backed by something" was indeed one of the
| conclusions of the AG in this limited scope investigation.
|
| Meanwhile, Tether is, was, claiming "Fully backed by USD!".
| And yet you are acting like the AG was supportive of
| Tether's claims, "Oh, yes, even the AG says so!"
| joshuakelly wrote:
| It's pretty amusing in the context of YC specifically, and less
| so HN, given that Coinbase is very likely to become the most
| valuable YC company to date.
| [deleted]
| ldbooth wrote:
| So let's assume tether is a fraud. All they have to do is buy
| bitcoin with their cash received for tether and they are out of
| reach of us regulators. Is it Fraud or is it Genius? Yes.
| divs1210 wrote:
| America lied to the world when it claimed each dollar was backed
| by gold.
|
| When the world figured it out and there was a bank run, the gold
| standard was "temporarily" put off by Nixon in 1970.
|
| Bitfinex just seems to be playing the same game America has
| always been playing.
| exabrial wrote:
| Link?
| divs1210 wrote:
| 1. https://en.wikipedia.org/wiki/Nixon_shock
|
| 2. https://www.wikiwand.com/en/Exorbitant_privilege
| exabrial wrote:
| thanks!
| jiveturkey wrote:
| Hopefully this isn't drowned out by all the crypto discussion.
|
| How can NY require mandatory reporting on core business, if both
| entities are forbidden now to transact with New Yorkers? How
| would this even be enforceable? "Sorry, we don't do business in
| your state."
| dragonwriter wrote:
| > How can NY require mandatory reporting on core business, if
| both entities are forbidden now to transact with New Yorkers?
|
| They can because that's the term the firms agreed to to settle
| the investigation and avoid a suit over misconduct identified
| by the OAG.
|
| > How would this even be enforceable?
|
| The OAG takes the firms back to court for violating the
| settlement agreement, which can include filing charges for any
| misconduct preceding and covered by the agreement, for which
| the statute of limitations is suspended by the agreement.
|
| > "Sorry, we don't do business in your state."
|
| That...doesn't help them at all.
| lifty wrote:
| This news is so funny. Tether detractors see this as confirmation
| that they were right all along, while crypto currency fans say
| that this is confirmation that it was FUD all along. No bridges
| were built in this endeavour.
| jbirer wrote:
| No bridges need to be built, only people saved from losses and
| fraud.
| bhouston wrote:
| I like btc but in a declaring that tether is fraud isn't about
| building bridges, it is about being correct. Getting rid of
| tether is the best way to legitimize btc. The sooner the
| better.
|
| It is confusing why you care about bridges with regards to
| fraud. When was fraud related to consensus building activities?
| Huh?
| [deleted]
| lifty wrote:
| I meant it as a figure of speech, in that the 2 parts can't
| see eye to eye. I care about the legitimacy of the space and
| I am not a big fan of these backed stable coins, because they
| can't be easily verified.
| baby wrote:
| The same way the fascists and the democrats can't seem to
| unify?
| ketamine__ wrote:
| Tether isn't decentralized but as it turns out users prefer
| convenience over ideology. This is pretty apparent from the
| rise of Binance.
|
| If you want to blame anyone though it's probably the folks
| that have been working on layer 2 since 2017 but haven't
| delivered in a major way.
| jMyles wrote:
| > Tether detractors see this... while crypto currency fans
|
| Be reminded that the overlap in this venn diagram is enormous.
| lifty wrote:
| Absolutely! I'm part of that venn diagram and I am
| disappointed that there wasn't more light shone on the whole
| thing.
| jcfrei wrote:
| _" Contrary to online speculation, there was no finding that
| Tether ever issued tethers [USDT] without backing, or to
| manipulate crypto prices"_
|
| I hope that ends the spreading of FUD - claiming that bitcoin and
| other cryptos are propped up by the printing of fake tethers -
| which seems to spread here every time there is a sharp rise in
| prices.
| thedufer wrote:
| "there was no finding" means that they did not show that that
| happened, not that they showed it didn't. You're reading
| something into that quote it very carefully does not say.
| PragmaticPulp wrote:
| This lawsuit only covers up to 2019, when the Tether supply was
| only a fraction of what it is now.
|
| It shows that Tether had no desire to correct the situation
| with the unbacked Tethers. Why does it matter why the Tethers
| were unbacked? The fact is that they were unbacked and Tether
| continued operating as if they were.
|
| Why would anyone trust an institution that has already
| demonstrated they don't care about backing and, moreover, that
| they'd rather hide that fact as much as possible until forced
| to reveal it.
| dgellow wrote:
| Read the settlement agreement:
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
|
| Page 4 of the agreement:
|
| > 20. Because of Tether's inability to conduct significant
| banking activity during this time, it could not itself hold
| dollars sufficient to back the hundreds of millions of new
| tethers that had entered the market. Until September 15, 2017,
| the only U.S. dollars held by Tether ostensibly backing the
| approximately 442 million tethers in circulation was the
| approximately $61 million on deposit at the Bank of Montreal.
|
| That's 14% of the cash required to back the issued Tether.
| tectec wrote:
| Where is that quote from? I don't see it in the linked article
| dgellow wrote:
| It's from https://www.theblockcrypto.com/post/95207/bitfinex-
| tether-ne....
| 35fbe7d3d5b9 wrote:
| https://www.theblockcrypto.com/post/95207/bitfinex-tether-
| ne...
|
| > Jason Weinstein, a partner at Steptoe & Johnson and counsel
| to Bitfinex and Tether
| FireBeyond wrote:
| Ahh, so their attorney said something nicely carefully
| worded, intended to imply to the lay person: "There was no
| specific finding that allegation X had absolutely occurred,
| so this shows that all along, allegation X has never
| occurred".
| jcfrei wrote:
| I think you are reading too much into it. That's just how
| the justice system works. You don't have to prove your
| innocence, you have to prove someone's guilty.
| 35fbe7d3d5b9 wrote:
| Noted unbiased participant "the defendants attorney" has
| been quoted in a pro-Bitcoin publication ;)
| [deleted]
| rednerrus wrote:
| It's weird that this has sent the price through the floor.
| dgellow wrote:
| Settlement agreement available here:
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
| jstrong wrote:
| usdt/usd market at kraken holding at ~$1
| https://cryptowat.ch/charts/KRAKEN:USDT-USD
| raiyu wrote:
| Is this the first official ruling on tether that shows it isn't
| backed 1:1 by the US dollar?
|
| That has long been speculated, but if this is the first official
| verification how does that affect the Market.
|
| Especially the self dealing of Bitfinex.
| kpaystaxes wrote:
| This isn't a "ruling" at all. The parties just reached a
| settlement agreement and Bitfinex/Tether did not admit any
| wrongdoing.
| [deleted]
| jcfrei wrote:
| The market doesn't care. Hasn't cared for years now, just look
| at the Kraken USDT/USD market which is freely tradable. Tethers
| are mostly backed by USD - no 100% but that's because some
| funds were seized due to regulatory scrutiny, not because they
| disappeared.
| albntomat0 wrote:
| I'm not convinced your argument works. Bubbles exist until
| they suddenly don't.
|
| This isn't a strong argument that it's a bubble, but the
| burden of proof is solidly on the tether folks to show that
| they're 100% backed, not the other way around.
| jcfrei wrote:
| I'm not arguing - I'm making a statement. It's evident from
| market prices that investors don't care. Whether the market
| _should_ care is another discussion but the parent asked
| about the market 's reaction.
| vzcx wrote:
| I am not sure why I should trust kraken, but even if I
| trusted them completely, this only proves tether has enough
| liquidity to maintain their peg, not that they are "mostly
| backed." That is to say, it only puts a relatively small
| bound on their reserve ratio.
| PragmaticPulp wrote:
| Tether themselves essentially admitted that it wasn't fully
| backed in 2019: https://www.coindesk.com/tether-lawyer-
| confirms-stablecoin-7...
|
| The strangest part of the Tether story is how much of it was
| obvious or even out in the open. Cryptocurrency proponents were
| happy to look the other way as long as prices were only going
| up. I suspect cryptocurrency proponents and Bitfinex are
| working hard to spin this as a win for Tether right.
| Cullinet wrote:
| no the strangest thing isn't how it was out in the open -
| that's precisely how to get away with fraud...the message and
| the reality aren't the same but the message is pumped into
| echo chamber
| [deleted]
| bhouston wrote:
| Getting rid of the fraud (tether) at the core of btc will
| strengthen btc. This cryptocurrency proponents should be all
| for it.
|
| I have honestly been surprised how long this obvious tether
| saga has gone on.
| ForHackernews wrote:
| This is only true if we accept your unstated premise that
| BTC itself isn't a big ole Ponzi scheme.
|
| I guess we could argue, "It's good news for our slightly
| more subtle fraud if the blatant, obvious fraud gets
| stamped out."
| CarelessExpert wrote:
| > This is only true if we accept your unstated premise
| that BTC itself isn't a big ole Ponzi scheme.
|
| Let's be clear, here: There's a _substantial_ difference
| between Bitfinex engaging in outright financial fraud vs
| a bunch of people buying into the value of a virtual
| currency for reasons no one can understand.
|
| BTC is not a ponzi. It's just a long-running speculative
| bubble. A collective delusion. You can disagree with
| that, sure, but it's certainly no more a fraud than
| Beanie Babies or tulip bulbs.
| ForHackernews wrote:
| Sort of. There are many many people hyping Bitcoin (and
| various bitcoin-adjacent projects: mining rigs, wallets,
| dodgy unregulated exchanges, etc.), and most of them have
| a vested financial interest in it.
|
| BTC didn't get to the price it is today on the backs of a
| few cypherpunks experimenting with decentralized digital
| currency technology.
| CarelessExpert wrote:
| > Sort of. There are many many people hyping Bitcoin (and
| various bitcoin-adjacent projects: mining rigs, wallets,
| dodgy unregulated exchanges, etc.), and most of them have
| a vested financial interest in it.
|
| You've basically described commerce.
|
| Pick a random asset class--stocks, real estate,
| commodities, etc--and ask yourself: are there people who
| are hyping that asset who have a vested financial
| interest in it?
|
| The answer is almost certainly "yes" in every case.
| ForHackernews wrote:
| In the less-scammy world of regulated finance, there are
| rules about disclosure and the SEC will come after you
| for running a pump-and-dump scheme.
| sekai wrote:
| > but it's certainly no more a fraud than Beanie Babies
| or tulip bulbs
|
| Did their bubbles also last 12 years, went through
| multiple bear/bull markets?
| ffggvv wrote:
| might strengthen it but not it's price
| dudus wrote:
| I've been following Tether for quite a long time. I have no
| absolute proof it is a scam but the writing is on the wall. Here
| are some facts.
|
| - The current Market Cap of USDT is 34 Billion Dollars. It was 4B
| this time last year. Since the value is pegged this means there
| has been an influx of cash of 30 B into this shady company in the
| last year alone. Who invested this money? We have no idea since
| Tether doesn't disclose, but we're supposed to believe all this
| money entered USDT even with the red flags we see.
|
| - There's a correlation between Tether printing new USDT and the
| Bitcoin Price.
|
| - There's no way to transfer USDT into USD. The few exchanges
| that say they offer withdraws actually don't if you go and try.
|
| - Daily volume of transaction is in the 100 B mark. Twice that of
| Bitcoin and 3 times Tether daily volume this time last year.
|
| - BitFinex is included in the NY decision because it's proven now
| that Bitfinex and Tether are operated by the same people. Note
| that a few years ago this was not only undisclosed but actively
| denied by Tether.
|
| - Tether initially told its investors it was 100% backed by
| dollar reserves and that it would be subjected to constant
| audits. The audits never happened, and they eventually conceded
| only ~70% was backed by "short term cash reserves".
|
| My conclusion is that the folks at BitFinex came up with a new
| currency, printed billions of it and used it to wash trade
| against itself and other crypto, creating an artificial demand
| that drove the prices up. It's textbook Ponzi scheme and will
| inevitably come crashing down, killing Tether, BitFinex and a
| chunk of the Crypto Market.
|
| Crypto folks will counter argue that people has been saying this
| for years but Tether is still chugging along and crypto is
| healthier than ever.
|
| Personally I won't touch any crypto with a 10 foot pole until
| this thing blows over. If that means missing out on a lot of
| possible gains so be it.
| tim333 wrote:
| >There's no way to transfer USDT into USD
|
| Use Kraken. You can change USDT to USD and withdraw money. I've
| done both.
| mastermojo wrote:
| This is the confusing part to me. Everything I read online
| talks about Tether being fraudulent. Shouldn't the price of
| Tether reflect a discount based on that? If it doesn't, does
| that mean the market is okay with a Tether being 1 USD even
| if it is not backed by anything?
| firekvz wrote:
| At some point yesterday, BTC/USD pair was trading up to
| 400$ lower than the BTC/USDT, that should be enough to tell
| you that a lot of people don't really want the USDT anymore
| and were willing to pay a 400$ premium to get real USD, it
| will start getting ugly at some point
| tim333 wrote:
| Not necessarily because Tether the company will use the USD
| or similar that they have to buy tethers on the market if
| the price falls below $0.995 or so. The worry is if there
| are say 30bn tethers out there and they only have $20bn
| cash and enough people redeem the the price will stay about
| $1 until the $20bn runs out and then suddenly drop to not
| much.
|
| It's actually possible that rather than just holding US$
| against USDT they have put some into bitcoin instead which
| would mean they may have plenty of funds unless bitcoin
| crashes in an unfortunate way.
| zby wrote:
| "There's no way to transfer USDT into USD. The few exchanges
| that say they offer withdraws actually don't if you go and
| try."
|
| How about Bitfinex? I had some problems with withdrawals there
| in the past - but now it seems to work.
| dcolkitt wrote:
| > There's no way to transfer USDT into USD. The few exchanges
| that say they offer withdraws actually don't if you go and try.
|
| There is an easy way. Swap USDT to USDC on Curve. Deposit USDC
| on Coinbase. Convert USDC to USD on Coinbase. Withdraw USD.
|
| I'm not saying I disagree with your overall thesis. But this
| specific point makes it sound like USDT is some sort of roach
| motel ("you can get in, but you can't get out"). That's not
| true, it's fairly easy to get back to USD at low cost. The fact
| that USDT is trading at near parity with USDC on Curve
| indicates that most of the market doesn't perceive a risk.
| lazide wrote:
| That's fairly easy?!?! That's a textbook yak shaving exercise
| if I heard of one, and seems like it would have to involve
| multiple parties during the exercise.
|
| Many exchanges have pretended for a long time that USDT is
| 'the same' as dollars, and there are going to be a lot of
| folks pissed that it isn't actually the same thing.
| DebtDeflation wrote:
| >That's fairly easy?!?! That's a textbook yak shaving
| exercise if I heard of one
|
| This. If Tether truly were just a token backed 1:1 with USD
| on deposit at a commercial bank, you would not need to make
| multiple hops across multiple entities to actually convert
| it to dollars.
| idownvoted wrote:
| Also imagine how "well oiled" this financial transaction's
| machinery will work during a market contraction.
| TheCapn wrote:
| >There is an easy way.
|
| How many fees have you paid through the 3 or 4 steps to get
| to this "easy" solution? Is that solution available to
| everyone worldwide? (I'm not familiar with Curve or Coinbase
| and whether they're US only or something of that nature)
| nostrademons wrote:
| There was a similar situation the last time the NYC AG tried
| to shut down Tether and withdrawals from Bitfinex were
| blocked (June 2019). What happened was that Tether started
| trading at about $0.93 and USDC/DAI started trading around
| $1.04, as the supply of other stablecoins wasn't quite
| adequate to accommodate all the people fleeing Tether.
| Bitcoin actually ended up being the reserve currency instead:
| the price of Bitcoin spiked from $5200 -> $8700 over the
| course of a couple weeks as Tether holders dumped it to buy
| Bitcoin and move it to other exchanges.
|
| Personally I'm surprised the risk premium wasn't more, but
| Tether is still around today despite both Bitfinex and
| Binance blocking withdrawals and the NYC AG initiating fraud
| charges against them, so ultimately the folks who decided it
| was nothing were right. Then, at least.
| tutfbhuf wrote:
| > There is an easy way. Swap USDT to USDC on Curve. Deposit
| USDC on Coinbase. Convert USDC to USD on Coinbase. Withdraw
| USD.
|
| Then what is your explanation for why it is not possible to
| directly exchange USDT for USD, there must be a reason that
| no exchange wants to do that.
|
| > that most of the market doesn't perceive a risk.
|
| That is absolutely no indicator for safety.
| dcolkitt wrote:
| > That is absolutely no indicator for safety.
|
| Currently, several billion in value is locked into Defi-
| based liquidity pools with USDT. If USDT collapses
| tomorrow, the stakers will lose nearly all of their
| principal. (Fast traders will quickly swap worthless USDT
| for all the USDC in the pool, before hardly anyone has time
| to remove liquidity.)
|
| The largest of these pool, currently pays about 2.6%.[1]
| Even if all of that return reflects USDT credit risk, that
| market implies a 1/50 chance of USDT collapsing within the
| next year. I'm not saying the market is necessary correct.
| But what I am saying is that very deep, liquid markets are
| not pricing any significant USDT risk.
|
| If you really disagree, you can even short USDT, by
| borrowing USDT on Compound at 4.2%. Then use that to buy
| USDC and supply it on Compound at 4.9%.[2] If USDT
| collapses, you'll make nearly 100% as you'll only have to
| buy back now worthless USDC. In fact the market will even
| _pay_ you take this position, with the only risk being if
| USDC collapses relative to USDT.
|
| [1]https://www.curve.fi/3pool
| [2]https://compound.finance/markets
| vidarh wrote:
| > Then what is your explanation for why it is not possible
| to directly exchange USDT for USD, there must be a reason
| that no exchange wants to do that.
|
| https://global.bittrex.com/Market/Index?MarketName=USD-USDT
| pas wrote:
| Do they process withdrawals in a reasonable time?
| vidarh wrote:
| I have not had problems with them, but I'm also not doing
| any large transactions.
| grlass wrote:
| Also note Kraken, withdrawals are as fast as a wire
| transfer (so a few days): https://www.kraken.com/en-
| us/prices/usdt-tether-usd-price-ch...
|
| What I'm not sure is how that market connects to Tether's
| bank accounts increasing or decreasing in holdings. This
| is all third-party exchanges, presumably with other
| customers as the counterparty.
| boring_twenties wrote:
| Dunno about Bittrex but Kraken also has a USD/USDT pair.
| Withdrawals via wire transfer take around 2 days.
| skybrian wrote:
| I'm wondering how high volume would need to be for the first
| step (from USDT to USDC) before something breaks?
|
| Why don't more people use USDC anyway?
| sb057 wrote:
| >Why don't more people use USDC anyway?
|
| USDT got there first.
| arcticbull wrote:
| Well, because Tether is happy to look the other way for
| money launderers, cartels and other bad actors. USDC can't.
| bbfnfkvkfk wrote:
| What will happen to NY AG which investigated Tether for 2
| years, went through 2.5 mil pages of documentation, yet missed
| such an obvious scam that a lot of people, including on this
| forum, can clearly see?
|
| If Tether implodes, is this proof that NY AG is incompetent or
| even worse, somehow implicated in this giant scam by covering
| it up?
|
| In the NY AG settlement PDF it clearly states that they will
| not indict Tether in the future for the investigated crimes,
| including not being backed up by assets, which happened before
| the date of the payment of the fine:
|
| > _56. Within five (5) days of the receipt of the penalty ...
| and agrees not to bring any claims or causes of action against
| Bitfinex or Tether ... for matters relating to the conduct set
| forth in the Findings and the Petition ... arising out of
| Bitfinex or Tether's representations concerning the backing of
| tethers during the time period January 1, 2014 to the effective
| date of this Settlement Agreement; transfers of a portion of
| the cash reserves backing tethers to Bitfinex pursuant to the
| line of credit_
| jtms wrote:
| The author of this report from 2018 agrees with your assessment
| https://www.tetherreport.com/
| quentinadam wrote:
| > There's no way to transfer USDT into USD. The few exchanges
| that say they offer withdraws actually don't if you go and try.
|
| It's perfectly possible to exchange USDT for USD and withdraw
| USD to your bank account; it does not involve complicated steps
| nor outrageous fees. Kraken, for example, has a very liquid
| USDT/USD market, is a well respected exchange, and processes
| USD withdrawals that arrive within minutes to US bank accounts.
| I'am speaking as an industry insider and hedge fund manager
| that trades ~$1B/month on the crypto markets.
| boring_twenties wrote:
| How do you get withdrawals arriving within minutes? Mine take
| about 2 days, I'm on the highest verification level that they
| list publicly ("Pro").
| quentinadam wrote:
| It may help that we bank at all of the same banks as
| Kraken, so most transfers are internal transfers. But even
| to outside banks, normally US wires should be pretty fast
| (usually within the day). It may also be the case that we
| literally wire millions every day on a regular basis, so
| our wires probably don't get held up at any compliance
| checks.
| boring_twenties wrote:
| > It may help that we bank at all of the same banks as
| Kraken
|
| Sounds like a good idea. Do you happen to know if a list
| of such banks is public?
| quentinadam wrote:
| As a start, you can check out Signature Bank and
| Silvergate Bank. They are known for being crypto-friendly
| banks, and they bank literally every exchange that trades
| crypto versus USD.
| boring_twenties wrote:
| Thank you, I will!
| hntrader wrote:
| If the total amount of USDT exceeds their USD cash reserves,
| who became the beneficiary of the extra USDT?
| rednerrus wrote:
| Bitcoin holders.
| hntrader wrote:
| Which BTC holders and how? What's the path from onboarding
| on an exchange website, to eventually getting _unbacked_
| USDT? If I put USD onto an exchange, why would the exchange
| give me more USDT than what I deposited (and if this never
| happened, then how did the first unbacked USDT come into
| existence)?
|
| I hold BTC but didn't use USDT in the process, just
| deposited normal fiat and bought BTC using that.
| _jjkk wrote:
| 1. Bitfinex processes a USD deposit and dispenses USDT
|
| 2. USDT holder purchases BTC with it
|
| 3. Bitfinex purchases crypto (mostly BTC) with the USD,
| instead of holding it as promised
|
| Thus the original USD of the person buying BTC at the
| exchange has effectively double the buying pressure on
| the BTC market because Bitfinex is actively investing all
| their USD holdings that "back" Tether into the market as
| well.
| hntrader wrote:
| Good explanation. Why do they do step (3)? Aren't they
| just opening themselves up to massive legal liability?
| _jjkk wrote:
| Some believe this is an intentional Ponzi scheme to print
| some money for the owners of Tether and Bitfinex, others
| believe they had good intentions at first, but through
| bad investment or otherwise got underwater, and started
| "investing" their USDT-backing dollars to claw back up.
|
| Bitfinex originally denied relation to Tether but it's
| been proven that was a lie.
|
| The worry is, at some point there could be a "run" on
| Tether, when the curtains are pulled back, where all the
| USDT-BTC traders who happen to have USDT holdings and
| they suddenly become worthless because nobody wants to
| trade USDT-BTC anymore at 1-1.
|
| As long as "public confidence" in USDT continues, the
| charade will too
| hntrader wrote:
| Another dumb question: If they've been buying assets like
| BTC using the USD that they were supposedly keeping as
| reserves, shouldn't they have made massive amounts of
| profits since 2018, and be in a position to now return
| the USD reserves so that it's 1:1, while keeping billions
| in profits for themselves?
| WrtCdEvrydy wrote:
| You couldn't liquidate that much BTC without tanking the
| markets... it's a game of chicken if it's true that the
| USD backing tether is gone.
| jcranmer wrote:
| If they haven't exited the BTC position, then selling the
| BTC to convert back into USD may not be possible without
| dramatically affecting the price. And if it's still in
| BTC and they don't bother converting back into USD until
| the last minute, then a run on USDT may make it
| impossible for them to convert enough BTC to USD fast
| enough to redeem USDT.
|
| It's hard to analyze Tether/Bitfinex's risks here
| because, well, they have been fairly opaque about what
| their actual financial situation is, so people are
| relying on their gut instincts to guess what it is.
| hntrader wrote:
| USDT has a market cap of $35bn, let's say that 30 percent
| is unbacked and the corresponding USD was used to buy
| BTC. That's a position of at least $11bn. It's probably
| worth more than that now, since the price went up after
| they supposedly bought in, but they only need to
| liquidate $11bn to return the USD to their reserves to
| make it 1:1 again.
|
| The market cap for BTC is $1000bn. Wouldn't they easily
| be able to unload the position over a 1-3 month period
| without too much price impact? They own 1 percent of the
| market cap, and in the stock market we often see larget
| stockholders than this unload their whole position
| without a catastrophic impact.
| blu_ wrote:
| Not considering your other points - I never had issues
| converting between USDT and USD. I just did it yesterday in
| fact.
| joshstrange wrote:
| Did you exchange USDT for USD through the exchange or did you
| trade USDT for USD, there is a difference.
|
| In the first instance the exchange is on the hook for the
| USDT and they have to go to Tether to get USD to cover it.
|
| In the second instance the other user you traded with is on
| the hook for the USDT and they will probably just trade it
| for USD in the future or another crypto.
| vmception wrote:
| Almost all fiat deposits into Bitfinex create USDT.
|
| Thats an additional fact that the amount is in line with the
| amounts that would be deposited into any big exchange.
|
| If Coinbase minted USDC whenever someone deposited, you would
| see the same kind of growth.
|
| The basis of your entire post is assuming impropriety based on
| pretty normal behavior with the addition of the business quirk
| of when USDT is created.
|
| The ability for impropriety is a good enough reason to avoid
| it, and their unilateral willingness to do so without any
| discussion can reinforce that. But people thought everything
| you thought since the beginning of Tether in like 2014 or so,
| but the reality is that it "only went fractional reserve" in
| 2018. Its kind of like they threw up their hands and said "well
| people think its a ponzi anyway might as well cover this
| business debt!" The irony being that the NY AG investigation
| actually proved that prior to 2018 it functioned exactly as
| promised, barring their 2017 distress by having nowhere to put
| their fiat deposits.
|
| But if you assume that it hasnt come crashing down because
| Bitfinex does what they said, then it still does make sense:
| crypto prices pump after Tether mints because it is people
| depositing into the exchange and then buying crypto.
|
| Any way glad USDC and DAI are growing a lot now, which have
| grown by the same orders of magnitude.
| quentinadam wrote:
| > Almost all fiat deposits into Bitfinex create USDT.
|
| As a matter of fact that is NOT true. (speaking as a crypto
| hedge fund manager, active since 2013, and trading >
| $1B/month on all major exchanges). It used to be like that in
| the past (when USD and USDT where one just represented as
| "USD" on Bitfinex), but this changed a year or two ago. Now,
| USD wires are being credited as USD and USDT deposits are
| being credited as USDT. And there is a USDT/USD market on
| Bitfinex to exchange between the two.
| vmception wrote:
| Nice this is how Coinbase functions with USDC too
|
| Likely they all piggyback off of each other's
| implementations in the face of evolving regulatory guidance
| jonplackett wrote:
| Why does USDC and USDT need to exist for this? What's the
| benefit of not just having USD in your Coinbase/bitfinex
| acc if they're meant to be pegged anyway?
| SkyMarshal wrote:
| Tax arbitrage, iirc. In some jurisdictions like the US,
| exiting your position into USD is a taxable event for
| capital gains taxes. I seem to recall stable coins were
| invented to avoid that. I can't imagine tax authorities
| allow that loophole though.
| tablespoon wrote:
| > Tax arbitrage, iirc. In some jurisdictions like the US,
| exiting your position into USD is a taxable event for
| capital gains taxes. I seem to recall stable coins were
| invented to avoid that. I can't imagine tax authorities
| allow that loophole though.
|
| If they did, it looks like it's closed now. At least in
| the US, converting between two cryptocurrencies is a
| taxable event:
|
| > There are plenty of questions about whether or not
| investors can claim a direct crypto conversion (e.g.
| bitcoin to ethereum) as "like-kind", avoiding taxes on
| those transactions. The tax laws changed beginning in
| 2018, and like-kind exchanges are only applicable to real
| estate transactions.
|
| https://www.coinbase.com/learn/tips-and-tutorials/crypto-
| and...
| inter_netuser wrote:
| a significant amount of cross-border trade (yes, actual
| goods transported in meatspace) is conducted in USDT for
| many years now.
| tylersmith wrote:
| Sending USDT is cheaper, faster and easier than sending
| actual USD.
| vkou wrote:
| > Almost all fiat deposits into Bitfinex create USDT.
|
| Which is insane. Those are customer funds, that Bitfinex owes
| to their customers, if they choose to withdraw from their
| ecosystem.
|
| They aren't a personal piggybank for them to dip into as they
| please.
|
| This is not at all like fractional reserve banking, where a
| financial liability (customer deposts) are used to print
| dollars (in the form of loans), because customer deposits can
| be called back anytime, while loans cannot.
|
| With Tether, if Bitfinex takes a dollar a customer deposits,
| and then prints and sells a USDT, and the customer withdraws
| their deposit, they have to destroy a USDT, in order to
| maintain the 1:1 peg. There is zero evidence that they are
| doing this at anywhere near the rate they claim.
|
| Ironically, what they are doing is very similar to a double-
| spend.
| Guvante wrote:
| Their post doesn't describe normal behavior. It describes
| what would be illegal behavior elsewhere. It may be somewhat
| legal depending on the underlying reasons due to the quirks
| of not being regulated but renegading on promises to
| investors is not normal behavior when it comes to things like
| audits.
| bitcoinmoney wrote:
| so bitfinex customers deposited 30B US$ since last year? hard
| to believe.
| lazide wrote:
| Is 'pretty normal business behavior' pretending two entities
| (bitfinex and Tether) are arms lengths entities with no
| relationship to each other to hide the conflict of interest,
| along with the provably lying about the actual backing of the
| coin, and using what were supposed to be customer trust funds
| to bail out what was supposed to be an explicitly stated
| unrelated business?
|
| If so - be aware those are felonies in many industries and
| are probably criminal in most jurisdictions (fraud at a
| minimum). For very good reasons.
| lotaezenwa wrote:
| Yes, this is precisely how investment banks work.
| ban5wall wrote:
| Surprisingly, yes. That is fairly normal in financial
| institutions. It seems nonsensical at a first glance, but:
|
| https://www.investopedia.com/articles/analyst/090501.asp
| lazide wrote:
| What you are pointing to is expressly pointing out that
| 1) it is illegal, 2) it is illegal for a very good
| reason, 3) if anyone finds out the illegal things going
| on, it will likely result in catastrophic (or at least
| very, very expensive) consequences.
|
| The pretending part that Tether and Bitfinex were doing
| was fundamentally different than the walling happening
| within financial institutions, where it has to be
| disjoint staff, disjoint control/leadership, and if
| someone sneaks through compliance and shares data ( _wink
| wink_ ) it is highly likely someone will get fired if
| compliance finds out.
|
| In the Tether/Bitfinex issue, they shared board members
| and ownership despite claiming they didn't in public, and
| were misrepresenting themselves in a very material way as
| independent.
|
| If you were just adding some information, apologies. If
| you were advocating that clear evidence someone is
| brazenly committing a crime is not a justifiable and
| strong reason to distrust them, or even that it is
| inappropriate to hypothesize how they could be getting
| rich while continue to do similar things - then yikes?
|
| If you were saying Situation Normal, All Fucked Up - then
| extra yikes?
|
| Goldman Sachs (or some random VC firm) say might have
| some subtle versions of this going on, but if they were
| doing what Tether is and has been doing right now, they
| wouldn't be a solvent entity for very long. That Tether
| is hiding from jurisdictions (for now) in a way that
| Goldman can't doesn't inspire confidence in their
| trustworthiness or stability going forward, as they're
| clearly on the radar now and blood is in the water. Along
| with a lot of money and some high profile political
| promotions, potentially.
| wayoutthere wrote:
| Goldman absolutely does play games like this on the
| market making side, but the difference is that the
| chairmanships of Goldman and the Federal Reserve tend to
| be a revolving door. They're a special kind of royalty.
| vmception wrote:
| I am able to perceive things that don't all reach negative
| conclusions. That doesn't mean I like the product or the
| organization or have any specific opinion on it. That's how
| due diligence works.
| pas wrote:
| If everything is fine and dandy with them why are they
| stopping trading in NY? Why is the AG claiming they lied
| about reserves, the one thing they really-really shouldn't
| have been? (Insert "you had one job" meme.)
| vmception wrote:
| I didn't write that everything is fine and dandy with them.
|
| The world toolset doesn't function under a "your either
| with us or against us" mentality, it functions as a
| gradient.
|
| That gradient is that the NY AG case showed Tether was
| functioning properly until 2017/2018. If you were around
| crypto at that point in time, you would know that people
| would not have believed they had full reserves ever.
|
| Just reread what I wrote. You are deciding to see advocacy
| for Tether which is not what I wrote at all.
| pas wrote:
| They haven't "functioned properly" because they promised
| audits, transparency/openness and independence, and none
| of that happened even back then. They then found out that
| they can keep up the empty promises and started dipping
| into the sauce, and now finally one investigation caught
| up with them.
|
| Your selective omissions imply advocacy - at least this
| is how it seems to me, and I'm not saying that's
| bad/good.
| jdemaeyer wrote:
| If fiat deposits into Bitfinex create USDT, shouldn't fiat
| withdrawals from Bitfinex burn USDT?
|
| I'm having trouble to find comprehensive data on USDT burns
| but https://coinmarketcap.com/headlines/news/tether-just-
| burned-... seems to suggest that one billion is extraordinary
| (and those weren't removed from circulation but swapped to
| another chain), and Tether finds it Twitter-worthy when they
| burn 100 million:
| https://twitter.com/Tether_to/status/1225088948243968005
|
| For sure I don't expect Bitfinex fiat withdrawals to match
| fiat deposits, but 100 million USD withdrawn vs 30 billion
| deposited seems unordinary?
| vmception wrote:
| I agree and have always found this interesting. But it is
| similar behavior in more transparent stablecoins. Only
| Gemini's GUSD has seemed to completely burned to nothing at
| one point. But USDC and DAI have growth so similar to
| Tether during bear markets that I cant put the lack of
| burns squarely on Bitfinex.
|
| Either there is a broader accounting issue with minting and
| burning methodologies or people/entities really do hold.
|
| During bear markets large market participants are still
| buying, and a tiny portion of people are providing the
| price discovery, and this is mirrored in the increasing
| amounts of crypto that have not moved from addresses in a
| long time.
|
| Many people hold the stablecoin itself, instead of going
| back to fiat. So there is growth of all market
| participants, even during bear markets when other cryptos
| are falling out of favor.
|
| Thinking out loud, I've paid a lot of graphic designers and
| marketers in India this year in Tether. They arent familiar
| with crypto but just notice that their Unocoin app takes
| it. We're not doing paypal, and all fiat transfers are
| domestic with none of fees, time, or scrutiny that an
| international fiat transfer would have.
|
| The nature of all stablecoins is that if the supply does
| not match the demand then there are arbitrage opportunities
| to mint more, which can be initiated by the user. If Tether
| is worth $1.02 then you can mint a new tether by depositing
| on Bitfinex and selling that Tether for a 2% premium.
|
| So if all the stablecoins have similar growth patterns, the
| things going for Tether are simply first mover advantage
| and greater clout in Asia.
| grey-area wrote:
| Yes it's a scam and 30 billion dollars deposited in a year
| is a laughable claim, particularly from a company with a
| history of lies and fraud. Nobody in the crypto space calls
| them on it because the fact they get away with it calls
| into question the entire ecosystem.
| firekvz wrote:
| How come you just come here telling that deposits in bitfinex
| creates USDT
|
| But Paolo himself post that all the usdt minted is 'tron
| replenish' everytime whale alert tweets about 800,000,000
| USDT frwshly minted
|
| So, basically, in your intentions to defend USDT you are even
| contradicting what its own CEO says...
|
| It's also funny how tesla 1.5b investment and microstrategy
| few millions buy are to be 'celebrated' as big and huge, yet
| you are trying to convince us there is people depositing 800m
| daily into bitfinex?
| TacticalCoder wrote:
| I agree with you that GP's post hardly makes any sense but
|
| > ... yet you are trying to convince us there is people
| depositing 800m daily into bitfinex?
|
| 800m daily would have meant 300 bn USDTs created in a year.
| They create 30 bn in a year, no 300 bn. It's huge but you
| are one order of magnitude off no?
| vmception wrote:
| US equities are choosing to make a big deal out of
| something benign at fairly small amounts. The corporate
| debt market is massive with almost all blue chips routinely
| issuing short term debt that dwarfs anything Microstrategy
| did, for completely ambiguous purposes and the market does
| not care as long as its paid back. 100 billion $ worth of
| US commercial paper was issued just in the last month with
| no fanfare whatsoever and no disclosure on what the
| proceeds are for. Microstrategy's dabbling in the corporate
| debt markets is only news because the CEO wants it to be.
|
| The volumes from a large crowd that can also include
| institutional can very easily be large.
|
| A recent example is the Saudi Aramco IPO, particiption in
| that IPO used Saudi retail investors and Saudi payment
| rails and resulted in $25bn in purchases. That one
| country's internal financial system was able to handle it
| and there was just that much participation.
|
| Tether doesn't have the transparency we will want. Choose a
| different product for that reason alone, and there are
| options now.
|
| But assuming the worst, out of the universe of assumptions,
| is just as useless as assuming the best. The western world
| says "all this is improbable so lets assume it is
| impossible", the eastern world doesn't seem to care and
| there are examples where much larger sums of money could
| show that Tether's growth is not improbable or impossible.
|
| The point is that $30bn of deposits (whether some of that
| is counted incorrectly on multiple blockchains) is not
| noteworthy enough on its own to reinforce your conclusion.
| Many random brokers have that. If they had a stablecoin
| that was minted upon deposit, you would see the same thing.
| And here, institutions also use Bitfinex and $30bn is
| actually then a reflection of how _small_ the crypto
| markets are.
| mcintyre1994 wrote:
| > There's no way to transfer USDT into USD. The few exchanges
| that say they offer withdraws actually don't if you go and try.
|
| So what actually happens when people sell Bitcoin? They get
| USDT on an exchange and then can never get cash out? Is there
| some convoluted series of trades you can make from USDT -> ???
| -> USD or something instead? And people selling Bitcoin have
| made enough profit to just ignore the overhead of those trades
| I guess?
| T0Bi wrote:
| OP got that wrong. It's very simple to exchange USDT for USD,
| you can do it on Kraken and Binance and withdraw to your bank
| account. No problem at all
| kevingadd wrote:
| Isn't that trading, you're selling USDT to someone who
| wants to give you USD for it? That's different from telling
| the operators of Tether itself "Here's some USDT, give me
| the USD that backs it".
| andreaorru wrote:
| "Contrary to online speculation, there was no finding that Tether
| ever issued tethers [USDT] without backing, or to manipulate
| crypto prices," said Weinstein, a former federal prosecutor. [0]
|
| [0] https://www.theblockcrypto.com/post/95207/bitfinex-tether-
| ne...
|
| EDIT: For some reason I'm being downvoted, but I'm genuinely
| curious to understand why this news is being simultaneously
| interpreted in two opposite ways.
| Jonnax wrote:
| The linked webpage is from the New York Attorney General's
| office and the quote you quoted is from one of BitFenix's
| lawyers.
| FireBeyond wrote:
| Because the issue is this:
|
| A "finding", in legal terms, is a specific, explicit statement
| with the supporting rationale behind it.
|
| You can make statements in a legal document, even a settlement,
| without classifying them as "findings" (that have specific
| legal ramifications).
|
| Indeed, the AG says in the documents that absolutely Tether did
| not always have backing. However, it doesn't address -issuance-
| without backing.
|
| So the attorney for Tether is doing as attorneys do, making a
| carefully crafted statement that will paint a specific
| impression to the world, whilst being entirely aware (and
| maintaining plausible deniability) that he is artfully weaving
| through several other "inconvenient truths".
| Clewza313 wrote:
| Huh? The NYAG press release literally says: "Tether's claims
| that its virtual currency was fully backed by U.S. dollars at
| all times was a lie."
|
| Edit: The difference between the two statements is that Tether
| can still be "backed" by something other than USD, notably
| crypto. And the PR is silent on what exactly Tether is backed
| by. This saga isn't over yet.
| andreaorru wrote:
| I'm also confused by the contradicting news. CryptoTwitter
| (and the markets) reacted enthusiastically...
| Izkata wrote:
| Those two quotes aren't necessarily contradictory, they're
| about different timings. Tether could have been fully
| backed when issuing new tethers, and stopped issuing
| tethers during period(s) when it wasn't fully backed.
| PragmaticPulp wrote:
| When was the last time CryptoTwitter didn't try to spin
| something as good for Bitcoin?
| jkhdigital wrote:
| That statement was made by their counsel, so it should probably
| be taken with a grain of salt.
| andreaorru wrote:
| I guess we'll know more in the next few hours.
| erwan wrote:
| That's a really good point, this settlement is extremely
| favorable to Tether and Bitfinex. It's odd to see people
| persist in pinning Bitcoin's market performance on Tether
| issuance after reading this settlement from NYAG. Chunks of
| Tether collateral weren't fully liquid but my takeaway is that
| they operated on a genuine best-effort basis. As another
| comment put it, Tether definitely operated in a grey area
| legally - they hacked the system, but they're not the
| fraudsters some media, comments, or rumors made them out to be.
| PragmaticPulp wrote:
| This settlement shows they operated as if Tether was fully
| backed and claimed Tether was fully backed when they knew it
| was not.
|
| How it that extremely favorable?
|
| If someone sells something they don't have under false
| pretenses, that's fraud. It's not a simple liquidity issue.
| lovedswain wrote:
| It also documents all their attempts to verify the peg required
| mixing funds with an exchange known to have a running $500m+
| hole in their balance sheet
| dgellow wrote:
| Read the settlement agreement:
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
|
| Page 4 of the agreement:
|
| > 20. Because of Tether's inability to conduct significant
| banking activity during this time, it could not itself hold
| dollars sufficient to back the hundreds of millions of new
| tethers that had entered the market. Until September 15, 2017,
| the only U.S. dollars held by Tether ostensibly backing the
| approximately 442 million tethers in circulation was the
| approximately $61 million on deposit at the Bank of Montreal.
|
| That's 14% of the cash required to back the issued Tether.
| teknopurge wrote:
| From 2019:
|
| https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
|
| "The USDT stablecoin is only about 74 percent backed by fiat
| equivalents as of April 30, says its issuer's general counsel.
|
| Tether, the company behind USDT, holds about $2.1 billion in
| cash and short-term securities, wrote its general counsel
| Stuart Hoegner in an affidavit Tuesday. Hoegner is also general
| counsel to Bitfinex, a crypto exchange which shares executives
| and has overlapping owners with Tether.
|
| The two companies are at the heart of allegations by the New
| York Attorney General, who says Bitfinex borrowed more than
| $600 million from Tether after losing as much as $850 million
| to a currency converter."
| IG_Semmelweiss wrote:
| question for HN.
|
| If tether has been so successful at avoiding scrutiny while also
| making money, why is it that we don't see more tethers?
|
| It seems like a very easy way to make money.. given the
| authorities are asleep at the wheel ?
| [deleted]
| graeme wrote:
| Well the issue is eventually if DOJ steps in and convicts the
| founders can all go to jail. Jail is a good deterrent.
| psychlops wrote:
| Here we are again, with a steady stream of nocoiner comments
| validating their long held positions while bitcoin slowly marches
| ahead year after year.
| ceejayoz wrote:
| Madoff's fraud took decades to unravel, too. You'd have looked
| silly declining to invest there, until the collapse.
| psychlops wrote:
| Madoff took in large sums of money, gave out little and lied
| about solvency. Tether is 1/30th the market cap of bitcoin,
| yet there is a magical belief (based on anonymous articles)
| that it's the primary source of price levitation.
|
| If true, Grayscale would have this same power.
| ceejayoz wrote:
| > Madoff took in large sums of money, gave out little and
| lied about solvency.
|
| That's exactly what Tether has done?
|
| Large sums? Check - tens of billions.
|
| Gave out little? Check -
| https://cointelegraph.com/news/tether-explains-why-it-
| hasnt-....
|
| Lied about solvency? They admit in this suit that they
| weren't 1:1 backed, despite asserting it on their website.
| They also claimed to be regularly audited, until they had
| to admit they'd never completed one. (Still haven't, to my
| knowledge?)
| psychlops wrote:
| Oh, don't get me wrong, I'm not supporting Tether. Tether
| may completely fall off the edge of the world and nobody
| would care. There would be a minor impact on the price of
| bitcoin and things will move on.
|
| As I mentioned, I believe the proof of insolvency is
| weak, but I don't think it matters long term either way.
| Better alternatives will supercede them soon enough. USDC
| and possibly Libra will be excellent choices.
| T-A wrote:
| > USDC and possibly Libra will be excellent choices
|
| https://www.coindesk.com/libra-diem-rebrand
| psychlops wrote:
| Much obliged.
| [deleted]
| lettergram wrote:
| It appears from the link in the settlement agreement:
|
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
|
| Tether wasn't backed at all times. The argument was that this
| happened due to asset seizures in Poland and Portugal in
| 2017-2018.
|
| https://www.theblockcrypto.com/post/95207/bitfinex-tether-ne...
|
| Seems to me they couldn't prove malicious intent, so they
| suggested they stop trading. Frankly this seems a bit of a click-
| bait title with the whole "illegal activities".
|
| Sure, tether wasn't backed at all times (probably is now), due to
| governments seizing their funds. Also banks do this all the time,
| every time they issue a loan for instance. The bank only keeps
| 10-30% collateral on your home.
| user-the-name wrote:
| > probably is now
|
| Here are the facts we know about Tether being backed:
|
| 1. They used to say they were backed 1 to 1 by cash.
|
| 2. This was a direct lie.
|
| 3. They now say they are backed 1 to 1 by cash and "cash
| equivalents", not otherwise specified.
|
| Which one of these facts is it that you are basing your claim
| that they "probably are now" on?
| FireBeyond wrote:
| 3. "... while printing multiple billions a week."
| PragmaticPulp wrote:
| > Sure, tether wasn't backed at all times (probably is now),
|
| Even Tether admitted that they weren't backed by funds, and
| that was before they printed most of their current supply:
| https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
|
| I don't understand why anyone would be in a rush to take them
| at their word when every new piece of evidence demonstrates
| that Tether's operators are not interested in behaving
| honestly.
|
| > Also banks do this all the time, every time they issue a loan
| for instance. The bank only keeps 10-30% collateral on your
| home.
|
| Fractional reserve banking doesn't mean banks can simply print
| more money than they have on the books.
|
| Regardless, if a bank loses funds due to fraud or government
| intervention or whatever, they can't simply continue pretending
| they had the money all along.
|
| I don't understand the desire to pretend that what Tether is
| doing is normal or good for the crypto community. It's not.
| wpietri wrote:
| I think it has a pretty simple explanation. The crypto
| community started with a few dedicated idealists. But it
| quickly attracted loons, fantasists, scammers, and get-rich-
| quick dreamers, along with some reasonable people interested
| in the hype.
|
| Over time, as the space has produced almost no actual utility
| and generated billions in theft, fraud, and losses, the
| reasonable people generally got out, often with fingers
| burned. A few idealists remain. But by now the dominant group
| are the people low on sense and scruples who are hoping to
| Make Money Fast, so anything that keeps the industry aloft is
| great by them.
|
| That's how bubbles work, alas. The dot-com bubble was less
| extreme, but still at the end there was all sorts chicanery
| that made no sense to a vaguely rational actor. We saw it
| again in the mortgage bubble. There was one bank CEO who
| stayed out of the more dubious mortgages; when questioned, he
| said, "If something grows too fast, it's a weed." But there
| were plenty of hucksters saying that everything was normal
| and good.
|
| The good news is that bubbles eventually pop. I loved the
| post dot-com bubble period! Most of the MBA-holding locusts
| who had rushed in went away again. I hope the people truly
| interested in digital financial innovation enjoy a similar
| period of quiet soon.
| 35fbe7d3d5b9 wrote:
| > so anything that keeps the industry aloft is great by
| them.
|
| _Bingo_. Tether being less than 100% backed isn 't a
| surprise. Heck, they've admitted it publicly for over a
| year now - this is, however, the first time we've seen how
| big the gap truly is.
|
| But the peg is still holding, which means that
|
| 1) the market had _already_ priced in the risk of USDT
| being 14% rather than 100% backed, or
|
| 2) the market for USD:USDT is not rational.
| Spooky23 wrote:
| The entire point of the tether was that it was backed 1:1 by US
| Dollars. Later they asserted that it was 0.75:1.
|
| The bank doesn't lie about it's capitalization.
| pavlov wrote:
| _> (probably is now)_
|
| This kind of argumentation makes cryptocurrency proponents so
| insufferable. There's no evidence Tether is backed, but somehow
| we can just assume in a parenthesis that they probably are, and
| then go on a tangential rant about banks or fiat or digital
| gold or something.
| gruez wrote:
| >This kind of argumentation makes cryptocurrency proponents
| so insufferable. There's no evidence Tether is backed, but
| somehow we can just assume in a parenthesis that they
| probably are, and then go on a tangential rant about banks or
| fiat or digital gold or something.
|
| Ah yes, because all cryptocurrency proponents are pro-tether.
| johnmaguire2013 wrote:
| The comment you're responding to isn't implying they are.
| It's implying a larger issue: that claims are often made by
| cryptocurrency proponents without any evidence to back
| them.
| thedudeabides5 wrote:
| Exactly.
|
| We've traded confidence in centralized, old world financial
| institutions, for decentralized, techno-utopian...financial
| institutions.
|
| Same s**, different marketing.
| PragmaticPulp wrote:
| At least banks have to operate within the realities of
| regulations and legal recourse. It's not perfect, but it
| does provide a forcing function to make them think long and
| hard before doing anything that might be fraudulent.
|
| Cryptocurrency proponents like to tout crypto's ability to
| escape regulation as a good thing, while ignoring that the
| same property makes it a dream come true for financial
| fraud schemes.
| [deleted]
| aqme28 wrote:
| Nothing about Tether or Bitfinex is decentralized.
| inter_netuser wrote:
| You can take redemption from tether and they will wire you
| the money, they are in fact registered and regulated. on
| several exchanges it can be exchanged into fiat, for smaller
| participant.s
|
| It would collapse a long time ago, if it weren't backed.
| wpietri wrote:
| Please name the regulators you think have verified Tether's
| backing. And once you've listed them, please explain why
| even though they missed the specific points at which the
| NYAG has proved Tether was not fully backed, you still
| think they can be trusted.
|
| (I ask only for my own entertainment, of course. If Tether
| were actually backed, they'd publish regular third-party
| audits from a responsible accountant. Anybody thinking it's
| backed is a fantasist that could make Baron Munchausen seem
| resonable.)
| chollida1 wrote:
| I've tried, six months on they are still stringing me along
| saying we'll get back to you.
|
| As far as I know tether only allowed a few crypto "king
| makers" to redeem tether, and even then, only at a very
| small scale.
| inter_netuser wrote:
| Several exchanges list USDT/USD pair.
| 35fbe7d3d5b9 wrote:
| "A market currently exists, is currently liquid, and
| currently trades 1 USDT:1 USD" is not a universal truth
| that will hold in perpetuity.
| user-the-name wrote:
| You very specifically claimed "You can take redemption
| from tether and they will wire you the money".
|
| There is no evidence that this is the case. Tether sure
| doesn't offer such a service openly.
| inter_netuser wrote:
| 1. https://tether.to/fees/
|
| 2. https://tether.to/redeem-tethers-to-bank-account/
| 35fbe7d3d5b9 wrote:
| > You can take redemption from tether and they will wire
| you the money
|
| Tether says they will. Has anyone successfully done this?
|
| > on several exchanges it can be exchanged into fiat, for
| smaller participant.s
|
| No one says you can't _trade_ USDT. But that requires a
| counterparty, and if it turns out that Tether is mostly
| backed by air they may evaporate as well.
| lettergram wrote:
| That's usually the way these things work. That's why the
| AG is making statements like "stop the illegal activity"
| and stuff, it degrades trust. However, if you read the
| statement it's a win for the crypto exchange. Only an
| $18m fine for supposedly "billions in fraud" (course if
| you read deeper, they found no fraud).
| 35fbe7d3d5b9 wrote:
| I'm surprised that you read a settlement narrowly focused
| on activities in 2017-2018 and apply it to today.
|
| Tether was nearing a lifetime market cap of two billion
| when investigated. Their "100% backed!" claim at two
| billion turned out to be 13.8% backed.
|
| They printed two billion USDT over the course of six days
| earlier this month. Wonder how backed that is.
| mumblemumble wrote:
| Heh. I just made another comment saying that Tether is not
| like Madoff, so of course I now need to make one comparing
| Tether to Madoff.
|
| Bernard L. Madoff Investment Securities was also registered
| and regulated, and also had to wire people their money when
| asked. Even though they didn't actually have all the assets
| they said they did. He was able to keep it up for 3 or 4
| decades.
|
| It will only collapse if outflows exceed inflows for long
| enough to deplete their supply of assets. Which is
| something that is unlikely to happen for as long as this
| Bitcoin rocket keeps racing toward the moon.
| inter_netuser wrote:
| Was Madoff also subpoenaed by the NYAG who investigated
| and announced there was no fraud and settled for a
| trivial amount?
| jkhdigital wrote:
| Tether is Tether. Bitcoin is Bitcoin. The fact that exchanges
| exist which allow you to trade one for the other does not
| make them the same kind of thing.
| notahacker wrote:
| If I could buy tulips on cryptoexchanges with freshly
| printed Tether, I could bid the price of tulips up. If the
| majority of tulip trades took place on crypto exchanges and
| much of that was bidding the price up with newly printed
| Tether, tulips would be exactly as useful as before, but
| cost a lot more. As such, if Tether were to collapse,
| people's bulbs would be worth a lot less. Tulips would
| still be tulips, but they'd be part of a Tether bubble.
| PragmaticPulp wrote:
| No one would care how many Bitcoin they had without an
| exchange rate.
|
| Tether printing is a convenient way to inflate the exchange
| rate. Remove Tether printing and the exchange rate falls.
|
| As long as people talk about Bitcoin in terms of the
| exchange rate, Tether and Bitcoin are deeply connected.
| sekai wrote:
| No it would not, plenty of stablecoins to take it's
| place, or just crypto/crypto ratios.
| user-the-name wrote:
| That assumes that Tether is being honest and not printing
| unbacked coins to drive the price up.
|
| So, no, it would still tank the price, because the price
| is quite likely inflated through fraud.
| user-the-name wrote:
| Remind me, what percentage of Bitcoin trades happens in
| Tether, again?
| lettergram wrote:
| Seems logical they would given the investigations and the
| reason they supposedly didn't have the funds at the time. I
| don't think tether is necessary or a good idea, simply
| stating what I see.
|
| Frankly, the AG admitted it was backed, just not "the entire
| time".
| FireBeyond wrote:
| > Frankly, the AG admitted it was backed, just not "the
| entire time".
|
| The AG did not. Certainly not completely, nor to the extent
| that Tether claims that it is. The AG merely acknowledged
| that Tether had some portion of the funds it claimed to.
| eMGm4D0zgUAVXc7 wrote:
| > makes cryptocurrency proponents so insufferable
|
| Tether is not a cryptocurrency.
|
| It's a cargo cult: A plain old centralized system which got
| the word "cryptocurrency" slapped onto it to attract dumb
| money.
| mannykannot wrote:
| That is beside the point: "(probably now)" is an entirely
| fanciful and blatantly self-serving attempt by a cryptocoin
| proponent to avoid the very real problem Tether poses for
| Bitcoin.
| [deleted]
| jkhdigital wrote:
| > Sure, tether wasn't backed at all times (probably is now),
| due to governments seizing their funds. Also banks do this all
| the time, every time they issue a loan for instance. The bank
| only keeps 10-30% collateral on your home.
|
| Exactly. Tether has made no claims about the quality of the
| collateral they use to back Tethers, so they can probably get
| away with some very questionable accounting. Anyone who
| actually has skin in the game understands this about Tether. If
| you want to take the risk, go right ahead. I've traded at least
| $50M in notional volume over the past 3 years and never, not
| once, have I touched Tether.
| PragmaticPulp wrote:
| You're ignoring the systemic issues that come from having
| Tether printing drive the price action.
|
| You may not have touched Tether, but Tether's influence on
| asset prices can't be understated. You are at risk by trading
| assets that are inflated by Tether.
|
| These things aren't uncoupled.
| Forbo wrote:
| If they're backed then they can prove it with an audit.
| Considering their last auditor told them to kick rocks, I'm
| highly skeptical.
| FireBeyond wrote:
| I thought it hilarious that 1) Bitfinex/Tether (when they
| were still pretending they were two completely unrelated
| entities, remember that?) thought that handing an auditor the
| front summary page of a bank account would be sufficient to
| 'verify holdings', and 2) when they told the public they had
| another audit done, but were unable to release it because it
| would be in Mandarin...
| bhouston wrote:
| The issue is that if it isn't backed they can print more at any
| time. But they claim it is backed to avoid inflation
| devaluation of the currency. Banks are not lower to print
| currency but tether can at any time. The potential for fraud
| sufrounding tether is huge and no one is checking over them. Do
| you trust them? They are already known for lying. This is why
| banking regulations exist.
| lettergram wrote:
| > The issue is that if it isn't backed they can print more at
| any time.
|
| That's how all banking works. China, for instance, never even
| publish how much money they click into existence.
|
| Not saying it's correct, just explaining how the system
| really works. They really do "create" money. Even synthetic
| shares are created on the stock market (largely when creating
| ETF blocks), see "naked shorts". It happens all the time.
|
| Here's an explanation on how banking & interest work in a
| digestible way: http://anuparty.org/on-interest-slavery/
| dgellow wrote:
| Tether isn't a bank. It's a stable coin supposed to be
| backed by real dollars. But that's of course not the case
| in practice.
| topynate wrote:
| "Because of Tether's inability to conduct significant banking
| activity during this time, it could not itself hold dollars
| sufficient to back the hundreds of millions of new tethers that
| had entered the market."
|
| The word "itself" is doing heavy duty in this sentence. Was there
| another entity holding dollars in this period? Did Tether issue
| USDT without a corresponding inflow of USD? We don't know. One
| would hope that the transparency agreement actually answers these
| questions for its future operations. It's those questions that
| matter, after all, not Ms. Letitia James' "efforts".
| bronzeage wrote:
| I'm waiting patiently for the whole Tether printing scheme to
| fall and crush to finally purchase Bitcoin / Ether. However I'm
| not viewing them as inflation hedges so long as Bitfinex / etc.
| are allowed to continue with their obvious money printing scheme.
|
| When most crypto trading volume is traded at trustworthy
| exchanges which actually hold dollars as much as they say they
| do, I'll trust $/BTC to be a fair market.
|
| It's dumb escaping from Powell's printing machine straight into
| Bitfinex tether printing machine. BTC isn't the hedge people
| think it is so long as it's traded against fictional dollars.
| Tether's volume exceeds Bitcoin, so that's the scale of fictional
| dollars supporting Bitcoin right now.
| PragmaticPulp wrote:
| Cryptocurrency isn't the only way to escape USD inflation.
| Investors have been investing to avoid inflation long before
| Bitcoin was invented.
|
| Investing in virtually any asset other than cash will, almost
| by definition, shield you from inflation. Inflation is an
| increase in asset prices, resulted in reduced buying power. You
| only need to invest in assets (stocks for example) and minimize
| holdings in cash if your goal is simply to avoid losing buying
| power of your cash. Cryptocurrency currently functions as a
| speculative instrument, not a stable store of value.
|
| Cryptocurrency in general is only deflationary if we pretend
| only a single cryptocurrency exists and ignore all of the
| increasingly brazen financial instruments offered by exchanges.
| As it stands, the ever expanding list of crypto currencies,
| NFTs, crypto lending products, and new crypto currencies
| represents a general inflation in the cryptocurrency space.
| devoutsalsa wrote:
| Stocks prices get negatively impacted by rising interest
| rates. With interest rates at ~0%, there's little money to be
| made in bonds, savings accounts, or anything that pays
| interest income, so people put money into stocks w/ the hope
| the stocks will go up. When interest rates go up to fight
| inflation, there's more incentive to put money into bond
| markets, which means there's not as much money going into
| stocks, which means stock prices don't go up as much. Housing
| prices also tend to go down as interests go up, as rising
| borrowing costs mean fewer funds are available for buying a
| home.
| ketamine__ wrote:
| The returns you can make in securities over ten to twenty
| years is much more impressive than bonds.
| xur17 wrote:
| Key word being "can". On average securities have a much
| better return than bonds, but they also have a much
| higher risk of a large drop in value.
| ketamine__ wrote:
| On an individual basis perhaps but not if you're in an
| S&P 500 ETF.
| xur17 wrote:
| Go lookup a graph of the sp500 from 2000 to 2010. There
| are no guarantees that it will always trend up.
| vkou wrote:
| Go look at that same graph from 2007 to 2021. If you
| bought in at the top of the 2008 bubble, you'd have
| tripled your money by now.
|
| Unless you're planning on retiring in the next 10 years,
| buy stocks.
| tim333 wrote:
| The S&P is unusually pricey at the moment though.
| vkou wrote:
| It's only unusually pricey if you expect to always live
| in a world of 3-4% interest rates. We're no longer living
| in that world, though.
|
| The thing is, you could say the same thing at nearly any
| point between 2009 and 2021, and be right, and it would
| still have been a good idea to invest into the S&P.
| deanmoriarty wrote:
| What's your recommendation for least-worse inflation hedge?
| ztjio wrote:
| This is not financial advice. This is just a reflection
| of knowledge that has kept all my long term investments
| stable or growing through every dip and shift in the last
| 25 years.
|
| - Stable index funds are the best long term hedge. (Date
| targeted mutual funds have largely been doing very well
| in the last 15+ years too.) - Then consider LONG TERM
| materials investments. - Then consider Treasury Inflation
| Protected Securities. - Then consider property, as in
| real estate.
|
| Actually personally I'd drop the materials at this point.
| It's easier to screw up materials investments and they're
| often in stable funds anyway.
|
| This is all long term, you'll note. I would argue there
| are no true short term hedges. There are bets against the
| market and that's often what you see in "hedge funds"
| that go relatively short term. But if you're in that
| space, well, you probably shouldn't even be having this
| discussion on Hacker News. I'm sure I'll take flack for
| that reinterpretation but it's important to be honest
| about these things, and many make money in this space by
| eschewing that honesty.
|
| But, your basic goal of keeping your money valuable long
| term is not a hard problem, it's literally a solved
| problem and it's what the S&P 500 & similar indexes
| and/or TIPS exist for. If you think you need to hedge
| against the fall of the US or at least the USD? I think
| you should be hedging outside the financial system
| entirely, go full prepper, because, that's where that
| fatalistic logic will take you ultimately anyway.
|
| Actually, with less snark, it is always reasonable to
| keep moderate term survival in mind. An actual major
| financial meltdown would likely be survivable with minor
| prepper-like approach to long term food and water stores,
| especially if you own property. So maybe move property up
| on your list if you are in a position to own it outright,
| and bury some water and long term preserves there as a
| bonus?
| tootie wrote:
| Paper towels never lose value and pretty pegged to
| inflation.
|
| But seriously, look at the past 20 years and your
| takeaway should be that USD is indestructible and that
| the Fed can do no wrong. They ran the printing press day
| and night for years and struggled to hit 2% inflation.
| "Full Faith and Credit of the US Government" is evidently
| the best inflation hedge in the world.
| sneak wrote:
| https://en.wikipedia.org/wiki/End-of-history_illusion
| tootie wrote:
| > In the long run, we're all dead
|
| If you want to know where to stash your money in 2021,
| you look at history for lessons. USD will be completely
| worthless one day just like the sun will eventually burn
| off the surface of the Earth. I'm thinking back to
| financial crisis days when there were endless cries of
| runaway inflation being around the corner and that the
| Fed couldn't handle a crisis of this magnitude. And I
| think that looking back they handled it extremely well.
| They took a nuclear bomb to the chin and stayed standing.
| xur17 wrote:
| It depends on how much downside risk you are okay with
| taking. If you want something relatively cash like,
| ibonds are an interesting option - their rate of return
| is updated to the latest inflation measurement every 6
| months.
|
| If you are okay taking on some risk, a mix of stocks and
| bonds seems sensible to me.
| deanmoriarty wrote:
| I totally buy ibonds, but their 10-15k limit a year is
| unfortunately a joke. I wish I could buy way more.
| alasdair_ wrote:
| Buy TIPS instead?
|
| https://www.investopedia.com/terms/t/tips.asp
| ffggvv wrote:
| Buy the swiss franc. Or TIPS. or a commodities etf. or
| emerging markets etf as EM does well when dollar is weak.
| (their loans are dollar denominated)
| microtherion wrote:
| The Swiss would appreciate if you did NOT buy Swiss
| francs as an inflation hedge. This kind of speculation
| hurts our export industry.
| ffggvv wrote:
| sorry :/ we just trust your government more than ours
| BenoitEssiambre wrote:
| Buy all the non perishables, non obsoletables you're
| going to need for the next decade. Buy them in discounted
| bulk for and extra return. Bonus: capital gains tax free!
| dec0dedab0de wrote:
| So invest in toilet paper?
| BenoitEssiambre wrote:
| Yup materialize your savings for a 2% a year compounding
| tax free return.
|
| Urban dwellers might be more limited but for people who
| have unused or underused space, this is a way to get a
| return on that space.
|
| Salt, granulated sugar, powdered sugar, brown sugar,
| socks, underwear, under-shirts, vinegar, soap bars,
| toothbrushes, razor blades, feminine products, toilet
| paper, paper towels, napkins, trash bags, freezer bags,
| sandwich bags, foil paper, parchment paper, plastic wrap,
| wax paper, candles, matches, diapers, pet supplies
| (litter, etc.), gardening supplies, building supplies,
| repair supplies, medical supplies, fire wood, wood
| pellets, long lasting appliances and furniture,
| kitchenware, dinnerware, sheets and pillowcases,
| blankets,comforter,bedspreads, Maintenance, renovations,
| Efficiency upgrades.
|
| Some liquid soaps and chemicals have a limited shelf life
| of just a couple of years so it might be better to avoid
| unless you know the shelf life. Also be careful buying
| more than you need which can lead to waste. Be careful
| being wasteful just because you have lots of stuff at
| home. Buying alcohol ahead of time in bulk works if you
| have the discipline not to drink more. Also to get a good
| return you need to use the full life of your stuff before
| replacing from your stash, not replace early because it's
| right there.
|
| There is also a macroeconomic benefit to this approach.
| It can get the economy out of keynesian recessions when
| people save by buying.
| gus_massa wrote:
| Tuna cans. The $/volume ratio of toilet paper is
| horrible, and in case of a real big emergency the other
| end is more important.
| kijin wrote:
| Spam has more calories and lasts just as long. If you
| want carbs as well, add canned fruits and vegetables.
|
| Any kind of dry bulk food will also work as long as you
| take proper measures to keep mold and insects out. Bonus
| points if you can also keep oxygen out. (Grains often
| contain a surprisingly large amount of lipids that can go
| rancid.) In the kind of emergency where you'd be
| seriously worried about the "other end", you could very
| well exchange a bag of rice or sugar for a handgun or a
| bottle of motor oil.
| deanmoriarty wrote:
| Not very practical if the amount to be preserved is
| multiple 7 figures, I should have clarified my question
| better.
| kragen wrote:
| US$5M is a bit under 100 kg of gold or 6 tonnes of
| silver. Might not be a _bad_ idea to spend a few percent
| of that on hiring security guards and stocking up on
| perishables to feed them an their families.
| deanmoriarty wrote:
| This quickly went downhill lol. Thank you for your
| suggestion, I'll stick my $5M in VTWAX and hope for the
| best.
| kragen wrote:
| Probably a good idea to maintain a more diverse asset
| balance than 100% in stocks, in the interest of hedging
| wealth preservation against both likely and unlikely
| shocks. The base rate of state collapse, for example, is
| about 1% per year, and examination of past episodes shows
| that it's often pretty unexpected. See notes/pandemic-
| collapse.html in Derctuo for some of the reasoning here.
| Moreover it's hardly unusual for share markets to dip 10%
| or 20% and take several years or a decade to recover.
| BenoitEssiambre wrote:
| That is probably your best bet for large amounts. You can
| also diversify into TIPS (note the negative nominal
| returns though) and improve your housing situation with
| renos, upgrades etc.
| elwell wrote:
| Potentially high opportunity cost here
| nayuki wrote:
| Solar panels, water filtration, and indoor farming!
| dkersten wrote:
| Investing for the zombie apocalypse!
| prewett wrote:
| Land is the typical recommendation. A noisy crowd thinks
| gold is a good hedge. Personally, I think that high
| quality companies with pricing power should retain their
| value; Coca-Cola and Apple can probably increase their
| prices to compensate for inflation, leading to increased
| earnings, leading to increased stock price (the increase
| compensating for inflation).
| ivalm wrote:
| Land and stock have the issue of being inversely related
| to interest rates and interest rates do rise with
| inflation.
| devoutsalsa wrote:
| I'm mostly kidding... Buy forever stamps from USPS. As
| they raise the price of postage, your stamps will go up
| in value, and then you can sell them for a profit! This
| is probably a terrible idea, but it makes me giggle.
|
| Now I'm imaging some sort of push on r/wallstreetbets to
| YOLO on stamps, posting insane strategies on how to
| predict when the price of postage will go up, by how
| much, and how liquid the market is for millions of
| stamps.
| currymj wrote:
| Back in the roaring '20s Charles Ponzi came up with a way
| to theoretically make a profit trading postage stamps,
| and raised a lot of money from investors, although in
| fact he never actually bought the stamps, and instead
| invented the Ponzi scheme.
| powvans wrote:
| My wife is a lawyer and she buys a lot of stamps.
| Recently she stumbled onto some strange stamp firesale on
| Ebay and bought forever stamps at below face value. I
| could only guess that this was an unwinding of the trade
| you propose.
| ipsin wrote:
| That, or forgeries being laundered... [1]
| https://www.linns.com/news/us-stamps-postal-
| history/quality-...
|
| For a cash-like instrument, stamps _seem_ to have very
| little in the way of anti-counterfeiting security.
| toast0 wrote:
| Stamps (forever or not) are often used for Ebay
| manufactured spend because they're easy to sell (clear
| value, lightweight and easy to ship).
|
| It goes like Ebay says spend $X or sell $X on ebay and
| they'll give you a rebate. (Or sometimes the rebate comes
| from a credit card or Bing). If the $X covers ebay fees
| and shipping, then buy stamps to reach the $X and then
| sell them when you get them. If the rebate it sufficient,
| you can sell the stamps for less than cost, because
| you're already ahead.
| samizdis wrote:
| There's a quaint and quirky thing in the UK called a
| premium bond, which you can buy and which the government
| guarantees to buy back from you at its initial fixed
| value (1 bond costs 1 British pound). Every month, a
| lottery system pays out prizes to holders of bond
| numbers, as chosen by "ERNIE" - "Electronic Random Number
| Indicator Equipment".
|
| https://en.wikipedia.org/wiki/Premium_Bond
| robocat wrote:
| The equivalent New Zealand scheme (Bonus Bonds) is being
| wound up due to low interest rates:
| https://en.wikipedia.org/wiki/Bonus_Bonds
|
| From elsewhere: "With low interest rates continuing to
| reduce the Bonus Bonds prize pool, the Bonus Bonds scheme
| was closed to new investment on 25 August 2020 and an
| announcement was made that ANZIS intended to begin
| winding up the scheme no later than the end of October
| 2020."
| antonios wrote:
| Cryptocurrency "in general" obviously isn't deflationary,
| given that one can create a new cryptocurrency with a simple
| code fork. But Bitcoin is, no?
| hiq wrote:
| As commenters hinted at in a previous thread, the price is
| a measure of the combination of demand and supply. The
| mechanics of Bitcoin only address the supply side. OP
| hinted at the demand side: if a new cryptocurrency were to
| become more popular, then Bitcoin could lose value.
| throwaway4good wrote:
| Which Bitcoin?
| ROARosen wrote:
| While your point is correct, I live in NY and true, it's
| heartening to see that someone is looking out for obvs fraud.
| But it's really annoying that I can't (straightforwardly)
| open an account at most crypto exchanges, and I'm banned from
| investing according to my choosing and to my knowledge.
|
| If I decide to hedge inflation with some obscure or even
| mainstream "coin" that should be my choice why should gov be
| able to deny that right?
| easymodex wrote:
| So much for freedom right?
| api wrote:
| > Investing in virtually any asset other than cash will,
| almost by definition, shield you from inflation.
|
| ... which is why virtually every nation on Earth adopted some
| kind of inflationary fiat currency. It pushes money to be
| invested, not held. Wealth is a verb, not a noun.
| anewaccount2021 wrote:
| This makes sense when you are under forty and can wait out
| a bad market. If you are 75, expect to live to be 83, you
| are much better off being able to guarantee your assets.
|
| This is a strange pattern emerging on HN lately - that
| inflation is fine because you should be fully invested in
| equities anyway
| PragmaticPulp wrote:
| The world would certainly be a strange and sad place if the
| best thing for everyone to do with their wealth was hoard
| it in currency.
|
| Not holding wealth in cash has been investing 101 material
| long before cryptocurrency. It is fascinating how crypto
| proponents took over that narrative to imply that crypto
| was the only investment that could escape inflation.
|
| They've also spread an idea that money printing is the
| singular source of inflation, which isn't true at all.
| Bitcoin, for example, is an inflating asset due to hype-
| driven demand. It hasn't spiked upward 100% of the time
| because USD became 50% less valuable overnight
| abernard1 wrote:
| > The world would certainly be a strange and sad place if
| the best thing for everyone to do with their wealth was
| hoard it in currency.
|
| Wealth is never held in currency, ever. It's a physically
| impossible thing.
|
| When a person holds savings, it doesn't prevent humans
| from working, or raw resources from being used, or land
| from being purchased -- it just means that person is not
| redeeming a claim on those resources at the time. Their
| failure to redeem at a point in time does not preclude
| others from doing so: otherwise said, for every debit
| there's a credit.
|
| But historically, you don't have to take my word for it.
| The United States had _deflation_ and 0% interest rates
| on government bonds for 100+ years during the period
| between the National Banks and the Fed. You held money in
| cash at 0%, because when you purchased goods later, your
| dollars were worth more.
| atleta wrote:
| Not only that, but inflation is a feature not a bug.
| Maybe a bug turned into a feature, but still a feature.
| Something governments and national banks _use_ to
| stimulate investment and thus economic growth. Because,
| as you say, hoarding and holding cash (or cash
| equivalent) does no good for the world. Even though our
| instinct is to do just that: secure what we have, secure
| our future and avoid risks.
|
| The strange thing about this is that it's not some secret
| knowledge, but something that is being discussed in
| (front of) e.g. the media constantly.
| CarelessExpert wrote:
| > They've also spread an idea that money printing is the
| singular source of inflation, which isn't true at all.
| Bitcoin, for example, is an inflating asset due to hype-
| driven demand.
|
| Uh, I'm very much of the opinion that your average BTC
| fan isn't exactly educated about macroeconomics, but this
| sentence makes absolutely no sense.
|
| Inflation isn't a thing that happens to a currency, it's
| a thing that happens to an economy. It's a systemic
| increase in prices across a basket of assets that
| demonstrates the _de_ valuation of a currency, as a
| single unit of that currency effectively buys less.
|
| Bitcoin, if it had been a usable currency over the last
| decade, is very clearly deflationary, as its rise in
| value as a currency relative to USD has dramatically
| outpaced the rise in the price of goods and services as
| denominated in USD, meaning that had prices been
| denominated in BTC, they would have dropped.
| jcranmer wrote:
| Inflation can happen to assets, and PragmaticPulp is
| analyzing Bitcoin as an asset, not a currency. Given that
| even when you buy stuff with BTC, you're buying a product
| or service denominated in USD, their analysis is
| generally more correct than arguing that Bitcoin should
| be analyzed as a currency.
| CarelessExpert wrote:
| > Inflation can happen to assets, and PragmaticPulp is
| analyzing Bitcoin as an asset, not a currency.
|
| Actually PragmaticPulp was doing both.
|
| In the comment I quoted, they stated:
|
| > They've also spread an idea that money printing is the
| singular source of inflation, which isn't true at all.
|
| This is specifically referring to currency inflation.
|
| They then went on to say:
|
| > Bitcoin, for example, is an inflating asset due to
| hype-driven demand.
|
| As you say, this is asset inflation.
|
| These should not be compared like this, which is why I
| noted that "this sentence makes absolutely no sense." I
| stand by that statement.
| bronzeage wrote:
| Stocks might fall in inflationary circumstances, depending on
| many things such as how much of the companies revenue can
| inflate - and most times, the answer is worse than inflation.
| Bonds might not give you a yield exceeding the inflation,
| especially in inflation created for the sole purpose of
| buoying bonds.
|
| Speculative inflation hedges might also act erratically, like
| bitcoin and gold, getting ahead of themselves and the
| inflation sometimes.
| maaaaattttt wrote:
| I used to say "a house will always have the price of a house"
| (it has issues of course _cough_ 2008 _cough_ ) to illustrate
| what you're saying here as I never managed to explain it
| properly like you did.
| gph wrote:
| But it also has property taxes and maintenance costs, which
| will likely be higher than inflation. So it's not a great
| passive investment unless you expect the value minus costs
| to gain faster than inflation. Otherwise you gotta live in
| it or rent it to make back your money, and that's no longer
| passive.
| mumblemumble wrote:
| Even if we assume only Bitcoin, it's not currently expected
| to stop printing money until (assuming Ray Kurzweil wasn't
| right all along) long after we're all dead.
|
| The Bitcoin inflation story is more political than simply
| economic. Right now, it's not really possible for it to be
| narrowly about whether printing money is OK. But one could
| easily mount an argument about whether humans should be able
| to twiddle with the money printing policy.
| PragmaticPulp wrote:
| It is supremely ironic that we're supposed to believe that
| the best way to escape money printing is to buy a
| cryptocurrency that was invented out of thin air, which is
| continuously mined (during most of our lifetimes) out of
| thin air by doing useless calculations.
|
| Or even worse, a basket of multiple crypto currencies,
| where the number of available crypto currencies and crypto
| assets grows larger every day.
| dasudasu wrote:
| It's not really surprising when anyone pushing crypto to
| you also happen to hold a lot of crypto. It's self-
| serving advice 100% of the time. It's pretty much a
| staple also to call every other crypto you don't hold a
| fraud trying to steal the spotlight.
| nemo44x wrote:
| BTC has been the #1 asset over the last 10 years. In many
| individual years it has out performed every other asset.
| It has this year by a large amount.
|
| At some point the dissenters will have to admit they were
| wrong. The reality is, BTC is here to stay and is a
| valuable hedge that is independent of any corporation,
| government, or central bank.
| UncleMeat wrote:
| What does it mean to be wrong? Should I have mined 1000
| coins in my CPU a decade ago? Duh. Does that mean that
| BTC is a useful financial hedge against inflation? Why
| would it? BTC went up by a factor of a gazillion during a
| decade when USD inflation was not out of the ordinary.
| Clearly something other than "inflation hedge" is driving
| the price.
| nemo44x wrote:
| What it means is pundits have spared no opportunity to
| ridicule anyone who has invested their money in BTC,
| pontificated that BTC has no value, that it is a fad,
| that it is a bubble, etc. For 10 years. At some point
| don't they have to capitulate from that provenly wrong
| position and at least admit there's something there?
|
| What is driving the price is price discovery. More people
| are becoming comfortable with it as an asset as the FUD
| described above has continued to be debunked. As more
| people become comfortable that drives demand which
| increases the value.
|
| As a hedge against inflation it works for a number of
| reasons. People generally price it in dollars, like
| stocks or real estate. As the dollar inflates one would
| assume the value of BTC would increase as investors have
| more dollars to invest into it, driving demand.
|
| But the "something other" is more and more people
| agreeing it has value and therefore creating more demand
| for it and therefore creating higher prices. This is how
| any asset works.
| andresp wrote:
| I think people don't really agree it has that much value.
| People want to get rich quickly. They always have done
| that and continue to do so. Casinos and lotteries are
| older than bitcoin.
|
| The idea that BTC goes above 50k USD because millions of
| people believe its intrinsic value is worth that much is
| a story that BTC investors tell themselves before going
| to sleep. Reality is much greedier than that, and they
| know it, but the narrative won't change while the fairy
| tale continues to be profitable.
| mumblemumble wrote:
| This statement, minus the political content, sounds very,
| very, _very_ similar to what I was hearing about tech
| stocks a bit over 20 years ago, and houses about 15 years
| ago.
|
| Maybe that means something, maybe it doesn't. If I had
| some way of knowing, I'd have a lot more money than I am
| now. It's worth remembering, though, that prices are just
| that: prices. Nothing more, nothing less.
| nemo44x wrote:
| Yeah me too - I remember when AMZN was $2. I remember
| when AAPL was 28 cents (before splits, etc). I remember
| when the Internet had a host of pundits proclaiming it
| was a dying fad in 2001.
|
| And most anyone who bought a house at the peak of the
| bubble is doing quite well if they still have it today.
| mumblemumble wrote:
| Are you familiar with the concept of survivorship bias?
|
| It's an important concept to remember when talking about
| the long term outcomes from adverse market events. "If
| they still have it today," for example, is a useful
| qualifier, because it subtly renders the statement almost
| tautological. "Sure, it was a bloodbath, but all the
| people who survived seem to be doing OK."
| nemo44x wrote:
| Yeah, don't go on margin is the lesson there. People that
| lost their hat on the housing crises borrowed too much
| (went too far on margin, which is what a home loan is).
| Anyone who just kept investing during any market crash in
| history is sitting well.
|
| So yeah, it's up to you.
| Apocryphon wrote:
| Those stocks were issued by businesses that were
| providing goods and services for people and being paid in
| return.
| jcranmer wrote:
| The counterpoint is Japan: its economy peaked around
| 1990, and _still_ hasn 't recovered to that level, 30
| years later.
| ad31mar wrote:
| > This statement, minus the political content, sounds
| very, very, very similar to what I was hearing about tech
| stocks a bit over 20 years ago, and houses about 15 years
| ago.
|
| Well those two performed pretty damn spectacularly in the
| past 20 years.
| silexia wrote:
| I saw a great comment earlier, "Buying bitcoin to hedge
| against inflation is like buying lotto tickets to hedge
| against Apple stock declines."
| heliodor wrote:
| That makes no sense.
|
| Lotto tickets have an expiration date. No value
| fluctuation over time. At expiry, they're worth X or
| zero.
|
| How is that like Bitcoin?
| mumblemumble wrote:
| You're maybe stretching the analogy way beyond what was
| intended.
|
| The intended analogy, I'm guessing, is that both lottery
| tickets and BTC seem to be uncorrelated with USD. A good
| hedge is something that is inversely correlated with the
| thing you're trying to hedge against.
| erwan wrote:
| You can inflate the money supply and still be
| "deflationary" if the convenience yield of holding the
| money (tokens, UTXOs, or whatnot) exceeds or neutralize
| that inflation rate. You make an excellent point, Bitcoin
| doesn't have to overtake gold or become a global-reserve to
| change the world. It just has to be a plausible alternative
| that enables people to opt-in or out of the system. It has
| largely already achieved that and I'm hopeful for a future
| of monetary pluralism.
| redblacktree wrote:
| > I'm hopeful for a future of monetary pluralism.
|
| My big concern about monetary pluralism is what happens
| to US citizens, when their day-to-day currency stops
| being used as the reserve currency for the world? I have
| trouble imagining any way in which that turns out good
| for me, as someone living and working in the US. Anything
| you can do to assuage my fears, since you seem to be
| educated on the matter?
| PragmaticPulp wrote:
| As much as we hear about things like M1 money supply, the
| vast majority of wealth doesn't exist in the form of
| cash. Investors hold companies, stocks, real estate, and
| so on. Fluctuations in money supply (or demand for
| currency) have exaggerated significance in online crypto
| discussions because crypto proponents find that angle
| more favorable to their "buy crypto" argument, not
| because it's the full picture.
|
| The global reserve currency issue is worth watching, but
| remember that it isn't a binary on/off switch where
| everyone changes overnight. Likewise, it's not really
| true that USD is _the_ global reserve currency so much as
| one of the most trusted. Again, crypto proponents like to
| suggest the collapse of the US currency is imminent, but
| the global market believes otherwise. Likewise, crypto
| proponents want you to believe that Bitcoin is the
| logical alternative, but again that's missing the point
| that part of the reserve currency math depends on things
| like stability, resistance to manipulation, and backing
| of a powerful government.
| spiralx wrote:
| For one the USD is only the largest reserve currency used
| internationally: GBP, EUR and JPY are also used as
| reserve currencies. For another the US has been trying to
| reduce the role of the dollar as a reserve currency
| because it actually has significant downsides and fewer
| benefits than is popularly portrayed - this even has it's
| own term, "exorbitant privilege". Here's Ben Bernanke
| talking about it:
|
| https://www.brookings.edu/blog/ben-
| bernanke/2016/01/07/the-d...
|
| TL;DR: the USD's reserve currency status is very much
| exaggerated.
| redblacktree wrote:
| Thank you, that was interesting reading. Not sure why you
| were downvoted.
| Robotbeat wrote:
| It has? Bitcoin _isn't_ an alternative to the existing
| system for people. It _might_ be a digital alternative to
| gold for people hedging inflation or in failed states,
| but its transaction fee is just way too high to be a
| practical alternative to anything but, like, wire
| transfers (Visa and ACH are WAY cheaper except for huge
| transfers... and Bitcoin isn't particularly fast,
| either). And this high cost is driven by the fundamental
| non-scalability of the blockchain which requires other
| layers for the little people (and this is partly why you
| have people doing business through large companies like
| coinbase or whatever instead of the vision of
| decentralized cyberpunk utopia where everyone is at the
| same level and can directly make transactions using just
| math... which is the part of the original Bitcoin white
| paper that was fascinating to me). It's primarily NOT an
| alternative to the existing system except that, as a
| speculative investment, it's crowding out other more
| productive physical investments.
|
| I suppose it is helping people think outside the box, but
| I fear that Bitcoin is sucking a lot of air out of the
| room. We should be pushing for instant and extremely low-
| fee ACHs, alternatives to banks like credit unions where
| customers--as owners--hold more power, etc. Hopefully
| things move in that direction.
|
| That startup people see cryptocurrency as a way to lock
| up rents by becoming new gatekeepers for the blockchain
| (like banks are for the traditional system) or whatever
| is really a betrayal of the hacker ethos IMHO.
| kragen wrote:
| If you live in a country with a highly functional banking
| system and no kleptocracy, Bitcoin is probably a bit
| puzzling unless you have family in Cuba. But it's not
| puzzling at all for those of us who live somewhere in the
| middle of the broad spectrum between Switzerland and
| Somalia, because most places have _a little_ kleptocracy.
| Argentina is far from being "a failed state," but if you
| want to send US$500 abroad via non-Bitcoin means it's
| basically impossible, and the only broadly available
| savings vehicle is real estate (" _ahorrar en ladrillos_
| "), which of course grossly inflates real-estate prices,
| with a substantial part of the capital city occupied by
| empty apartments someone bought "as an investment".
| Historically Argentines have saved by buying dollars but
| that's limited to US$200 a month now, and then only if
| you have a non-under-the-table job (about a third of
| total employment is under the table):
|
| https://www.ambito.com/finanzas/dolares/cronologia-del-
| cepo-...
|
| You can see that in September 02019 when this measure was
| imposed the price of a dollar was AR$63.50; now it's
| AR$147. So whatever savings you had in pesos in 02019
| have lost 57% of their value to peso devaluation.
|
| In 02001 a lot of Argentines had saved dollars in their
| dollar-denominated bank accounts. This did not preserve
| their savings through the financial crisis that year; the
| cash-strapped government limited withdrawals to a
| trickle, then converted dollar deposits to pesos at a
| one-to-one rate, then released the exchange-rate peg, at
| which point peso went overnight from being worth US$1 to
| being worth US$0.25 before settling at about US$0.31 for
| the next few years.
|
| You suggest, "alternatives to banks like credit unions
| where customers--as owners--hold more power," but
| Credicoop depositors suffered the same two-thirds
| confiscation of savings as depositors in for-profit
| banks. And they pay the same 3% tax on bank transactions
| including checks. That's more than a fast Bitcoin
| transaction fee of US$15 for transactions over US$500.
|
| But we're not a failed state. There are no gangs of
| bandits roving the streets in Argentine cities (though
| there are some pretty bad slums where you'll get robbed
| if you wander in without knowing anybody). Courts, free
| public hospitals, and roads continue to function, though
| there are more potholes than a year ago. Argentine infant
| mortality is 10 per 1000 live births, down from almost 20
| in the late 01990s and the same as the late 01980s in the
| US; life expectancy at birth is 77 years, worse than
| Switzerland's 84, but the same as China and Hungary, and
| better than Saudi or Mexico. (Somalia is 54.)
|
| Most of the world is worse off than Argentina, although
| not necessarily in such a statistically transparent
| fashion. About one fourth of the people in the world are
| unbanked, 51% here in Argentina; even advanced countries
| like Russia, Hungary, and Uruguay have roughly a quarter
| of the population unbanked:
|
| https://www.gfmag.com/global-data/economic-data/worlds-
| most-...
|
| And if your family lives in a country like Iran or
| Venezuela subject to US sanctions, and you live in the
| US? Good luck sending them an ACH, instant or otherwise!
| It's well known that Bitcoin is very popular in
| Venezuela, which kind of _is_ a failed state, so one of
| the Venezuelan governments is trying to tax Bitcoin
| remittances at 15%.
|
| https://archive.fo/ZRXzS
|
| Bitcoin handles a few billion dollars per year in such
| remittances. This might seem like a trivial amount of
| money to someone in a rich country, but in poor
| countries, it's enough to keep several million people
| alive.
|
| Even in the US, it's common for the police to confiscate
| large amounts of paper currency just because they can
| ("civil forfeiture"); US bank accounts are probably fine
| for US$100K but probably somewhat risky for US$10M if the
| bank thinks you don't seem like the kind of person who
| ought to have it. US$10M in US$100 bills fits in a box
| you can wheel around on a dolly, but Bitcoin is a lot
| more practical. (And of course US$10M in dollar bills
| loses about US$200k per year to inflation.)
|
| So, Bitcoin doesn't have to be a cypherpunk utopia to be
| a big improvement on the _status quo ante_. For those of
| you living in stable countries where your worries are
| things like "instant and extremely low-fee ACHs" and
| "decentralized utopia", this may be very confusing, but
| try to remember that most of the world lives in places
| with much more pressing concerns, concerns that Bitcoin
| helps a lot with. And you may live there too, soon -- the
| loyal subjects of Kaiser Wilhelm in 01913 certainly
| didn't expect that in 15 years they'd be in the middle of
| a hyperinflation episode that remains legendary a century
| later.
| mancerayder wrote:
| You should publish this someplace. This perspective is
| never mentioned in the mainstream outlets, even if it's
| pro or neutral on BTC.
| kragen wrote:
| Everyone is free to redistribute my comments in this
| thread, in whole or in part, modified or unmodified, with
| or without credit; I waive all rights associated with
| them to the maximum extent possible under applicable law.
| Where applicable, I abandon their copyright to the public
| domain. I wrote and published these comments in Argentina
| in 2021.
|
| http://creativecommons.org/publicdomain/zero/1.0/
| Robotbeat wrote:
| Yeah I grant Bitcoin has value as a hedge against system
| failure. And maybe you're right about the corner case it
| addresses being larger than I think. But so much of the
| hype of Bitcoin is in developed countries with very low
| inflation. And this should be tempered.
| kragen wrote:
| But I'm not talking about system failure, primarily; I'm
| talking about day-to-day life for somewhere between one
| third and two thirds of people, most of whom aren't using
| Bitcoin yet.
| UncleMeat wrote:
| The same four countries get brought up by BTC proponents
| all the time. Yes, evading authoritarian regimes can be
| useful. But like 1/3 of the planet lives in just
| India/China. Going from "a use case is sending cash from
| the US to your family in Iran" to "2/3 of the world
| population wants this" is a big leap.
| kragen wrote:
| Which ones--Cuba, Venezuela, Iran, and Argentina? I don't
| think Bitcoin adoption is terribly high here in
| Argentina, but hopefully you can forgive me bringing it
| up--I live here, so it's the place I know best, and the
| uses of Bitcoin are pretty easy to understand here even
| if most people aren't using it yet. And even those four
| countries are hardly inconsequential in terms of the
| global commonweal: 170 million people live in them, one
| in every 46 people alive. That's, like, more people than
| play _Fortnite_ or _Minecraft_. More people than have
| bought a Justin Bieber album. Almost as many people as
| follow Ariana Grande on Instagram. Four times as many
| people as live in California. We 're not talking about
| some tiny Elbonia here. Anything that affects 170 million
| people is a big deal for human welfare.
|
| But the utility, or potential utility, of Bitcoin is a
| lot broader than that.
|
| Argentina is not terribly high on the scale of "people
| being unbanked" or "kleptocracy". If we take infant
| mortality as a rough measure of kleptocracy, we're #84
| out of 201 countries and territories in https://en.wikipe
| dia.org/wiki/List_of_countries_by_infant_an..., so we're
| actually better than average. We're neck and neck with
| PRC and way ahead of India. If we trust the table in the
| GFMag link I posted, which they attribute to "a just-
| released study by the British research platform Merchant
| Machine", whoever that is, there are nine countries with
| an even larger percentage of unbanked than Argentina,
| namely, Morocco, Vietnam, Egypt, the Philippines, Mexico,
| Nigeria, Peru, Colombia, and Indonesia. Each of Nigeria
| and Indonesia are _individually_ nearly the size of the
| US; Indonesia is the fourth biggest country in the world.
| As for India and China, they claim that 20% of PRC 's
| population is unbanked (another unbanked population
| nearly as large as the US) as well as 20% of India's (yet
| another).
|
| And Bitcoin doesn't become useless just because you have
| a bank account. If you're paying a 3% tax on every bank
| transaction (as we do here), experiencing substantial
| inflation rates, working under the table, or facing the
| prospect of an Argentina-style bank confiscation, you
| have a use case for Bitcoin. Don't tell me it can't
| happen in the US; it _did_ happen in the US in 01933 with
| Executive Order 6102, with gold playing the role of
| Argentine dollars.
|
| To expand on the inflation question, on https://en.wikipe
| dia.org/wiki/List_of_countries_by_inflation... there are
| 24 countries with a consumer price inflation index over
| 10% per year, of course including Venezuela, Argentina,
| and Iran (but not Cuba), but also including Sudan
| (regular and South), Zimbabwe, Congo, Angola, Libya,
| Syria, Suriname, Haiti, Sierra Leone, Burundi, Nigeria,
| Mozambique, Turkey, Pakistan, Zambia, Azerbaijan,
| Uzbekistan, Ghana, Liberia, and Malawi. You may not care
| about Burundi but this list _also_ includes the 7th-
| biggest country in the world by population and the NATO
| member with the largest military. These countries don 't
| necessarily have "authoritarian regimes" but it's still
| useless to try to save up money in the local currency for
| anything more than the very short term; after 5 years
| you've donated 40% of it to your central bank by way of
| inflation. Or maybe 85% if you're in Angola.
|
| India doesn't have a high inflation rate by the numbers
| but it did "demonetize" the savings of the poor in 2016--
| those piles of rupee bills under your mattress didn't
| lose just 10% or 20% of their value but 100% of it--and
| this in a country where hundreds of millions of people
| have no bank accounts! Most of them have cellphones,
| though.
|
| Both India and China also have a tendency to limit their
| subjects' access to foreign exchange in general, and cut
| it off entirely at precisely the moments when their
| subjects most need to emigrate to seek work. This is not
| at all unusual among poor countries; a Bloomberg overview
| of some of the measures current in 02019 is at https://ec
| onomictimes.indiatimes.com/markets/stocks/news/fro...
| though mostly from the perspective of foreign investors.
|
| Now, even if the 84 million Turks (one third without bank
| accounts) aren't _currently_ using Bitcoin to escape the
| ruinous inflation rate (15% per year)--the way they used
| to use dollars before the government cracked down on it--
| it 's clearly a problem many of them need to solve,
| whether or not their nominally democratic government is
| an "authoritarian regime". But diffusion of innovations
| doesn't happen in a vacuum, and it may take a while for
| Bitcoin or something similar to get widely adopted in
| Turkey.
|
| So that's the kind of thing that makes me think my
| Argentine experience generalizes to about 2/3 of the
| world population, and my US experience doesn't.
| andresp wrote:
| Isn't there really any service that lets you buy and use
| USD, EUR, GBP... online? And if not, would you still
| continue to buy crypto if one of these currencies was
| available?
| kragen wrote:
| Of course there is! The banks provide this service. It's
| called "Home Banking" (yes, in English). As I said above,
| and as in most countries, it's heavily regulated by the
| government as described above--prohibited to the part of
| the population whose need for a form of savings is most
| desperate, and limited to US$200 a month--and everyone
| over 20 remembers when the government confiscated 2/3
| of everybody's Argentine-bank USD savings. Something like
| half of Argentines have a bank account and about half of
| those (about a quarter of the total) are eligible to
| purchase dollars with it.
|
| Bitcoin is so far not heavily regulated, but presumably
| will be. But it doesn't provide the scrumptious, juicy
| central point of control that the Banco Central de la
| Republica Argentina does; regardless of what the law
| says, there's no practical way to confiscate every
| Argentine's Bitcoin savings between sunset and sunrise.
| vkou wrote:
| Not to mention that the reason you can't send money to
| Iran is not because of any problem in Iran - it's because
| the United States doesn't want you to do it.
|
| If you live in the US, and you are using bitcoin to
| circumvent the embargo, you're just adding to the list of
| crimes you're committing.
| kragen wrote:
| Family remittances to Iran are specifically exempted from
| the USA embargo, but good luck finding a way to do that
| through a bank: https://www.wiggin.com/wp-
| content/uploads/2019/09/26580_advi...
| Robotbeat wrote:
| Is it practical to use Bitcoin for day to day life for
| one to two thirds of people if the transaction fee is now
| $24? The Bitcoin blockchain itself is limited to 7
| transactions per second. With 7 billion people using it,
| that mean each person doesn't get one transaction per
| day, they get one transaction per billion seconds (over
| 31 years).
|
| It's useful for rare cross-border transactions for a
| small portion of the world's population, I agree. But it
| cannot, in its current form, be used by one-third to two-
| thirds of people day to day. Even if you increased the
| block size 1000 fold (which is not necessarily very
| practical), you're still only talking about one
| transaction a week.
|
| So first layer blockchain Bitcoin simply isn't going to
| be useful to most people for day to day operations.
| They'll have to go through intermediaries or use higher
| layers (perhaps with more localized trust, etc). Which
| may be fine, but we should temper our expectations here
| of first layer Bitcoin.
| kragen wrote:
| > _Is it practical to use Bitcoin for day to day life for
| one to two thirds of people if the transaction fee is now
| $24?_
|
| Yes, but the transaction fee is typically about US$15
| these days, down to US$5 or so if it's the kind of thing
| you can wait 24 hours for. This is about the same cost as
| Western Union. Today there's a lot of trade volume as
| people panic, but the latest block
| https://blockchain.coinmarketcap.com/block/bitcoin/671850
| contains fees ranging from .023 mBTC, with a bunch of
| transactions paying .042 mBTC up to 58.7 mBTC. The block
| reward including fees was 7763 mBTC, of which 6250 mBTC
| is the mining bounty and the other 1513 mBTC is
| transaction fees for the 2900 transactions in that block,
| a mean of 0.52 mBTC. The median transaction in that block
| paid .341 mBTC:
|
| https://btc.com/00000000000000000000476ab57eea9be8ada36e2
| 680...
|
| The recommended fees from earn.com (previously
| blockchain.info) are currently 102 satoshis per byte for
| immediate inclusion and 88 satoshis per byte for
| inclusion within the hour, but this .341 mBTC median from
| the last block is generally 140 satoshis per byte.
|
| https://bitcoinfees.earn.com/api/v1/fees/recommended
|
| In dollars at US$50/mBTC, this means that the latest
| block included transactions that paid as little as
| US$1.15 and as much as US$2935 (!!!), and a whole bunch
| of transactions that paid US$2.10, but the mean is US$26
| and the median is US$17. That means about 1400 of those
| 2900 transactions paid _less_ than US$17.
|
| But yeah, this is not what you want to use to pay for a
| can of Red Bull or even a restaurant dinner. It's more
| like Western Union or US$100 bills or gold. For example
| the current underground market spread for dollars is
| AR$142 buy, AR$147 sell, which is a price you will not
| get for small bills like US$20:
|
| https://preciodolarblue.com.ar/
|
| In effect every time you buy US$100 for savings from one
| of the "blue market" currency dealers (travel agencies
| and the like) you are paying half that spread, AR$250 or
| US$1.70, to the money changer. 1.7%. The break-even point
| where this is more expensive than the Bitcoin transaction
| fee is US$16000 for a US$26 fee, US$10000 for a US$17
| fee, US$1200 for a US$2.10 fee, or US$700 for a US$1.70
| fee. And, as you point out, lots of Bitcoin transactions
| happen inside of a single vendor platform like Coinbase
| and so don't pay the fee at all.
|
| Usually cashing out your savings so you can buy a car or
| pay the rent or buy food or whatever is an every-month or
| every-few-months kind of thing. But you're still buying
| food on a day-to-day basis.
|
| Even if you're using Bitcoin in an ATM-like fashion,
| paying a fee of US$15 or so every time you withdraw
| US$200, it's in the "everyday financial bad decisions"
| category, not the "totally impractical" category. (I hear
| ATM fees are a lot lower than that in the US now. Sadly,
| not in Argentina.)
|
| Early on I avoided Bitcoin because I worried it might
| destroy civilization--after all, I rely on public
| streets, the public education of the people around me,
| and the public hospitals, not to mention the police, all
| funded by tax dollars. And there's been a cogent argument
| since Tim May presented his manifesto at Hackers (01991?
| Certainly before early 01993, when I read it) that
| cryptocurrencies would inevitably kneecap taxation and
| thus cause the collapse of governments.
|
| But the US election in 02016 made it clear that
| civilization is doing a perfectly fine job of destroying
| itself before losing any significant taxability to
| Bitcoin or other cryptocurrencies, and the best we can
| hope for is to salvage its crown jewels from the rubble.
| stickfigure wrote:
| Not that many years ago, we used to pay for things with
| _physical cash_ (gasp!). Once ever week or two, I would
| go to an ATM, withdraw $N00 in USD, and put it in my
| wallet. Sometimes I 'd have to spend $2 in fees for this
| service.
|
| There's no reason BTC can't work the same way. With high
| transaction fees, maybe you'd withdraw once a month? The
| cost is annoying but it's still safer than having your
| savings in a shady banking system.
| Lord_Baltimore wrote:
| This a very good use case for a cryptocurrency, but in
| the long run a crypto like NANO might be a better
| solution with due to quicker transaction times, lack of
| fees, and much lower environmental impact.
| ordinaryradical wrote:
| This is the most cogent answer I've seen regarding BTC
| utility for those living under less stable regimes.
| Usually it's a hand-wavy "something something Venezuela
| something," which, as bad as Venezuela is, makes it seem
| like crypto is only really relevant in exceptional cases
| of instability.
|
| Thanks for the effort.
| kragen wrote:
| I'm glad you found it useful!
|
| If we're talking about _political_ regimes, though, I don
| 't think we're even talking about "less stable" regimes--
| whatever you might think about Cuba ethically, old Raul
| and his brother have been in power there for over 60
| years and show no signs of losing control, and I don't
| see any signs of incipient revolution in Indonesia, PRC,
| Mexico, or Vietnam either. Here in Argentina we've
| remained democratic since 01983, electing presidents from
| three different political parties (UCR, PJ, and PRO), and
| there's no serious insurgency. It's the _economy_ and
| _government policy_ that are ruinously unstable, to a
| point that seems satirical to anyone accustomed to the
| US, but is lamentably common worldwide.
|
| Thank you for the ego strokes!
| firekvz wrote:
| Venezuelan and bitcoin whitepaper lover here
|
| I've posted several times that the adoption of bitcoin in
| venezuela is pure bull**
|
| Is only used for corruption/drugs money laundering, more
| details onhttps://news.ycombinator.com/item?id=25599693
|
| So please, the fact that some venezuelan hners say they
| use bitcoin doesn't make bitcoin a real valid alternative
| and widely used
|
| Venezuelans right now only care to protect against the
| 5000% yearly inflation and they do it with the dollar,
| they don't care _for now_ about dollar losing value when
| Bolivar loses 5000%
| kragen wrote:
| I'm not Venezuelan or in Venezuela, but I definitely know
| Venezuelans here in Argentina who send Bitcoin back to
| Venezuela. But it's clearly not widely used--the best
| estimates are that there are only a few billion dollars
| per year in total Bitcoin remittances, of which under
| US$400 million (per year) are to Venezuela, and there are
| 5 million Venezuelan expats. And Venezuela has almost 30
| million people. So clearly only about 2%-10% of
| Venezuela's population uses Bitcoin at most, and many of
| them only use it to provide "send money to your family"
| services to and from other Venezuelan expats--who may not
| know or care that Bitcoin is involved.
|
| That certainly doesn't add up to "widely used" but it's
| not "absolutely 0" as you said in your other comment
| either.
|
| When I said, "Bitcoin is very popular in Venezuela" I
| meant relative to its popularity in other countries, not
| relative to the Venezuelan population as a whole. I mean,
| if I said Emacs was very popular in Venezuela, that
| wouldn't mean that every other moto-taxi driver could
| give you Elisp tips. It would just mean that more people
| used Emacs than VS Code.
|
| Where does this hypothetical 2% of Bitcoin adopters live?
| Maybe not in Caracas where it's easy to find someone to
| exchange dollars with. Maybe they live close to the
| Colombian border, where they trade with drug traffickers?
| (Though why would Colombian drug traffickers be Bitcoin
| _buyers_ rather than _sellers_? Maybe I need to think
| this through better.) Maybe they live in rural areas?
| Probably one of the P2P market sites has a map.
|
| If you had to flee Venezuela, maybe through unsafe areas
| where bandits were operating, would you rather be
| carrying your savings in Bitcoin or in dollars?
| jessriedel wrote:
| >18.5M of bitcoin has already been mined of the maximum
| 21M. So the amount of remaining future inflation from
| increased supply negligible. That the remaining 2M will be
| mined asymptotically over many years is not important
| except for purposes of incentivizing miners to run
| transactions.
| mumblemumble wrote:
| It's not _that_ negligible. At current reward of 6.25BTC,
| that means that the rate at which new BTC are being
| minted, as a percentage of total BTC supply, is about 3
| times the (admittedly unusually low) current US inflation
| rate.
|
| You're right, though, it will become negligible at some
| point in the not-too-distant future. I think, though,
| that that may not be all that relevant. The arguments
| about BTC and money printing seem to be more moral than
| pragmatic, so I'm not sure you can really draw a line and
| say, "Below this mark, printing money is A-OK. Above this
| mark, printing money is _the end of the world_ ," because
| trying to move to that style of argument would be moving
| the goalpost right out of the stadium. It was never about
| the actual pragmatics of inflationary currency policy.
|
| By analogy, I'm not sure a lot of dyed-in-the-wool gold
| bugs would respond to the hypothetical opening of a
| massive new gold mine by saying, "An increase in the
| production rate? That, I just cannot do," and walking
| away from gold. If, on the other hand, the mine were
| opening in their own country, and being operated by the
| government, which planned to carefully release gold onto
| the market at a slow rate, then you might see a lot of
| protesting. That would actually be better for price
| stability, but price stability was never actually the
| point.
| eigenvalue wrote:
| It's absolutely not true that investing in any assets besides
| cash will shield you from inflation. Inflation impacts
| companies very differently, and you want a preservation of
| real earnings power taking into account the need to replace
| plant and equipment over time. The best inflation protection
| would come from a company with a pure revenue royalty with
| fixed expenses. The worst would be a company with bad pricing
| power and lots of commodity inputs.
| redblacktree wrote:
| Is there an easy way to determine which companies are
| which? Do I need to be well-studied in business, or is
| there a chart or key statistic I can look at to tell one
| from the other?
| deanmoriarty wrote:
| What's your recommendation for least-worse inflation hedge?
| BenoitEssiambre wrote:
| On top of that, any asset for which demand comes mostly from
| being an "inflation hedge" is a bad inflation hedge since
| prices will rise when people want more inflation hedging and
| drop when they want less hedging, meaning the majority of
| people inflation hedging will buy high and sell low.
|
| Gold has had that dynamic for a long time, which is one
| reason it is not considered a good investment most of the
| time. Buy assets that are productive and you will be much
| less subject to that. Real inflation hedges look like
| stockpiles of goods, inventory or production capacity
| thereof.
| boredpandas777 wrote:
| This proven logic is drowned by people's instinct to follow
| the herd... and buy Bitcoin.
| kipchak wrote:
| Could that make such inflation hedges a good pre-inflation
| hedge? For example buying gold with the expectation that
| people will soon want more hedging than they do now, though
| this relies on getting in earlier than others.
| pas wrote:
| This is how derivatives trading (and speculation, and
| investing itself ultimately) works. It's all about
| mentalizing how others will trade.
|
| The big question is to pick the optimal asset for
| hedging.
| dkersten wrote:
| So, just price speculation then?
| vkou wrote:
| Yes, but at that point, you should just borrow money, and
| do something useful with it, because being in debt is a
| simple, straightforward inflation hedge.
| orasis wrote:
| Yes! Value producing assets produce value regardless of the
| nominal price of that value. It's insane that people don't
| understand this.
| yabudemada wrote:
| This is why I think the proper crypto currencies are backed
| by another functional use instead of "just coins." (e.g.
| Ethereum vs. Bitcoin)--one is a useful Turing-complete
| machine; the other only exists to send coins.
|
| Bitcoin will probably always outshine the other "just coins"
| because it was the first. Why get another coin if this one
| works fine for monetary transactions?
|
| Similarly with the functional ones: Ethereum will probably
| always outshine the other "Global Turing Machines" because it
| was the first. We don't really need another one--assuming it
| can adapt to changes in efficiency with hard-forks as needed.
|
| The rest of them really ought to provide another service
| underneath to become valuable.
| ad31mar wrote:
| > Ethereum will probably always outshine the other "Global
| Turing Machines" because it was the first. We don't really
| need another one--assuming it can adapt to changes in
| efficiency with hard-forks as needed.
|
| We didn't need the first one.
| safog wrote:
| You'd need to do better than that. How exactly does printing
| USDT lead to BTC price inflation? I haven't heard anything
| convincing yet. Most of the vol doesn't come from the BTC USDT
| pair. Exchanges don't seem to be doing anything shady like
| manipulating the price upwards by themselves.
| CapmCrackaWaka wrote:
| The story is that Tether has been printing tethers and buying
| Bitcoins. However, they haven't released any concrete
| holdings or submitted to an audit AFAIK, so there's a lot of
| speculation on how big of a problem this actually is.
| safog wrote:
| I don't think there are any claims that Tether the
| organization itself is doing anything like that. They just
| print USDT and send it to people who are interested in
| buying USDT like exchanges.
|
| The two problems as I see them are:
|
| - Is USDT actually backed 1:1 by USD / cash equivalents as
| Tether claims? w/o independent audits we have no idea. So
| technically, if you hold USDT on an exchange and use it to
| trade alts and evade the taxman, then if this whole thing
| falls apart your USDT might be worthless.
|
| - The owners of Bitfinex and the people who run tether are
| the same set of people. So theoretically it's possible that
| + Bitfinex generates artificial demand for USDT somehow
| + Finds a way to swap actual USD for USDT (customer
| deposits? 19bn worth of customer deposits? Unlikely)
| + In turn goes around and buys BTC with that USD for some
| reason + Does it w/ enough vol that all the
| arbitrage bots won't be able to arbitrage it
| away.
|
| These are a lot of ifs and I'm just not seeing the
| incentives here as best case Finex gets stuck with a bunch
| of BTC they inflated themselves which isn't in their
| interest.
|
| I'm not a finance guru, so I'd love it if someone more
| informed than me can comment on how someone can pull this
| off.
| graeme wrote:
| The settlement agreement shows that at multiple points
| Tether was not backed: https://ag.ny.gov/sites/default/fi
| les/2021.02.17_-_settlemen...
|
| I think the best case is tether printed usdt, used it to
| buy btc, inflated the btc price and is now fully backed
| by their btc holdings. This works as long as people want
| btc
|
| They were able to do it because people accepted usdt as
| dollars.
| [deleted]
| FireBeyond wrote:
| > - Is USDT actually backed 1:1 by USD / cash equivalents
| as Tether claims? w/o independent audits we have no idea.
|
| I'm going to say no. Because Tether refuses audit,
| refuses to name banks, and would be, based on their
| printing rates, depositing $3.5B USD a week into their
| bank (a rate which would put them on par with AT&T,
| Samsung, or Alphabet). I'm not sure how a few people
| working out of Hong Kong, etc., do that while sliding
| under the radar and avoiding scrutiny (from their bank or
| authorities).
| safog wrote:
| Yes I agree, but still trying to figure out what impact
| that has on the broader eco system if USDT ends up being
| worthless starting now. How exactly will it impact the
| BTC price?
| graeme wrote:
| 70% of btc volume is tether. Apparently the dollar exit
| points in regulated markets are rather narrow.
|
| So it could be rather catastrophic if either the market
| loses confidence in Tether or subsequent Us enforcement
| action shuts them down or makes Tether untouchable to
| various exchanges.
| luka-birsa wrote:
| It's well known that USDT is not 1:1 backed and this is
| true since the AG started their investigation.
|
| Market doesn't care. Right now USDT trading is popular
| since people are used to it. There are so many stable
| coin alternatives (backed with various collateral, some
| like USDC backed by USD 1:1), so you can always remove
| the risk.
|
| Good luck to those shorting crypto due to "Tether scam".
| If you're a newcomer, this kind of news makes rounds
| every X months and market sometimes reacts widely, just
| to return back and inexperienced crypto investors/users
| get spooked. I'm not saying that Tether is all good and
| for sure they run a hazy operation there, but there is a
| wider crypto adoption taking place now. Companies are
| diversifying their treasuries, starting to load on BTC as
| a hedge against inflation.
|
| PS: Expect news of China banning bitcoin, India banning
| bitcoin, Russia takedown on crypto, Yelen commenting that
| BTC is a scam. All of this will be amplified to move
| price down and shakeout small time holders while large
| investors keep buying more and more.
| rthomas6 wrote:
| I've always championed DAI for a stablecoin. I don't know why
| it's not more popular. https://makerdao.com/en/
|
| Instead of it being (supposedly) backed by a dollar reserve,
| it's collateralized by ETH and several ERC20 tokens in a smart
| contract. The smart contract does things to make DAI tend
| toward $1. It's been out for years and I think it has worked
| pretty well: https://coinmarketcap.com/currencies/multi-
| collateral-dai/
|
| It works through collateralized loans.
| nipponese wrote:
| Super interesting project and tech, but it's competing with
| USDC (and similar USD-backed tokens). Adoption will just take
| longer for DAO-backed stablecoins.
| intotheabyss wrote:
| DAI is very cool.
|
| If you want to really blow your mind, check out RAI:
| https://stats.reflexer.finance/
| rthomas6 wrote:
| Very interesting. I wonder how stable it will be vs USD
| over the long run.
|
| I am interested in someone making a CPI coin, that tracks
| some value of a basket of goods instead of another
| currency. I think that would be sort of the ultimate
| inflation hedge because ideally the value would not change
| at all over the long run.
| notahacker wrote:
| The real question would be "how". A [crypto]asset backed
| by another currency is easy in principle: simply hold the
| currency to back it (and make sure you have some sort of
| transaction fee to cover your storage costs, and don't
| lie about it...). Same with a [crypto]asset backed by oil
| or metals. But CPI goods include many goods which are
| either perishable or lose value over time, and the
| composition of actual CPI baskets changes over time so
| you can't do that.
|
| In the absence of that backing you can create a purely
| synthetic asset that can only track CPI if you've got the
| ability to withdraw significant quantities from
| circulation every time the value starts to drop. (That's
| sort of what central banks do with targeting a fixed
| _non_ -zero rate of CPI inflation. But they have an
| economy built on debt so the money supply can contract
| organically by debts being repaid faster than new debts
| are issued. This is less troubling for the future of a
| coin than alternative strategies like having to use
| VC/company funds to buy back coins, or making a
| percentage of coins disappear)
| rthomas6 wrote:
| Well, DAI exists and is pegged to USD without USD
| backing. Why couldn't one create a similar system with a
| CPI value target instead of a 1 USD target?
| nbardy wrote:
| You could it's a really interesting idea. Synthetix and
| kwanta have done it with TSLA share price. It requires a
| liquidity pool to balance the asset. The liquidity pools
| are usually seeded with rewards from the companies that
| start them. They eventually find stability via automated
| market makers.
| erwan wrote:
| Short description: RAI dampens volatility (goes up slower,
| goes down slower) of its collateral (Eth). All thanks to
| some straightforward control theory tricks!
| SilasX wrote:
| Can you summarize the dynamics/phenomena that those
| smartcontracts in DAI exploit to maintain stable value? What
| stops it from gaining -- or, more importantly, losing --
| value?
|
| I couldn't tell from the link.
| rthomas6 wrote:
| There are a few different mechanisms. I might be missing
| some, but here are the ones I know about.
|
| * The interest owed on loaned DAI (called a stability fee)
| changes depending on the market price. So if DAI goes too
| high, the stability fee increases which makes getting a DAI
| loan less attractive. If the market price goes too low, the
| stability fee drops. If it drops to 0, this would mean
| interest free collateralized loans.
|
| * There is a savings account smart contract that generates
| a variable savings rate on DAI. The savings rate changes
| depending on the market price.
|
| * There is the Target Rate Feedback Mechanism which frankly
| I don't understand. It has something to do with changing
| the amount your collateral is worth depending on DAI's
| market price.
|
| * When the value of the collateralized asset drops to some
| defined percentage of the DAI withdrawn (currently 150% I
| think?), the smart contract can liquidate and auction off
| that asset _for the value of the withdrawn DAI_. This
| increases the value of DAI and also ensures that all DAI is
| overcollateralized.
|
| * MKR token holders function as the governance for DAI and
| vote on stuff, like the collateralization rate mentioned
| above. They get rewards for holding MKR and in normal
| circumstances the amount of MKR is static. But in the event
| of a black swan, if the collateralized assets drop to below
| 1:1 faster than the normal system can handle, MKR is
| automatically generated and sold to raise the additional
| collateral needed. This devalues MKR in order to keep DAI
| stable.
| ssakamoto wrote:
| Both are still printing machines. Dollars are backed by faith
| in the USA. Is there any difference ?
|
| Powell - "We print money digitally. As a central bank, we have
| the ability to create money."
|
| https://www.youtube.com/watch?v=ff6SDsaS7rI
| ncallaway wrote:
| I mean, if you accept that Bitfinex is printing tether, then
| the difference would seem to be the fact that Bitfinex is
| lying about it while the US Government isn't lying about it?
|
| The ability of the US Government to create more dollars is a
| well understood aspect of the financial system. The US
| Government acknowledges is has the power to print money, and
| regularly tells us how much it is printing.
|
| Bitfinex claims they do not print USDT and that it is backed
| by USD.
|
| For a system that's based largely on trust (for both the USD
| and USDT), lying is a significant problem.
| NovemberWhiskey wrote:
| Sorry, is the question really "what is the difference between
| the US Government printing dollars and Tether printing
| dollars?"
| heterodoxxed wrote:
| | _Dollars are backed by faith in the USA. Is there any
| difference ?_
|
| Jesus lord, yes, absolutely. The weight of the US Empire and
| all its combined military and economic might versus what...
| some shell corporations and the whisper of a promise?
| christiansakai wrote:
| You have no idea that a lot of people, including high
| profile analysts forgets this very crucial fact, and refuse
| to invalidate their analogy. You thought flat Earthers are
| ignorant enough, surprise surprise.
|
| Many people think that money is money. They think money is
| what makes a nation strong, not products and services. I
| don't know how even highly educated people missed this
| part.
|
| Money is a side effect of power, not the other way around.
| owenmarshall wrote:
| One has a standing army and a history of successfully
| deploying it against countries that attempt to disrupt the
| geopolitical status quo by moving away from the dollar.
|
| The other does not.
| FireBeyond wrote:
| As recently as a couple of weeks ago, I've heard people claim
| that Tether is still "1:1 backed with USD". Oh, and:
|
| > Keep in mind that in relationship to tether, $1.5 billion is
| tiny. It's only 3 days of tether printing.
|
| apparently depositing $3.5B a WEEK into some bank (unnamed of
| course, because Tether won't disclose).
|
| While there is a large deal of potential, and some real value
| in crypto, there's definitely a non-negligible portion of True
| Believers, the crypto equivalent of Qanon.
| jcranmer wrote:
| > As recently as a couple of weeks ago
|
| For more recent claims, just read the comments on this post
| in this site.
| jkhdigital wrote:
| And what about all the cash-for-difference swaps and futures?
| BitMEX's XBTUSD swap is basically a synthetic dollar that can
| only be redeemed for Bitcoin within the walled garden of
| BitMEX. Tether is like a dollar swap contract that can be moved
| on-chain and, in theory, can be redeemed for the nominal
| currency. Of course Tether represents itself as a fully
| reserved stablecoin, which is likely a total fiction, but in
| the grand scheme of things I don't think it actually matters
| much.
| kenneth wrote:
| I have the same doubts you do about Tether's legitimacy, but
| there's a few conclusions I believe you're jumping to which I
| think don't quite hold:
|
| - Tether's volumes being greater than other crypto-currencies
| don't have much impact on the legitimacy of other crypto-
| currencies. The volume is so high because USDT is the other
| side of most crypto-currency trading pair. Given the liquidity
| of the market, you can trade almost anything (BTC, ETH, all
| alts, etc) against USDT without being exposed to any underlying
| USDT risk.
|
| - The market value of crypto-currencies minus any deposit-
| backed USD coins far exceeds those coins. Tether "printing"
| coins out of nothing cannot alone explain the market
| capitalization of cryptocurrencies.
|
| - Even if everything alleged were true, it really wouldn't be a
| drop in the bucket compared to the kind of shenanigans central
| banks have been pulling for centuries. If the crypto-currency
| market is illegitimate due to money printing by Tether, then so
| is the conventional financial system due to quantitive easing
| by the Federal Reserve and other central banks around the
| world.
| kaibee wrote:
| > If the crypto-currency market is illegitimate due to money
| printing by Tether, then so is the conventional financial
| system due to quantitive easing by the Federal Reserve and
| other central banks around the world.
|
| The difference is that central banks aren't lying about
| whether they're printing money or not.
| ericns wrote:
| Instead, they control the methodologies that define the
| value of what they've printed as well as the flows.
|
| Differences...Distinctions...are there?
| rglullis wrote:
| > If the crypto-currency market is illegitimate due to money
| printing by Tether, then so is the conventional financial
| system due to quantitive easing by the Federal Reserve and
| other central banks around the world.
|
| IOW, "Meet the new boss, same as the old boss"?
|
| No, there should be no moral relativism to get Tether out of
| the hook. It doesn't matter if they manipulated the market by
| one or one hundred billion dollars, they are a bad actor in
| the space that we _must_ get rid of.
| CarelessExpert wrote:
| > Even if everything alleged were true, it really wouldn't be
| a drop in the bucket compared to the kind of shenanigans
| central banks have been pulling for centuries. If the crypto-
| currency market is illegitimate due to money printing by
| Tether, then so is the conventional financial system due to
| quantitive easing by the Federal Reserve and other central
| banks around the world.
|
| Man, I find it endlessly amusing that cryptocurrency utopians
| touted the benefits of BTC based on how it will democratize
| finance and finally remove the yoke of corrupt governments
| manipulating currencies and markets to their benefit.
|
| And then when a private company like Tether comes along and
| starts engaging in shenanigans in this cryptoanarchist
| libertarian fantasy land, all of a sudden the whataboutisms
| pop out and the excuse is "well... whatever dude, like, the
| government does this, too!"
| rglullis wrote:
| Both your paragraphs are correct, yet each refers to
| different groups of people.
| FireBeyond wrote:
| > - Even if everything alleged were true, it really wouldn't
| be a drop in the bucket compared to the kind of shenanigans
| central banks have been pulling for centuries. If the crypto-
| currency market is illegitimate due to money printing by
| Tether, then so is the conventional financial system due to
| quantitive easing by the Federal Reserve and other central
| banks around the world.
|
| Currently Tether is printing $3.5B worth of Tether per week.
|
| They, and supporters are claiming with a straight face that
| those printings are supported by USD deposits. But who knows
| what bank this supposed $180B/year is going into?
|
| Recognizing that revenue is not a straight comparative metric
| (but that much revenue is banked and/or/then invested), that
| would put Tether's deposit rate at the top 20 in the world (h
| ttps://en.wikipedia.org/wiki/List_of_largest_companies_by_r..
| .). We're going to need to accept that there's some pretty
| large optimism needed to believe this.
| carleverett wrote:
| Tether is using Deltec Bank and Trust in the Bahamas.
| Deltec's CEO actually did an interview where he responded
| to the Tether fraud claims:
| https://unchainedpodcast.com/is-tether-a-fraud-its-bank-
| says...
|
| When Tether started, most financial institutions weren't
| open to working with cryptocurrency companies, but the fact
| that it's still the top stablecoin by value is troubling
| since there are plenty of better options now.
| ordinaryradical wrote:
| People have already researched that the total volume in-
| out of Deltec and it could not be more than a fraction of
| Tether's printing meaning:
|
| 1) They aren't holding the money as USD 2) They aren't
| holding the money in the Bahamas--then where? 3) They are
| printing money without a corresponding asset aka Ponzi
| Scheme.
| FireBeyond wrote:
| I'm sure it'll get me flagged as a naysayer, but this
| raises more questions than it answers
| (https://www.coindesk.com/tether-bank-deltec-stablecoin-
| reser...):
|
| > "Every tether is backed by a reserve and their reserve
| is more than what is in circulation," said Gregory Pepin,
| Deltec Bank's deputy CEO.
|
| What business does the bank have in auditing Tethers? Why
| would they care? They're just holding funds.
|
| > "We can see it firsthand, so I can confirm that."
|
| That to me more reads like Deltec is heavily involved in
| the actual day-to-day operations at Bitfinex/Tether.
| Which wouldn't be surprising - after all, remember when
| Bitfinex and Tether were claimed to be entirely separate
| and independent entities.
|
| It's a little bit of a stretch to say that Bitfinex has
| been able to get Deltec on board with keeping this all
| going by providing a "partnership" above and beyond the
| usual "banking relationship", but that's very much the
| vibe I get from all this, and as I said, to me, it just
| increases the sketchiness of everything.
|
| Oh, and WTF, I watched the video of the interview with
| the "Deputy CEO" of Deltec Bank, self-described as a
| "50-year-old bank [whose] customers range from asset
| managers to high-net-worth individuals"
|
| It's a damn "kid" who looks to be 30 at most, sitting in
| his gamer seat with red slashes in the black, wearing a
| Razer gaming headset.
|
| He has almost no photos on the internet, his LinkedIn
| profile is full of multiple spelling errors
| ("Independance Weath Management"), who claims to be a
| Professor of Finance at a University in Lebanon (a year
| after graduating from a Lausanne University) while
| working for numerous Swiss funds, oh and in Jacksonville,
| Florida, simultaneously.
|
| How the hell are people taking this seriously?!?
|
| EDIT: He's 33.
|
| So he apparently graduated with a Masters in Science from
| HEC Lausanne when he was FIFTEEN. I'm sorry, I'm crying
| now with laughter.
|
| Sources:
|
| -
| https://wallmine.com/nasdaq/tenx/officer/2087842/gregory-
| pep...
|
| - https://www.linkedin.com/public-profile/in/gregory-
| pepin-0a8...
| jboggan wrote:
| And the Bahamas does annual reports on the total amount
| of reserves its banks hold, and the government numbers
| aren't close to what Tether claims to deposit in Deltec,
| even if Deltec were the only bank in the Bahamas.
| FireBeyond wrote:
| You mean this interview?
|
| https://www.reddit.com/r/Buttcoin/comments/l5m2my/gregory
| _pe...
|
| See my previous comments, the Deltec Deputy CEO claims
| that he was simultaneously Professor of Finance in a
| Lebanon University, administering Swiss investment funds,
| oh and working for a company in Jacksonville FL. He gave
| his interview from his gaming setup, and talked all about
| seeing all the Tethers personally from their operations
| (Why? You're just their bank).
|
| You're going to forgive me on being a little skeptical
| here.
|
| Especially when his LinkedIn has him graduating HEC
| Lausanne in 2001 with a Masters in Science...
|
| when he was fifteen...
|
| Funnily enough, Deltec bank removed him from their
| website when this interview was published, then re-added
| them when people asked questions, and then arranged a
| very quick website complete "redesign" (I use that word
| lightly - this looks like a WordPress template that
| they've struggled to fill with any content whatsoever -
| most of the pages are effectively empty, many of the
| buttons to "learn more" are not linked to anywhere).
|
| This is such a scam.
| ketamine__ wrote:
| Bitcoin is going up because young people want to buy Bitcoin.
| Most young people are trading (i.e. WSB) and not investing in
| cryptocurrency. That has a lot to do with price fluctuations.
| Also taxes, vacations, etc are all funded by cashing out.
| nateberkopec wrote:
| Are there any other active government investigations of
| Tether/iFinex that we know about?
| temp wrote:
| So even back in 2017, Tether was backed only by a fraction of
| USD.
|
| _> Until September 15, 2017, the only U.S. dollars held by
| Tether ostensibly backing the approximately 442 million tethers
| in circulation was the approximately $61 million on deposit at
| the Bank of Montreal._
|
| Wonder how much of the tether they pumped out through last year
| has been backed?
| londons_explore wrote:
| Nearly none I would guess... Which large company, investment
| firm or rich individual will wire Tether Inc millions of
| dollars in return for a promise from a bunch of people that
| look like arrest warrants will shortly be issued for them...
| BelenusMordred wrote:
| Do people here not realise that people give them bitcoin and
| other cryptocurrencies for that in exchange for tethers? If
| they were only a week late in converting it to USD they'd be up
| tens of billion in profit this year.
|
| The lack of critical thinking and mindless mob mentality around
| tether is amusing and has been going on for years now. Proven
| wrong everytime.[1][2][3]
|
| Even this announcement is dumb politiking that people seem to
| lap up. Bitfinex has banned US customers since 2017.[4]
|
| [1] https://news.ycombinator.com/item?id=14934874
|
| [2] https://news.ycombinator.com/item?id=16252365
|
| [3] https://news.ycombinator.com/item?id=16182423
|
| [4] https://www.coindesk.com/bitfinex-suspends-sale-select-
| ico-t...
| tootahe45 wrote:
| A 145m sell just sent BTC down 13k. It's not so easy to just
| sell your ~30b worth of buttcoin.
|
| If anything it's shocking that "we checked and it's all
| fraud" is seen as a win for crypto.
| graeme wrote:
| Where can you find data on sell volumes? This seems very
| material.
| FireBeyond wrote:
| > Do people here not realise that people give them bitcoin
| and other cryptocurrencies for that in exchange for tethers?
| If they were only a week late in converting it to USD they'd
| be up tens of billion in profit this year.
|
| So they're speculating to cover their "1:1 Backing!", and
| relying on BTC still being hyped, like they said all along?
|
| No, wait, hang on. They were the ones who said they received
| 1:1 USD inflow for each and every Tether printed.
|
| Now you're like "mindless mob mentality!" while fully
| admitting that their claims all this were exactly as the mob
| said.
|
| Tell me, what happens to Tether's ability to create backing
| out of BTC (or whatever) arbitrage and trading if and when
| BTC craters again?
|
| > Bitfinex has banned US customers since 2017.
|
| NY is still investigating and believes that Bitfinex has
| knowingly kept US customers while claiming that they don't.
| bhouston wrote:
| And if they used made up tether to buy a bit of extra btc or
| a lot they would be even further ahead. The easily
| exploitable opportunities for fraud surrounding tether is
| huge. Bernie Madoff should be jealous.
| filleokus wrote:
| So there are 34B outstanding USDT right now. In the documents I
| see talk about some 850M USD is missing. Are all the other [?]
| 33B USDT backed?
|
| Will we only know that on the first report they obliged to do
| each quarter? Will those reports be made public?
|
| I'm confused what to make of this.
| Clewza313 wrote:
| The NYAG investigation is about what happened up to 2019 or so.
| What has happened since (which includes printing 33 of those 34
| billion) is a separate matter, and NYAG is basically saying
| it's irrelevant because nobody in NY should be able to use
| Tether/Bitfinex anymore.
| TacticalCoder wrote:
| What's confusing is that in addition to the slap on the wrist
| of 18.5m and the prohibition for BitFinex to operate in NY,
| it is written:
|
| "agreement with iFinex, Tether, and their related entities
| will require them to cease any further trading activity with
| New Yorkers, as well as force the companies to pay $18.5
| million in penalties, in addition to requiring a number of
| steps to increase transparency."
|
| What are these steps to "increase transparency"? On
| activities related to these 850m or on the 33 bn+ printed
| since then?
|
| To benefit whom? New Yorkers cannot use BitFinex anymore. If
| it's now irrelevant to the NYAG because from NY's point of
| view BitFinex is out, why ask for "a number of steps to
| increase transparency"?
| lovedswain wrote:
| The most damning detail I've seen comes from US treasury TIC
| reports, which fail to reveal matching bond ownership inflow to
| the country that is the reputed host of Tether's segregated
| bank account.
|
| It is possible that Tether holds funds in some kind of strange
| non-interest-bearing account, but that seems highly unlikely.
| Another possibility is that the primary bank is actually a
| wrapper around some overseas correspondent bank where the funds
| are really held.
|
| Occam's razor: a company selling a 1:1 hedged coin should have
| absolutely _no difficulty whatsoever_ proving on a daily or
| hourly basis that all coins are verifiably fully hedged. It
| should literally be the company 's prime directive, and in this
| particular case, especially following the endless stream of
| controversy. The fact they haven't managed to convincingly
| achieve this even once in 7 years is all I need to know.
|
| The whole thing stinks terribly. Good luck for those who invest
| in it, but I'll be there if/when it blows up to quietly feel
| smug about it all
| raiyu wrote:
| The minting of tether accelerated in 2020 and continues in to
| 2021 including one week alone where $2B was minted.
|
| https://www.coindesk.com/tether-mints-record-2b-usdt-in-one-...
| Clewza313 wrote:
| Meanwhile, a group of hackers claim to have penetrated
| Bitfinex/Tether's bank Deltec:
|
| https://deltecexposed.medium.com/deltec-bank-trust-and-their...
|
| Grab some popcorn, the show is only getting started.
| capnorange wrote:
| no evidence. looks like some random post.
| capnorange wrote:
| wait.. this seems contradictory to this --
| https://www.theblockcrypto.com/post/95207/bitfinex-tether-ne...
| londons_explore wrote:
| I think I trust ag.ny.gov much more than theblockcrypto.com...
|
| It suggests the latter is 100% made up news, possibly with the
| aim of market manipulation by sentiment bots who will be fooled
| for a few minutes until humans intervene.
| celticninja wrote:
| I would also prefer to trust that source, however it is
| written as a press release. So they write it to make them
| look as positive as they can and stress the Bitfinex bad
| points. The blockcrypto article seems to indicate that the
| accounts were now balanced, but the ag.ny.gov makes no
| mention of it, which is expected if they are still trying to
| paint bitfinex as a wrongdoer, but calls into question their
| impartiality, so it becomes difficult to accept either at
| face value.
| londons_explore wrote:
| The settlement agreement[1] I suspect is a good middle
| ground.
|
| It looks like the NYAG believes the loan from bitfinex to
| tether has now been repaid, but makes no claims about
| either having sufficient reserves to cover liabilities.
|
| [1]: https://ag.ny.gov/sites/default/files/2021.02.17_-_set
| tlemen...
| FireBeyond wrote:
| > I would also prefer to trust that source, however it is
| written as a press release. So they write it to make them
| look as positive as they can and stress the Bitfinex bad
| points.
|
| Whereas theblockcrypto is quoting Bitfinex's counsel who is
| weasel wording over people's understanding of what a
| "finding" is at law?
|
| > The blockcrypto article seems to indicate that the
| accounts were now balanced
|
| Given that in 2019, Tether's lifetime holdings were $2.1B
| and even that was not fully backed, and they're now
| printing $3.5B a week, I'm intensely curious how they are
| comfortable drawing that conclusion.
| londons_explore wrote:
| I'm also very interested in the $18.5M number in the
| settlement...
|
| It seems surprisingly small for someone who can't explain
| where $200M+ has gone to...
| dgellow wrote:
| This article doesn't make that much sense IMHO. You can read
| the settlement agreement for yourself here:
| https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
|
| Page 4 of the agreement:
|
| > 20. Because of Tether's inability to conduct significant
| banking activity during this time, it could not itself hold
| dollars sufficient to back the hundreds of millions of new
| tethers that had entered the market. Until September 15, 2017,
| the only U.S. dollars held by Tether ostensibly backing the
| approximately 442 million tethers in circulation was the
| approximately $61 million on deposit at the Bank of Montreal.
|
| That's 14% of the cash required to back the issued Tether at
| the time.
| londons_explore wrote:
| The price of bitcoin dropped _substantially_ yesterday.
|
| I wonder who was trading on this information before release...
| zaxu wrote:
| It was always public information that this was coming out today
| or tomorrow.
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(page generated 2021-02-23 23:01 UTC)