[HN Gopher] Legal expert says Tether and Binance Coin are likely...
___________________________________________________________________
Legal expert says Tether and Binance Coin are likely picks for SEC
lawsuit
Author : haskellandchill
Score : 148 points
Date : 2021-06-16 13:34 UTC (9 hours ago)
(HTM) web link (cryptoslate.com)
(TXT) w3m dump (cryptoslate.com)
| Tenoke wrote:
| Binance isn't even allowed in the US. What would a SEC lawsuit
| even mean?
| auc wrote:
| Binance _is_ allowed in the US. They have a special US facing
| website.
| Tenoke wrote:
| Binance.us isn't Binance, and doesn't offer most of their
| services (does it even have BUSD?). It's a completely
| separate company actually based in the US and run by
| different people who basically pay Binance to use the name.
| They definitely do not run or are responsible for BUSD.
| ipnon wrote:
| I would much rather live in a world where I can choose for myself
| whether or not using crypto like Tether or Binance Coin is too
| risky. It has been said that crypto is essentially regulatory
| arbitrage. It's like a UFO landing on Wall Street, yes it's
| obviously finance but it is different enough that the government
| doesn't know how to deal with it. This has clearly led to new
| financial and cryptoeconomic innovations, as well as clear scams
| and crashes.
|
| Nonetheless I would rather make the decision for myself.
| Financial regulations are already looser for the rich in the
| United States than the poor. There are many more shackles on what
| you can do with your money as a retail trader than a
| institutional trader. At least one benefit that crypto has over
| traditional finance is that all participants have the same
| opportunities. For the most part it is open source code for nodes
| that anyone can run themselves.
|
| Finally I'd like to add that the nature of crypto means that when
| the United States removes its regulatory ambiguity, or if USG
| decides to crackdown on the whole endeavor, there will most
| likely still be some country like El Salvador where it is still
| legal and accepted. So to me it seems that the future of crypto
| is still bright despite what may be seen as increasing regulatory
| pressure from the elephant in the room.
| [deleted]
| kenneth1amar wrote:
| Clearly the freedom to choose is the actual problem here. No
| one here is taking time to point out issues in bitcoin that
| would fail to laugh at someone loosing their money as a result,
| let's be honest about that at least. Thus it's pretty clear
| that all of this a double standard to crypto, and are only
| feigning concern for it's users.
|
| The real issue here is the collective concern about crypto's
| impact on an already failing USD. These people are just trying
| to selfishly protect their own investments by utilizing the
| legal system like a bully. Hey, this sounds like a problem
| crypto might solve...
| ur-whale wrote:
| Are US folks allowed to buy BNB from Binance directly?
| kemonocode wrote:
| As of a little while ago, yes: https://www.binance.us/
| jpmattia wrote:
| I find it a little strange that 100% of the comments (as of this
| moment, with 154 comments) are not about the main thrust of the
| article: Whether the SEC has Tether and BCB in their sites for a
| lawsuit.
|
| For those who are looking for the usual HN summary: The tldr is
| that BCB is likely to incur SEC lawsuit mainly because of an ICO
| back in 2017, and the "legal expert" did not actually give a
| probability of Tether incurring an SEC lawsuit.
| haskellandchill wrote:
| Good point, it kind of is Hacker News style not to read the
| article and just go off on interesting tangents in the
| comments. Thanks for the summary!
| kenneth1amar wrote:
| Reading the comments here, I'm curious why there are no
| disclosures found in this tread. It seem most of anti-bitcoin
| proponents are happy to hold a double standard due to their
| gleeful investment in the Fed's corrupt management of the USD.
|
| Is it really any surprise those which aren't overly invested in
| the current house-of-cards are willing turn to what might amount
| to the wild-west of financial investments? Get off the self-
| righteous horse and drop that Pravda. All of your hands are dirty
| from the current propped up system, and your feigned ignorance of
| it's glaring mismanagement shows there's little to no value in
| the arguments here against using crypto.
|
| Side note: this lot have clearly lost control of the narrative,
| that means it's about time for taking a back-log of medicine. Oh
| gnashing of teeth.
| jpdaigle wrote:
| What's incomprehensible to me about the Tether saga is: the idea
| of a stablecoin pegged to USD is so _incredibly useful_ as a
| bridge between financial systems... why go through all the
| trouble and risk of doing it fraudulently when you could... just
| not be crooked?
|
| The basic idea seems sound: people want to transfer around
| cryptocurrencies (or speculate on them, fine), but actually
| selling them for USD is somewhat hard and peppered with
| regulatory issues. So swoop in with a partial solution: a
| stablecoin worth exactly 1$ USD that you can transfer quickly
| around using the blockchain, but doesn't have any price
| volatility so is a safe store of value until you can move out and
| redeem for USD through a slower, regulated offramp (of which
| there are fewer).
|
| That seems like the hard part? They solved all the hard problems,
| and it's so useful that it should be possible to get rich just by
| charging small transaction fees, success just requires doing all
| that _plus_ not being crooked and lying about the 1:1 backing.
| haskellandchill wrote:
| Ok so I know this answer! They lost money through exchange
| hacks and bad banking relationships so they could never rely on
| 1:1 backing and fees, they had to make it up through bitcoin
| price increase which they contributed in pumping and then
| backing with commercial paper from their sister exchange.
| ArkanExplorer wrote:
| People want to transfer around cryptocurrencies, because their
| price is high and they can speculate on them and mine them.
|
| If the price was lower, then the mining activity would be
| reduced as would the interest in speculation.
|
| The interest in tether is thus directly associated with the
| price of bitcoin.
|
| It makes sense then to use the power of controlling Tether and
| Bitfinex to pump up the value of bitcoin, in the hope (I guess)
| that the value becomes self-sustaining.
|
| But, basically, we have been duped at a civilizational level
| and this whole crypto pyramid needs to come crashing down for
| the good of electricity, chip shortages, limiting ransomware
| and criminality, and wasting technical talent.
|
| Crypto is basically the Uber of money laundering and ponzi
| schemes.
| MinorTom wrote:
| Interacting between the crypto space and the U.S. financial
| system is hard. USDC does it by being a well-regulated in the
| U.S. and internationally financial institution, but that's
| certainly not easy.
|
| Just one example (from [1]):
|
| > At the time, Bitfinex (theoretically a Hong Kong entity but
| whose location, like a Bond villain, changes moment-to-moment
| to fit the needs of the scene) was banking in Taiwan at Hwaitai
| Commercial Bank, KGI Bank, First Commercial Bank, and Taishin
| Bank.
|
| > Taiwanese banks do not have direct access to the U.S.
| financial system; they engage via correspondent banking
| relationships. These banks corresponded through Wells Fargo.
| Wells, in the wake of publicity about the Bitfinex hack, told
| the banks they would no longer clear USD wires to or from
| Bitfinex.
|
| [1] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
| Flatcircle wrote:
| If you spend 10 mins looking into tether online, it's easy to see
| it's a totally fucking scam. It's unbelievable.
| cheeseomlit wrote:
| It really is quite obvious- the funny thing is the USD/Federal
| Reserve has been running the same scam for decades (expanding
| the money supply with no backing) and it's just as obvious
| iudqnolq wrote:
| The difference is the fed is up front USD is unbacked,
| whereas tether lies about USDT's backing. In the financial
| system it's often not a problem to sell something as long as
| you're up front about what it is.
| threevox wrote:
| False equivalence much?
| pavlov wrote:
| I didn't realize Tether owns eleven aircraft supercarriers
| and collects tax revenue from 330 million people. Pretty
| impressive for a company that operates out of a backroom
| somewhere in the Bahamas.
| cheeseomlit wrote:
| That doesn't legitimize it in my eyes, it's still a scam.
| Ancient Rome was also the leading regional superpower in
| its day, that doesn't make it OK for them to debase their
| currency by filling the silver coinage with lead.
| Clewza313 wrote:
| That's on par for Tether, which has 13 employees managing
| ~$65B in funds, meaning everybody including the janitor
| manages a portfolio of $5B. The poor schmucks at Goldman
| Sachs can only manage around $18M per person.
| Smithalicious wrote:
| I always enjoy this argument that approximately goes "don't
| worry, if the dollar goes tits up, Uncle Sam will just bomb
| people until it's alright again."
| kevingadd wrote:
| Unfortunately, it's true.
| lazypenguin wrote:
| More like "if the dollar goes tits up, Uncle Sam has
| enough assets in the real world to maintain
| infrastructure and law and order."
| thehappypm wrote:
| US government services will always only accept USD, which
| means the dollar is tied back to real-world value. taxes,
| services, etc.
| kenneth1amar wrote:
| "Always"... is that a fact? Do you mind lending me that
| time-machine you're sitting on?
|
| Sounds like a bit of faith is mixed in with your
| argument. Sounds a bit hypocritical to me.
|
| You've placed your faith in the established system and
| are likely seeking to handicap the competition. How brave
| and noble.
| dang wrote:
| Could you please not create accounts to post in the
| flamewar style to HN? We're trying for a slightly
| different internet here.
|
| https://news.ycombinator.com/newsguidelines.html
| thehappypm wrote:
| This is one of the funniest replies I've seen so far in a
| crypto discussion.
| kenneth1amar wrote:
| Nice, your over-confidence amuses me as well. I can at
| least be honest about my intentions: I hope your up to
| your neck in stocks and bonds. :)
| thehappypm wrote:
| So much honesty in your 2 hour old account.
| uninteresting wrote:
| Ha, here I was, unable to respond until hours later for
| having a dissenting view and your response is to use this
| ad-hominem attack for not adequately participating in
| your echo chamber. Complete lack of self-awareness, the
| perfect lackey. There aren't enough words to express my
| contempt for your lot.
|
| To return the favor, your experience with your dog, as
| you described, makes you sound like a soft-boiled egg
| that needs someone to manage your life for you. I can see
| why you feel this way now.
|
| and fuck you 'dang', you disingenuous double-dealing
| turd. Just in case you thought I forgot or didn't know
| what happens next on this platform.
| dang wrote:
| Please don't respond to a bad comment by breaking the
| site guidelines yourself. That only makes this place even
| worse.
|
| https://news.ycombinator.com/newsguidelines.html
| cortesoft wrote:
| The money supply has to expand because our economy expands.
| If an economy keeps producing more things more efficiently,
| you need your money supply to also expand, or you will have
| deflation and the economy will grind to a halt.
| cheeseomlit wrote:
| If you produce things more efficiently they should cost
| less, the money supply shouldn't expand to make sure their
| cost stays the same or more. Nobody can be entrusted with
| the authority to "expand the money supply" and not abuse it
| to the point of collapse. Case in point:
|
| https://fred.stlouisfed.org/series/M1
| [deleted]
| throw_m239339 wrote:
| Well you're right, retail banks and central banks do operate
| fractional reserves. The problem is that Tether/Bitfinex
| claim every single Tether is backed by a dollar but they are
| lying. If they want to operate a fractional reserve, why not
| register as a bank legally?
| jfrunyon wrote:
| It's also just as obvious that everyone will agree for the
| foreseeable future that USD can be used to buy things, do
| things.
|
| Given that people already disagree about the status of
| Tether, it's not nearly as obvious.
| xwolfi wrote:
| And that caused downward spirals when it started, centuries
| ago. Paper money is tempting people to print since it
| started, however societies have learned how to do it for a
| net positive, will USDT manage the same?
| Smithalicious wrote:
| I like how it's always people who spent 10 minutes looking who
| say it's a total scam.
|
| What percentage of tether doomsayers here have ever traded a
| significant amount of tether? Don't get me wrong, I also don't
| trust tether and think there's an unacceptable amount of
| sketchiness there, but simply looking at who's at each side of
| the debate should show you that it's not as slam dunk as you
| think it is.
| yunohn wrote:
| I can trade in and profit off of snake oil, and there are
| lots of snake oil salespeople around the world - but it's
| still snake oil at the end of the day.
| kevingadd wrote:
| What percentage of lead paint critics have actually tried
| licking lead paint? My kids love it, so it can't be that bad
| rsynnott wrote:
| > What percentage of tether doomsayers here have ever traded
| a significant amount of tether?
|
| "But what percentage of people who say that dioxins are
| dangerous have ever jumped into a big swimming pool full of
| dioxins?!"
|
| I mean, if you think tether is a scam, you are probably going
| to refrain from going anywhere near it.
| Apofis wrote:
| Tether and Bitfinex are entirely banned in New York State and I
| really don't think it will be too long until other states
| follow suit and likely the SEC too.
| Synaesthesia wrote:
| I have spent 10 min looking into it, and I'm suspicious. But
| could you maybe elaborate?
| lovecg wrote:
| This article was an entertaining read
| https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
| Jenk wrote:
| Their Wiki page[0] is quite damning: Tether
| is a controversial[1] cryptocurrency with tokens issued by
| Tether Limited, which in turn is controlled by the owners of
| Bitfinex.[2][3] Tether Limited formerly falsely[4] claimed
| that each token was backed by one United States dollar, but
| on 14 March 2019 changed the backing to include loans to
| affiliate companies.[5][6] The Bitfinex exchange was the
| subject of a lawsuit by the New York Attorney General of
| using Tether's funds to cover up $850 million in funds
| missing since mid-2018.[7][8] The investigation found that
| iFinex -- the operator of Bitfinex and Tether -- made false
| statements about the backing of the Tether and about the
| movement of hundreds of millions of dollars between the two
| companies to cover up the truth about massive losses by
| Bitfinex. According to the New York Attorney General,
| "Tether's claims that its virtual currency was fully backed
| by U.S. dollars at all times was a lie".[4]
|
| [0]: https://en.wikipedia.org/wiki/Tether_(cryptocurrency)
| paulgb wrote:
| A YouTuber called Coffeezilla had an entertaining video yesterday
| that I think is one of the most comprehensive (and entertaining)
| takes on this. It's pretty damning when you look at all the
| evidence together.
|
| https://www.youtube.com/watch?v=-whuXHSL1Pg
|
| Even in the off-chance that people with a track record of lying
| about being backed have suddenly gone legitimate, it's a pretty
| big indictment of the system that it could grow to the size it
| did _while looking incredibly like a scam_.
| billytetrud wrote:
| Very interesting video. Seems pretty clear that Tether is a
| scam, as people have been saying for years at this point.
| However, I would be surprised if Tether's downfall really has
| much of a significant effect on bitcoin or other
| cryptocurrencies. I mean, maybe for a week or two, but not for
| any significant length of time.
| mdoms wrote:
| That was the most annoying video I have ever seen. I couldn't
| make it past about 4 minutes because the dude simply cannot get
| to the point.
| gatkinso wrote:
| It may shock certain commenters here to learn about something
| called 'fractional reserve banking'.
| kenneth1amar wrote:
| I'm sure plenty here are aware. This looks like a game because
| it is, they're pretending not to see their collective bias
| because they know it's being weaponized to make crypto illegal,
| as a means to protect their entrenched investments in the
| current corrupt system.
| gatkinso wrote:
| yes, this is power at work
| haskellandchill wrote:
| Honestly I am concerned for my friends I see dumping their
| savings into crypto because people are confusing them with
| technology they don't understand. It's a massive fraud and
| people are going to get hurt. That's my concern, if there was
| a crypto asset I believed in I'd invest but none of them
| match my world view. I do want a new economy, but I don't
| think crypto is the way to do it. For me book keeping is
| secondary to the cultural change necessary to have a better
| economical system.
| _fat_santa wrote:
| Saw a really good YT video[1] on Tether yesterday. Breaks down
| all the sketchiness. But the problem he mentions in the video is
| a problem with pretty much all stablecoins, in order to function
| you must have the proper reserves before generating a token, but
| inevatably greed kicks in and you start thinking what if you
| minted coins without the backing. USD pegged stablecoins are
| basically money printing machines in the hands of whoever runs
| the project.
|
| [1]: https://www.youtube.com/watch?v=-whuXHSL1Pg
| vadansky wrote:
| FYI skip to 2:10 if you don't wanna watch a skit
| derimagia wrote:
| I started using SponsorBlock (https://sponsor.ajay.app/) a
| bit ago. I was skeptical that the crowdsourcing wouldn't
| reach enough but I find it works for most videos.
|
| It essentially tags parts of videos and it's pretty
| customizable - it only highlight a certain type, have it skip
| automatically, etc.
|
| I already pay for YouTube Premium and am not a fan of ads.
| beforeolives wrote:
| The whole video would have been better if he had built an
| argument from the ground up instead of starting with the idea
| that Tether is a scam and laying so many attempts at humor
| and irony on top of it.
|
| Or at least it would have been clearer and more educational;
| I haven't seen his videos before and maybe other people watch
| him for entertainment.
| jbverschoor wrote:
| That's exactly how fractional reserve banking started...
| toomuchtodo wrote:
| Which is backed by a governments, laws, and regulators...
|
| If my deposit account gives up the ghost, I know the FDIC or
| the Fed will make me whole (or SPIC for my brokerage
| account). Who will do the same for Tether and other
| stablecoins?
|
| Not good!
| hammock wrote:
| >the FDIC or SPIC
|
| You mean they will print more money to fill your loss
| (dilution net effect zero)
|
| >the Fed will make me whole
|
| Says who?
| tfehring wrote:
| The FDIC's Deposit Insurance Fund has a balance of over
| $119 billion as of March 31. No need for money to be
| printed. https://www.fdic.gov/analysis/quarterly-banking-
| profile/stat...
| toomuchtodo wrote:
| So, I'm really unsure how to have these sorts of
| discussions with crypto proponents. The US government's
| securities (UST), as well as the US capital markets, are
| some of the most trusted financial assets and mechanisms
| in the world. Treasuries, in particular, are considered
| one of the safest asset classes to hold. As a crypto
| proponent, _you_ might not believe that, but collectively
| $22 trillion of capital (and those responsible for its
| management, sovereign and institutional alike) believes
| that 's the case. If the US government fails, crypto is
| likely to be of lesser value than say, ammo, food, and
| fuel.
|
| This is in stark contrast to offshore crypto operations
| who refuse transparent auditing of their reserves.
| jbverschoor wrote:
| They're not "backed". It's simply not there. They're backed
| by the law that if you arrange a "run on the bank", YOU
| will go to jail.
| notahacker wrote:
| They're not backed by an imaginary law, they are backed
| by an outstanding portfolio of expected loan repayments,
| the ability to borrow all the short term cash they need
| at lower rates, and ultimately _you 're_ backed by the
| FDIC even the people the bank loaned out to all default.
| jcranmer wrote:
| How do you go to jail if "arrange a 'run on the bank'"?
| There's no law against it, so far as I'm aware.
|
| As for the backing, let me go through this in more detail
| (see https://www.bloomberg.com/opinion/articles/2021-06-1
| 0/maybe-... for a decent coverage of how this works).
| There are three categories to keep in mind here: assets
| (which include loans, cash, precious metals, etc.),
| liabilities (i.e., the value of all of your deposits),
| and capital (which is money to support the assets that's
| actually the bank's owner's).
|
| Regulation requires liabilities to hit no more than about
| 90% of assets. They also require the bank to stake about
| 8% of its own capital to support the assets, on a risk-
| weighted basis. The risk weighting reflects the
| likelihood of assets crashing in value: a typical loan
| might have a 100% weight, so $100 in loans requires $8 in
| capital. Safer loans (e.g., residential mortgages) would
| require less capital. Stuff like cash or T-bills have a
| risk weighting of 0%. Riskier things include stocks
| (which tend to go down big when they go down), requiring
| maybe $24 per $100 of stocks, or cryptocurrencies...
| which require $100 of capital per $100 of cryptocurrency.
|
| What this actually means, when you combine stuff
| together, is that you really do have something like $100
| in safe things for every $100 in deposits a bank has.
| unyttigfjelltol wrote:
| Always and everywhere banking has faced precisely this problem,
| which is the original reason for bank regulation and deposit
| insurance-type backup.
|
| If you encounter an unregulated or irregular market participant
| doing anything that looks like banking, buyer beware-- on
| average, over time, you're not getting your money back.
| wpietri wrote:
| Yup. If one can make money now by pushing off problems for
| the future, oversight is vital. Otherwise we guarantee
| problems in the future. Banks are a great example. As are
| investment companies; Ponzi schemes are one easy way for
| those to go wrong.
|
| One non-governmental way to do that is audits. Which is why
| Tether's lack of serious audits is so concerning. They
| claimed to be cash-backed for a long time but wouldn't prove
| it. Once the NYAG force them to open up, it's clear they were
| lying.
| elliekelly wrote:
| I feel like cryptocurrency markets and investors are
| painfully "re-learning" the lessons of a hundred years ago.
| eloff wrote:
| It seems that reinventing finance works out about the same
| a rewriting a big software project. You think you'll get
| rid of a lot of nasty code, but then you realize all that
| ugliness was there for a reason and you're just
| rediscovering all the edge cases again the hard way.
| ArkanExplorer wrote:
| Except that now its even worse, because we are throwing a
| whole lot of electricity and advanced manufactured goods
| (computer chips) into it, which currently has large
| negative impacts on the rest of civilization.
| anunnymouse wrote:
| This is an interesting point, what does it mean when it
| is gray?
| clintonb wrote:
| Comments get grayer as they are further downvoted.
| [deleted]
| CyberDildonics wrote:
| I think the problem is that people think they are
| reinventing finance when the only thing that changed is
| the currency.
| gradys wrote:
| But in doing so, you bring that latent knowledge back
| into the minds of living people who can rethink the
| solutions in the face of the modern ecosystem and clean
| out the cruft that truly has no modern purpose.
| elliekelly wrote:
| Do you think no one in finance has thought about
| financial regulations until crypto came around? I can
| assure you there were (and are!) many people paid quite a
| lot of money to "rethink the solutions in the face of the
| modern regulatory ecosystem and clean out the cruft that
| truly has no modern purpose". One of the reasons
| securities regulations are "expensive" to comply with is
| because they're constantly changing. Why are they
| constantly changing? Because we're rethinking how, when,
| and whether the various regulations ought to be
| implemented.
|
| The regulations implementing Federal securities laws are
| perhaps the most nimble, iterative, and "listen to your
| users" driven regulations in the US.
| billytetrud wrote:
| Certainly no one in finance ever thought about
| programmatic regulation of a currency. But your comment
| is of the type that has the premise "everything that
| could ever be thought of has been thought of before".
| Well obviously that isn't true. And it also isn't true
| that everything that has been thought of and not done is
| not doable.
| vkou wrote:
| Certainly? How certain are you of this?
|
| I am not so certain.
| gradys wrote:
| I don't think that, no. Still, different people with
| different toolboxes will come up with different
| solutions.
| Animats wrote:
| "Extraordinary Popular Delusions and the Madness of Crowds"
| (1841) is still worth reading. You get to see the first
| versions of the classic large-scale scams. John Law's bank,
| the South Sea bubble, tulipomania. Scams go much further
| back, but mass-market scams had to wait for mass
| communications. Newspapers powered the first round of
| large-scale scams.
|
| Most scams today are very similar to some classic scam
| mentioned in that book. There's not that much innovation.
|
| Kids should be taught the classics in school - the short
| con, the long con, the big store, the pigeon drop, the
| badger game, the protection racket, the bait and switch,
| the Ponzi scheme... The list is not that long.
| duskwuff wrote:
| Personal finance should be a subject in schools, and scam
| awareness should be one of the topics covered. The long-
| term economic benefits would be huge.
| skybrian wrote:
| At the most basic level, some entity is making statements
| about their financials (like "we have X in reserves") and
| nobody can check this. If a liar can make financial
| statements and be believed, and nobody checks, they can do
| anything.
|
| It's odd that cryptocurrency was designed to work without
| trust and yet many people are so trusting.
| jmharvey wrote:
| > At the most basic level, some entity is making statements
| about their financials (like "we have X in reserves") and
| nobody can check this
|
| This is not a problem unique to stablecoin providers. Every
| company with a large number of stakeholders (e.g. public
| companies, bond issuers, companies that manage assets on
| behalf of their clients, etc.) faces the same problem.
|
| The traditional solution to this is to have a widely-
| trusted third party, like a big four CPA firm, examine the
| company's books and operations and provide an audit. It's
| still possible to defraud auditors (there used to be a "big
| five CPA firms" before Enron blew up and brought down
| Arthur Andersen, and more recently Wirecard made EY look
| pretty bad), but it's a lot harder than defrauding people
| who don't get a detailed look at your operations. The
| reason to go with a big four accounting firm is that the
| firm's reputation with the public is substantially more
| valuable than any particular client relationship.
| ska wrote:
| This is why substantial organizations have 3rd party audits
| and reviews.
|
| All of this stuff has known solutions, but people don't
| like what the solutions would show.
| jpmattia wrote:
| > _but inevatably greed kicks in and you start thinking what if
| you minted coins without the backing._
|
| Yet another tired implication of Tether printing coins without
| backing, so let's break down the NYAG's announcement of
| Tether's fine. The fine was for:
|
| 1. Buying a bond (= lending out their backing) in a related
| party transaction, and
|
| 2. Not updating their customers that Tether backing had changed
| from 100% cash into a mix of cash+bonds.
|
| The guy with the handle bitfinex'd was an extremely prolific
| screamer about fraudulently unbacked tether and folks seemed to
| believe him. If you still believe him, it now means you believe
| that NYAG Leticia James looked at Tether's books and gave them
| a pass on fraud in order to collect a few million dollars in a
| fine. Not bloody likely.
| Tenobrus wrote:
| Actually this is no longer true. As of recently, the crypto
| ecosystem produced Dai (https://makerdao.com/en/), which is a
| fully decentralized stablecoin. I think it represents one end-
| state of the crypto ecosystem, blockchain transactions but with
| decentralized systems keeping volatility near zero.
| runako wrote:
| I've only skimmed the white paper, but this appears to be a
| "stablecoin" backed by crypto assets. Is that correct?
|
| The white paper is complex, and the Emergency Shutdown price
| stability mechanism appears exposed to ETH price risk such
| that if ETH moves rapidly around the Emergency Shutdown,
| there's no guarantee that Dai holders could recoup on a 1:1
| basis. Is that correct?
|
| This seems to be not a dependable peg.
| miracle2k wrote:
| The Bank of England couldn't keep their peg, so what's the
| gold standard for a dependable cross-asset peg then?
|
| DAI has been tremendously successful over multiple years
| and multiple bear markets and ETH price crashes; it can
| only do so much of course. If ETH goes to zero tomorrow,
| DAI holders will not be able to recoup, sure.
|
| In fact, the real problem with DAI is that demand often
| exceeds supply, the latter being limited by people who want
| to go long ETH, so they keep having to fight DAI breaking
| the peg in the other direction. To solve this, they
| onboarded other collateral types, including the USDC
| stablecoin, which now unfortunately accounts for >50% of
| DAI collateral.
| runako wrote:
| > The Bank of England couldn't keep their peg, so what's
| the gold standard for a dependable cross-asset peg then?
|
| I'm not a crypto expert, but naively I would at a minimum
| expect uncorrelated collateral to be part of the picture.
| DAI runs on ETH, so collateralizing via an ETH mechanism
| seems like possibly not the best choice.
|
| I would expect that the peg would depend on something
| that exhibits a low correlation with crypto asset prices
| and a very high and dependable correlation with USD, like
| money market funds or Treasuries.
| Sargos wrote:
| Dai is backed by lots of different assets in the Maker
| Vaults. Most of them are crypto but they just added some
| real estate assets and the plan from day one has been to
| add as much diversified collateral as possible for safety
| and scale (Dai can't scale big enough to service the entire
| world on crypto backing alone).
| shkkmo wrote:
| Divirsification of assets does help reduce risk. However,
| you can't eliminate that risk without holding reserves
| that are entirely made up of the pegged currency.
| riffraff wrote:
| How are non-crypto assets represented in crypto space?
|
| It seems you would need a trusted party/oracle of some
| kind, which creates the same problem as centralized
| stablecoins anew.
|
| Edit: indeed a sibling comment mentions they have USDC as
| a backing support which means they are as stable as that.
| whimsicalism wrote:
| > It seems you would need a trusted party/oracle of some
| kind, which creates the same problem as centralized
| stablecoins anew.
|
| If it is multicollateral, then yes, it somewhat involves
| trust, but you are dependent on a lot of various people
| betraying trusts _along_ with ethereum price dipping,
| whereas a traditional stablecoin is entirely dependent on
| one entity.
| graeme wrote:
| A substantial chunk of DAI is backed by USDC. USDC has never
| been audited, and has been curiously late with its
| attestations at precisely the same time the supply of USDC
| has massively increased.
|
| And the value of ETH backing DAI is dependent on Tether not
| being fraduluent and instead being worth $1.
| sushid wrote:
| You think a joint collaboration by Coinbase and Circle with
| monthly audits has "never been audited"?
|
| https://www.centre.io/usdc-transparency
| graeme wrote:
| It hasn't, no. Those are attestations, not audits.
|
| You won't find the word audit on that page or in the
| reports.
| sushid wrote:
| I thoughts an attest is a form of audit. Can you explain
| why you think this is insufficient?
|
| And aren't these reports going to take time to complete?
| Every report in the past took about a month to complete
| and I don't see why that's a red flag.
| graeme wrote:
| They seem to have caught up somewhat for the April
| report, but March was extremely delay. News article
| below.
|
| I'm not an expert, but I think an attestation just
| examines if a statement makes sense. My accountant did
| one for my revenues and the percent that were in USD. I
| sent them a spreadsheet with my revenues from various
| sources and calculations showing total USD.
|
| The accountant verified that my spreadsheet said what I
| said it said. However, they did not actually verify the
| info underying the spreadsheet beyond examining some
| screenshots of customer addresses I provided. They
| samples a handful at random.
|
| In USDC's case, I think the auditor would look at a bank
| statement and say "the bank statement on May 31st indeed
| says Circle has $X" and Circle says this money is theirs
| for backing USDC.
|
| Stuff they wouldn't verify:
|
| * Was the money there before that specific minute of the
| day?
|
| * Did it remain there after?
|
| * Was the money from deposits, or was it from a loan or
| some other source? (Bitfinex did this with a prior
| attestation, mixing up Bitfinex's money and reserve
| funds)
|
| So most people would assume these attestations mean "At
| all times USDC had backing of basically all of their
| tokens by $ in a bank account, free and unencumberer" but
| the attestations don't examine that claim at all. They
| examine a very specific moment in time, and don't examine
| the source of the funds.
|
| In an audit you might actually examine the accounts at a
| time not chosen by Circle.
|
| https://news.bitcoin.com/usdc-attestations-run-late-
| raising-...
| rojeee wrote:
| Former auditor here.
|
| An attestation offers considerably less assurance than an
| audit.
|
| An audit is the most comprehensive type of assurance.
| Often called positive assurance. A clean audit opinion
| means the auditor collected sufficient and appropriate
| evidence to form an opinion on the financial statements
| (or reserves in tether/usdc case).
|
| On the other hand, an attestation or review is a form of
| negative assurance where auditors state that nothing has
| come to their attention to indicate that subject matters
| or financial statements contain a material misstatement.
| In this type of assurance, auditors do not give an
| opinion; they simply say that financial statements look
| "reasonable".
|
| Unlike positive assurance, auditors are not required to
| obtain sufficient and appropriate evidence to form an
| opinion. Instead, they only need to review if there are
| any problems with financial statements or subject
| matters.
| graeme wrote:
| Thanks! How would an attestation work with a fraud. For
| example, suppose a company simply produced a false bank
| statement.
|
| Would an attestation have no ability to verify that the
| statement was fraudulent? In other words we must trust
| the entity undergoing attestation in order to rely on the
| attestation, and the attestation merely certifies there
| is no error of math or logic in what was presented.
| rojeee wrote:
| Good question.
|
| With an audit, the auditors get a representation from
| management that they will provide the truth etc. The
| auditors would also get third party evidence eg. from the
| bank providing the audit client's account. For important
| things you would always get third party evidence from
| banks, custodians, etc or even just go and check to see
| if physical things exist!
|
| With an attestation or limited/negative assurance
| engagement, there's no third party evidence. Instead, the
| auditors just rely on what they are given and whether it
| looks reasonable. The auditors would state in their
| "report" that only limited evidence was gathered and not
| enough to form the basis of an opinion.
|
| Basically, limited / negative assurance is not really
| that useful in most circumstances.
|
| Regarding fraud - auditors are not expected to
| find/uncover fraud under any type of engagement, which is
| a common misconception.
|
| The biggest audit firms won't go any where near tether,
| and this alone, tells you quite a bit :)
| graeme wrote:
| Thanks, that's what I figured. And that's very
| interesting about not even audit or assurance finding
| fraud.
|
| > Basically, limited / negative assurance is not really
| that useful in most circumstances.
|
| So what exactly can we glean from USDC having
| attestations? It's certainly a step up from Tether in
| that respect but I'm also not sure it tells us all that
| much.
|
| Or maybe a better way of asking is: how exactly _would_
| you prove that a stablecoin was backed?
| digianarchist wrote:
| Why would they kill the golden goose though? Think of how much
| money they could be making by simply holding deposits...
| pjlegato wrote:
| The amount of money a bank (or loosely equivalent crypto
| entity) can make holding deposits and making loans out of
| them is far lower than the amount it can make by printing new
| fiat (or crypto tokens) out of thin air and loaning them out
| (/selling them.)
|
| Usually, this works fine, they make a lot of money, and
| everyone's happy. When there's some unexpected macroeconomic
| issue, which empirically happens with some regularity, they
| have massive problems as loans default en masse (or everyone
| tries to redeem their token for USD at once.)
| SpicyLemonZest wrote:
| And it's critical to note that Tether has, in fact, refused
| to process any redemptions for any US client since 2018.
| skybrian wrote:
| I'm wondering why non-US intermediaries couldn't do it?
| wmf wrote:
| There's no evidence that Tether does redemptions for
| anyone.
| SpicyLemonZest wrote:
| According to their stated policy
| (https://tether.to/fees/), a non-US intermediary would
| have to:
|
| * Pay them a nonrefundable $150 fee.
|
| * Wait for your account to be verified, _if_ you 're
| approved - they have "sole discretion to approve or not
| approve accounts"
|
| * Send them a minimum of 100,000 USDT
|
| * Pay an additional $1000.
|
| To be clear, it's likely that all of this is a lie and
| they simply aren't processing redemptions for anyone. I'm
| not aware of any documented story from the last few years
| of someone successfully performing a Tether redemption.
| The US policy is just easier to talk about because it's
| explicit: they say, in black and white
| (https://tether.to/faqs/), that "no issuance or redeeming
| services will be available to these users".
| notahacker wrote:
| The other difference is that loaning out to unconnected
| parties /= selling the tokens and keeping the
| uncollateralized bit as profit. Banks with outstanding
| loans might have issues with the timing of repayments, they
| might more rarely make so many bad loans that their
| expected future income is less than they loaned out, but
| they haven't simply pocketed the money depositors paid in.
| rsync wrote:
| "When there's some unexpected macroeconomic issue, which
| empirically happens with some regularity, they have massive
| problems as loans default en masse (or everyone tries to
| redeem their token for USD at once.)"
|
| "Nobody knows you're swimming naked until the tide goes out
| ..."
| missedthecue wrote:
| Because killing the golden goose could mean a several billion
| dollar payday for the insiders?
| ostenning wrote:
| Centralised stable coins maybe or yes. But there are also
| decentralized stable coins like DAI that have smart contracts
| to ensure a level of backing
| tootahe45 wrote:
| > decentralized stable coins like DAI that have smart
| contracts to ensure a level of backing
|
| Which has been collateralized by centralized stable coins
| including tether, if i recall correctly..
| whimsicalism wrote:
| Dai is not collateralized by tether.
| shkkmo wrote:
| Isn't the DAI better describes as semi-stable since it holds
| reserves in Ether and other cryptocurrencies but is pegged to
| the dollar. This exposes it to systemic risk in the way that
| stablecoins backed by reserves in their pegged currency are
| not. The degree of excess in their reserves does cushion
| against a lot of violatility, but that cushion is finite and
| could easily vanish in a cryptomarket crash.
| coolspot wrote:
| AFAIK it survived ETH price crash from $1400 to $90 .
| shkkmo wrote:
| Have any details on this? I find those numbers
| implausible without a context or a citation.
| ostenning wrote:
| You can just look at the market cap and price history of
| DAI through the last market crashes
| superkuh wrote:
| I like that he calls them "coin". Because they definitely aren't
| cryptocurrency and have almost nothing to do with cryptocurrency.
| They're all just off-chain market inventions created by financial
| people because they refuse to understand what cryptocurrency is
| and want something more like their normal, easily manipulated,
| financial markets and derivatives.
| beforeolives wrote:
| It's not even created by financial people. If you watch the
| coffeezilla video that some other people in this thread linked
| to, you'll see that the people behind Tether have backgrounds
| in various types of fraud.
|
| Also, this affects the entire cryptocurrency market. If you own
| any cryptocurrency, you're exposed to risk from Tether's
| collapse even if you hold no Tether yourself.
| superkuh wrote:
| >backgrounds in various types of fraud.
|
| Right. Financial people.
| [deleted]
| jfrunyon wrote:
| Or, maybe it's because cryptocurrency isn't actually useful for
| the things people claim it's useful for...
| dcolkitt wrote:
| There seems like a huge number of people who, at least in online
| discussions are skeptical of Tether's stability. And they may
| very possibly be correct? However, my question is why do
| virtually none of these people actually out money behind these
| views and short USDT?
|
| It's pretty cheap and easy to take a short position in Tether.
| You can borrow USDT on Compound for 3.37%, convert it to USDC at
| Curve for 0.06%, then collect 2.32% on USDC at AAVE. If/when
| Tether collapses, you'll only have to cover your short at the
| collapsed value.
|
| Many in comment sections like these will argue that Tether is
| less than 50% backed by hard assets. If you genuinely believed
| that to be the case, why would you not be happy to pay less than
| 1.5% per year to earn a 50% profit when the house of cards
| collapses?
| Giorgi wrote:
| I guess nobody has that kind of money to risk it.
| unmole wrote:
| Because the market can remain irrational for far longer than I
| can remain solvent.
| nannal wrote:
| I've a 'teather fudster' for a number of years and that's why
| I'd be hesitant to open a short right now. Finex have kept the
| wheel spinning for a remarkably long time, there's no point
| spending money to wait while its just wobbling given how
| quickly a short can be opened, once it hits 0.85c or so though
| then that would indicate to me that its all about to be over
| very quickly.
| paulgb wrote:
| A lot of us who are skeptical of Tether think it poses
| systematic risk to the whole crypto ecosystem, so selling it
| short for other crypto would defeat the purpose. Is it possible
| to convert the USDC to actual USD while maintaining the USDT
| borrow, or is it required as collateral?
|
| Instead of shorting USDT directly, I'm short a public market
| company which I believe will drop if Tether blows up (it's a
| pretty junky company, so it's already a profitable trade). If I
| could convert that to a direct USDT short without crypto
| exposure, I'd do it.
| anonymoushn wrote:
| These defi lending platforms generally require you to
| overcollaterlize your loan because they can't sue you or send
| you to collections or whatever. You could deposit a bunch of
| USDC, withdraw a bunch of USDT, send that to coinbase or
| whatever and sell it for real dollars, but you'll have
| slightly fewer dollars than you started with.
| paulgb wrote:
| The USDC is not frozen as collateral?
|
| The way I understand it, I could borrow $10 USDT
| collateralized by (say) $11 of USDC, but then I couldn't
| convert that $11 of USDC to $11 USD until I bought back the
| $10 USDT and returned the loan.
| anonymoushn wrote:
| That's correct. I'm just saying you could sell the 10
| tether for dollars and put those in your bank account
| while you wait for the tether collapse.
| paulgb wrote:
| Ahh, I see what you mean. That way if USDC collapses, I
| would lose just the amount it was over-collateralized by.
| If USDT completely collapses but USDC does not, I would
| gain the amount I was short USDT.
|
| This is more interesting. Thanks for explaining it.
| marderfarker2 wrote:
| Because you cannot bet against irrational things. Would rather
| throw money into things with higher conviction, lower risks,
| albeit with much lower potential returns.
| throwaaskjdfh wrote:
| Because if Tether is defying gravity now, there's no way to be
| sure it won't defy gravity even harder before it collapses.
|
| With a short, you can't just be right in the end, you have to
| find a way to not blow up if things get more irrational in the
| meantime.
| grapehut wrote:
| Tether is particularly easy to short because it's pegged to a
| dollar. That means there's no significant risk it'll become
| more valuable than a dollar.
| croes wrote:
| I don't think so
|
| https://twitter.com/Bitfinexed/status/1405037796172222466?s
| =...
| rsync wrote:
| I would like to hear more details on this - the linked
| twitter thread is a bit bare ...
|
| Isn't there an enormous risk in manipulating the price as
| high as $400/tether just to liquidate (someone elses)
| short position ? Who else, then, has the opportunity to
| sell at the temporarily inflated price ?
|
| Again, some more details would be very interesting ...
| grapehut wrote:
| Yeah, in reality it's not what happened. Exchanges don't
| instantly margin-call positions, they have to use time-
| outs and do it slowly (or there simply isn't going to be
| the liquidity).
|
| So it's pretty easy to get the price of tether on a
| single exchange to momentarily hit $400, just blow
| through the order book. However no one is getting margin-
| called just yet, so the trick is to sustain that price,
| which means buying tether at $400 a piece. Unless you've
| got hundreds of millions of dollars to blow, it's simply
| not possible. And something as obvious as that, manual
| circuit breakers are going to be getting hit before they
| let margin calls cascade.
| rawtxapp wrote:
| Because they will do everything to liquidate you, at one point
| price of tether briefly hit 1000$ on kraken.
| viro wrote:
| as a "outsider" that makes no sense to me. tether is supposed
| to be a stable coin ... how the fuck was it $1000
| grapehut wrote:
| Generally spikes like that happen because of fat-finger
| mistakes that blow through the order book, and typically
| return to normal within seconds.
| 988747 wrote:
| There was a short spike of CHFPLN on Forex few years ago:
| exchange rate went from less than 4.00 PLN to 5.50 PLN,
| because of Swiss central bank decision to not stabilize
| it anymore. Some people made a lot of money (or so they
| thought). Few days later the broker declared that spike
| "a technical glitch" and they cancelled all the trades.
|
| The moral of the story is: your exchange will always find
| a way to screw you.
| mcintyre1994 wrote:
| It looks like it was a very brief spike and immediately
| went back to its peg, but I have no idea how it happened. h
| ttps://twitter.com/Bitfinexed/status/1405037796172222466?s=
| ...
| rsync wrote:
| "It's pretty cheap and easy to take a short position in Tether.
| You can borrow USDT on Compound for 3.37%, convert it to USDC
| at Curve for 0.06%, then collect 2.32% on USDC at AAVE. If/when
| Tether collapses, you'll only have to cover your short at the
| collapsed value."
|
| I am genuinely interested in exactly that short trade and your
| list of counterparties, above, is the reason I have never
| pulled the trigger on this.
|
| A handful of new, interesting and untested entities all need to
| function properly _at a time of market panic_ for that trade to
| complete as expected.
|
| EDIT:
|
| Somewhat off-topic, but given the actual real-world economic
| pain that chiacoin has caused me, I am much more interested in
| the prospect of an IPO of (chia parent) which could then be
| shorted (or optioned) properly through normal channels.
|
| I daydream of being on the right side of that trade with every
| batch of triple-priced SAS drives we have purchased in the last
| 4-6 weeks ...
| thebean11 wrote:
| A slightly different strategy with less counterparty risk
|
| - Borrow USDT with USDC as collateral
|
| - Sell USDT for USD, put it in your regular bank account
| (you'll end up with slightly less cash than you had
| originally, since your loan needs to be over-collateralized)
|
| Outcomes:
|
| - USDT collapses, USDC does not: best outcome, buy USDT for
| pennies and use it to get your USDC back
|
| - Both collapse: pay back your loan only if USDC > USDT
|
| - Only USDC collapses: just don't pay back your loan. you
| lose whatever "extra" collateral you paid
| warkdarrior wrote:
| Those are the kinds of financial engineering shenanigans we
| can look forward to in the brave new world of crypto. Just
| faster and on a larger scale than before.
| IculsOneyAD wrote:
| The liquidity on most crypto exchanges comes from USDT. If
| Tether goes down, I don't believe exchanges are going to let me
| liquidate my positions. At least not before insiders can do
| that.
| lalaland1125 wrote:
| Shorting tether is a horrible idea. Tether manipulates the
| market and will spike the price to collapse your short.
| ARandumGuy wrote:
| I'm someone who's highly skeptical of Tether, but has no
| interest in shorting it. Here's a few reasons why:
|
| 1) I'm pretty confident Tether will collapse, but I have no
| idea when that will actually happen. The old saying is that
| "The market can remain irrational longer then you can remain
| solvent"
|
| 2) I'm not an expert in cryptocurrency shorting, but the
| scenario you stated involved shorting Tether against other
| cryptocurrencies. Since Tether is heavily integrated with the
| rest of the crypto market, if Tether falls, it will likely
| heavily impact the rest of the market. It may be possible to
| make money off of that, but it would also be possible to lose
| money if you time things incorrectly.
|
| 3) It's not all about the money. I'm making plenty of money at
| my day job, and feel confident in my existing investments. I
| don't need to spend my time gambling in the crypto market.
| anonymoushn wrote:
| You can short tether against USD for like less than two
| pennies per year at FTX, so this is a pretty good deal if you
| want the exposure for a decade or so, and you don't need
| exposure to other cryptocurrencies.
| paulgb wrote:
| USD, or USDC? If it's real USD, I'd love to know how.
| anonymoushn wrote:
| Real dollars yes. You deposit money at FTX and then you
| short the tether quarterly futures:
| https://ftx.com/trade/USDT-0924
|
| I think most people would be more worried about
| counterparty risk with FTX than with Circle though.
| paulgb wrote:
| By real dollars I mean dollars in an FDIC or SIPC-insured
| account, unless I'm mistaken this just appears to be an
| IOU from FTX.
| anonymoushn wrote:
| As far as I know these products are not legal to offer in
| the US, so you won't find them offered by a US brokerage.
| The insurance funds you mention only insure a tiny amount
| per account anyway.
| paulgb wrote:
| SIPC covers up to the first $500k per account. Not much
| to a hedge fund, but a lot to a small fry like me.
|
| It's not so much as the insurance coverage, anyway, so
| much of the vote of confidence that an insurer is willing
| to cover them.
| [deleted]
| tshaddox wrote:
| > I'm pretty confident Tether will collapse, but I have no
| idea when that will actually happen.
|
| The trouble with this is that it's not a very meaningful
| epistemological claim unless you can put _some_ ballpark
| timeline on your prediction. Will it happen before the Sun is
| a red giant?
| wpietri wrote:
| One of the lessons of the 2008 financial bubble is that
| financial systems are complex, often arcane, and prone to
| unexpected failure modes. Or more colloquially, the devil is in
| the details.
|
| I used to write financial trading software, so I am reasonably
| familiar with the topic. But there's no way in hell that I as
| an individual would use 3 different unknown services to make
| bets in an unregulated and likely manipulated market. There are
| all sort of risks there.
|
| If I were managing $100m it would be a different story. I could
| have analysts carefully looking at the financial risks and a
| lawyer or two gaming out the legal concerns. If all that looked
| good, then I might go for a short, because believe it's a
| fraud. But there's no way a typical individual investor should
| be making bets like that.
| phpnode wrote:
| When tether collapses it can take the whole crypto economy with
| it, including Compound. If you want to short it you have to do
| so in an indirect way, e.g. by shorting MSTR or COIN.
| yunohn wrote:
| > It's pretty cheap and easy to take a short position in
| Tether.
|
| Proceeds to describe a Byzantine crypto solution, which
| neglects the inherent risk of each counter-party and
| interaction along the way.
| jameshart wrote:
| If you believe Tether is engaged in essentially a criminal
| conspiracy, you might well have some concerns about engaging in
| financial transactions which intend to profit from that
| criminal conspiracy.
|
| If Tether does collapse, and you manage to engineer a solution
| so that at the end of that event you are holding some of the
| resulting money... whose money is that you've got hold of? The
| victims of the crime?
| spywaregorilla wrote:
| > It's pretty cheap and easy to take a short position in
| Tether. You can borrow USDT on Compound for 3.37%, convert it
| to USDC at Curve for 0.06%, then collect 2.32% on USDC at AAVE.
| If/when Tether collapses, you'll only have to cover your short
| at the collapsed value.
|
| Read what you just wrote and then ask yourself if figuring out
| / validating / executing that is actually "easy" to the average
| person. As a casual observer, and crypto owner, that is
| definitely not easy for me.
| rawtxapp wrote:
| Average person isn't shorting Tether, those shorting Tether
| _should_ have a deep understanding of why it has the
| potential of collapsing and to have that understanding, you
| also need to understand these different financial products
| properly.
| spywaregorilla wrote:
| Of course. And that's one reason why the average person
| observing tether seems scammy doesn't immediately try to
| short it.
| random_kris wrote:
| Hmmm for someone reading hacker news, participating in this
| thread and claiming that they hold crypto this shouldlnt be
| hard to understand by doing 10 minutes of research. Instead
| you decided to use that time for commenting and complaining
| spywaregorilla wrote:
| > Hmmm for someone reading hacker news, participating in
| this thread and claiming that they hold crypto this
| shouldlnt be hard to understand by doing 10 minutes of
| research
|
| I would strongly advise against anyone trying to learn and
| devise a shorting strategy in 10 minutes
|
| > Instead you decided to use that time for commenting and
| complaining
|
| ... ditto?
| raesene9 wrote:
| This may work if you could trust the venue that you place the
| short position with, however if Tether collaborates with the
| main venues, that won't work, if they can spike the price and
| wipe out your position. There are suggestions that this occurs,
| example below.
|
| https://twitter.com/Bitfinexed/status/1405037796172222466?s=...
|
| ``` PSA: Do not attempt to short Tether. If you obtain a large
| enough position in Tether, the exchange will leak your position
| to Bitfinex shareholders who will coordinate to liquidate your
| short position.
|
| This happened on Kraken. Tether went over $400 per tether,
| twice. ```
| gruez wrote:
| >https://twitter.com/Bitfinexed/status/1405037796172222466?s=
| ...
|
| If someone was short and got wrecked by this, I'd expect them
| to raise a big fuss about this, but that's not happening
| (maybe it is, but they didn't link to it). Kraken is also one
| of the more regulated exchanges out there which puts more
| doubt on it. All in all, the only thing I'm seeing is
| witnessing an event and making up an explanation for it that
| fits their narrative, while offering zero evidence to support
| it.
| anonymoushn wrote:
| Kraken does apparently offer spot margin (but not to people
| living in my country), so it's possible for someone to be
| liquidated in such a situation. The accusations are pretty
| wild compared to the evidence on hand though.
| yunohn wrote:
| Why would the price suddenly spike to 1000$ otherwise?
| What's a sane reason for this occurring?
| anonymoushn wrote:
| Kraken is notorious for trades occurring at non-
| representative prices across a variety of assets. This
| happens any time someone places a large limit order and
| there's not enough liquidity at "reasonable prices" to
| fill it.
| Tenoke wrote:
| Yes, and it's pretty clear that happens in order to make
| a bigger killing with an opposite side margin trade.
|
| There's not that many rich people fat-fingering huge
| orders all the time..
| tedunangst wrote:
| Open interest on futures isn't public info?
| xwolfi wrote:
| If you genuinely believe God will reward you for murdering
| heretics in a Saint War, why don't more people do it?
|
| I am skeptical of USDT, but maybe I'd like to keep my savings
| out of speculation, especially shorting that leaves you with
| nothing if your bet turns out false (a long mistake at least
| let you keep the valueless assets lol).
|
| There s no binary choice between speculating for USDT or
| against USDT, you can say this entire thing stinks and you're
| better not speculating at all.
| cesarb wrote:
| Besides what others have already said, there's also the risk
| that if Tether collapses and becomes so worthless that it's not
| being traded anymore, you cannot exit the short position, as
| Matt Levine once mentioned on his newsletter
| (https://www.bloomberg.com/opinion/articles/2018-04-11/-go-
| to...).
| vkou wrote:
| You can't short tether, because if you succeed, it's likely
| that the entire crypto ecosystem will implode, and there's a
| serious chance you won't get paid.
| amznthrwaway wrote:
| To my knowledge, I can only bet on Tether's collapse if I hold
| uninsured funds in an institution that is, itself, at risk of
| failure in the case of Tether's collapse.
|
| Is there a way to short Tether without this egregious counter
| party risk?
| mortehu wrote:
| The value of tether is a function of how close the supply is to
| the underlying assets. The only thing that matters at the
| moment is that you can redeem for dollars _now_ , not whether
| you can do so in ten years.
|
| The fact that the next billion can be safely redeemed doesn't
| mean the token isn't a scam.
| kemonocode wrote:
| I'd rather prefer it died already so the crypto ecosystem can
| purge itself off it, but I can't make a bet as to when that
| will happen. It'll be a bloodshed in the short term but it'll
| recover in time.
|
| We did just fine without it at the beginning, we can do just
| fine without it now.
| chollida1 wrote:
| I mean, who says people aren't doing that? I know one fund that
| is short tether.
|
| The downside is that you have to trust USDC at the same time
| and if tether breaks, there is n o guarentee taht USDC holds
| its peg
|
| so you can lose the following ways
|
| 1) be wrong and tether is fully backed
|
| 2) be right but way too early
|
| 3) be right but the peg only breaks by a couple of pennies so
| you really make peanuts for the risk you put on
|
| 4) be right but USDC also breaks and you end up losing
|
| 5) be right but6 tether falling sinks crypto so there is not
| real crypto position you can hold in this case that makes you
| money.
|
| 6) Counterpary/exchange risk, you have to close out your tether
| position or remove it from the exchange, in the case that new
| broker that Tether is worthless, every exchange would suddenly
| lock out withdrawals and go down like they do each time there
| is a crash, which means you may end up losing even if you were
| right.
|
| I mean there are so many ways to be right and lose on this
| trade:) Its not something too many hedge funds would dare put
| on.
|
| The upside to being right just isn't anywhere near enough to be
| in this trade in a fully leveraged way and this is crypto and
| everyone accepts its manipulated in some way so its hard to
| rationalize leveraging this trade up to make any meaningful
| return
| intuitionist wrote:
| Massive counterparty risk. Tether is likely backed mostly by
| loans to exchanges like Binance and FTX (and of course
| Bitfinex.) When and if Tether collapses the exchanges will very
| possibly be rendered insolvent and you'll be in line with all
| the other creditors trying to make a recovery.
|
| I don't know enough about fully decentralized protocols to know
| what the risks are there.
| robjan wrote:
| The risks are that tether brings down whatever currency your
| short is denominated in. For DeFi, it will be either another
| token or cryptocurrency.
| esyir wrote:
| Because the market can remain irrational longer than you can
| remain solvent. Just look at the state of Meme stocks now.
| gruez wrote:
| but stablecoins are basically guaranteed to never exceed $1,
| so your downside is essentially limited to the interest you
| pay.
| croes wrote:
| I don't think so
|
| https://twitter.com/Bitfinexed/status/1405037796172222466?s
| =...
| gruez wrote:
| My response to that:
| https://news.ycombinator.com/item?id=27529751
| croes wrote:
| But still invalidates your claim
|
| >stablecoins are basically guaranteed to never exceed $1
|
| Why it happened is debatable, but not that it happened.
| mcintyre1994 wrote:
| Even if the narrative is nonsense, would a short not have
| got ruined by that spike regardless of cause?
| esyir wrote:
| Therin lies the rub. With options, you're making a double
| bet :first that it is overvalued, and second that you got
| the timing right.
|
| If you're wrong on either, you lose money. You don't get
| the really huge blowout risk due to the stable nature, but
| the other two still apply.
| beforeolives wrote:
| Is there a mechanism for Tether to collapse on its own or does
| the collapse have to necessarily come from regulation? If the SEC
| do nothing about this, can Tether keep printing forever?
| pointsphere wrote:
| Maybe a bank run on Tether for some other reason than the SEC?
| It would require a lot of people to lose trust in Tether at the
| same time, which surprisingly still doesn't look likely. But it
| might happen.
| elliekelly wrote:
| If everyone holding tether attempted to redeem their tether
| coins for USD in rapid succession it would implode. Of course,
| if tether were telling the truth it would be an operational
| headache but otherwise a non-issue.
|
| There's also a certain point where they can no longer "print"
| coins that are believably backed. If tether is to be believed
| (and, for the record, I'm of the opinion they shouldn't be)
| then they're already responsible for an absurd portion of the
| commercial paper market.
| pointsphere wrote:
| Maybe they invented their holdings of commercial paper as
| well.
|
| Pretending to be fully backed by USD didn't work out, so now
| they pretend to hold equivalent assets.
| ulzeraj wrote:
| I think only exchanges can redeem USDT from the Tether
| treasury or company or weather is called.
| hiq wrote:
| The collapse would come from a loss of trust from USDT holders
| who would then try to dump their positions (basically a bank
| run) for less than their pegged values.
|
| SEC action could be a cause for such a loss of trust, but you
| can imagine many others, such as leaks (of damning information)
| from insiders, other exchanges unlisting USDT, and so on.
| washedup wrote:
| Who the hell even holds Tether? Don't people get it and then
| convert into a different crypto pretty quickly? If all remaining
| Tether got "burned" after they got shut down, wouldn't it's
| impact on crypto markets be rather trivial?
|
| I don't see why there is so much focus on it. Either they have
| funds to back up the printing or they don't (yes, they didn't for
| a period of time in 2018, but settled that lawsuit). If they
| still don't, and Tether goes away, I would think it would only
| lower Bitcoin/crypto volume and volatility as there is one less
| funding source. But, anyone that bought Tether to buy Bitcoin has
| already done so, and that Tether is sitting with someone else
| like an exchange, lender, or liquidity pool.
|
| If they truly are a fraudulent weak-link in the ecosystem, than I
| am all for figuring this out so we can move on.
| throwaway6734 wrote:
| One thing I think is interesting is what if tether fraudulently
| printed notes to push up the price of BTC, and now they either
| have made enough money to back what they printed or the price
| of BTC is now anchored to these inflated prices so their
| actions no longer matter as much
| jMyles wrote:
| People do hold it sadly.
|
| It provides fiat-pegged stability with crypto-level defi
| liquidity. So people choose to hold it for use in defi
| products.
|
| It's a blight on the blockchain world.
| washedup wrote:
| Got it - that makes sense... they would certainly be hurt by
| this and likely have to liquidate crypto holdings to recover.
| SpicyLemonZest wrote:
| Converting to a different crypto just means that whoever you
| traded with is now holding the Tether you paid them. In the
| absence of a practical redemption mechanism, someone will
| always end up holding the bag.
| washedup wrote:
| Yes, correct, thanks for the comment.
|
| I guess I see the people who are buying Tether (exchanging
| bitcoin for Tether for example) are market makers or lenders
| and appreciate the liquidity that Tether offers, who would
| certainly be crushed by Tether collapsing. Overall though it
| shouldn't affect the demand for other blockchains... but
| negative news / narratives can do a lot of damage
| shkkmo wrote:
| How does a loss of demand/liquidity not have a direct
| effect on blockchain token prices?
| graeme wrote:
| There are 62.5 billion Tether in circulation. I can't tel; you
| who holds it, but they certainly aren't all "converted into a
| different type of crypto". Various market participants hold
| every single one of those Tethers.
|
| Tesla made waves for injecting 1.5 billion into Bitcoin. The
| Tether injection is 42x that.
|
| So the strong probability is that the crypto market has been
| raised by a flood of fake money and the actual dollar demand
| for Bitcoin et al is rather low.
|
| As for backing, it is surely not present. It would be trivial
| to audit Tether's assets but they have dodged it for years and
| been caught in lies.
|
| As Dan Davies said about the Iraq War lies, " There is, as I
| have mentioned in the past, no fancy Latin term for the fallacy
| of "giving known liars the benefit of the doubt", but it is in
| my view a much greater source of avoidable error in the world.
| Audit is meant to protect us from this, which is why audit is
| so important."
|
| https://blog.danieldavies.com/2004_05_23_d-squareddigest_arc...
| washedup wrote:
| Right, I agree that lots of people are holding Tether, mostly
| exchanges, market makers, and liquidity pools if I had to
| guess, but unclear. If that Tether was proved worthless,
| anyone who used Tether to buy crypto still gets to keep their
| crypto. It is ONLY people holding Tether that are hurt, but
| the negative news could have waterfall impact on ecosystem.
|
| As for the triviality of auditing, I don't think it's that
| simple, but point taken.
| graeme wrote:
| It would be a removal of $62.5 billion from the ecosystem.
| That's a massive loss of demand. Everyone else still has
| their bitcoin but if it turns out the majority of the
| orders were with fraudulent funds, what does that do to BTC
| value?
|
| Why wouldn't auditing be trivial? It's just checking the
| level of funds in account and whether they're present over
| time. All major companies do audits, it's a simple, common
| procedure.
| shkkmo wrote:
| > Why wouldn't auditing be trivial? It's just checking
| the level of funds in account and whether they're present
| over time.
|
| Except that we know for a fact that Tether is not mostly
| backed by bank deposits. They hold a bunch of different
| types of assets, some (most?) of which is probably debt
| with varying levels of collateral. Assessing debt risk is
| doable but mote complicated than just checking a balance
| number.
| graeme wrote:
| See the note above about not trusting the claims of
| proven liars.
|
| For years Tether said they were backed 1:1 by dollars,
| but blocked audits. The audits would have been simple. It
| turns out Tethers were not backed 1:1.
|
| It would also be simple to audit their dollar deposits
| now, but they haven't done that either. And no one in the
| commercial paper market has heard of them.
|
| So, if they were bonafide, there are claims it would be
| simple to audit. They have not audited them.
| lamontcg wrote:
| Their "commercial paper" is most likely loans to
| exchanges and "whales" which is against crypto as
| collateral. It is a "shadow market" for loans against
| crypto that they're calling "commercial paper" to sound
| all official and grown up.
|
| Which makes Tether effectively backed by crypto.
|
| As the price of crypto/bitcoin rises that collateral is
| worth more and those loanees can come back and borrow
| more Tether.
|
| Tether then gets used as fuel for arbitrage bots which
| pumps up the price of crypto (which is literally just
| monetary inflation, you have more and more Tether chasing
| after roughly the same amount of crypto so you wind up
| with inflation).
|
| This also explains how the peg is maintained since if the
| loan is dollar-denominated then nobody who has borrowed
| $250,000 in Tether wants to see Tether drop to $.90 USD
| and have to pay back 250,000 Tether plus $25,000 in
| actual USD (while on the other side everyone wants to buy
| Tether once it goes over $1.00 since you can flip it and
| arbitrage it).
|
| I'll let you do the math though on what happens if crypto
| were to say drop by 90% or so...
| shkkmo wrote:
| Well, clearly the incentives for Tether are against
| auditing as any details they could announce (given what
| we already know) would just generate mote negative
| coverage amd uncertainty.
| graeme wrote:
| How does that follow? If they had proof of their reserves
| it would dispel the rumours and increase confidence.
| michaelt wrote:
| Well, you _could_ make a stablecoin that was trivial to
| audit - you merely need to demonstrate that, at the moment
| of the audit, the number of tokens in circulation equals
| the amount in your backing funds account with a reputable
| bank. And that the auditor can see the history of cash in
| your account and coins in circulation match up.
|
| Of course, if you _don 't_ want to be easy to audit, you
| can introduce a bunch of complexity - play a shell game
| shifting money around, intermingle the clients' money with
| the company's money, operate independent lines of business
| and intermingle those too, and so on...
| washedup wrote:
| Excellent point - does one exist (an easily audited
| stablecoin)?
| shkkmo wrote:
| If tether breaks, it will not just create negative
| sentiment, but cause a liquidity crunch since the major
| providers of liquidity are presumably the one that also
| hold a lot of tether. This combo could easily crater prices
| as more and more sellers compete for buyers by dropping
| prices.
| logicchains wrote:
| >Who the hell even holds Tether? Don't people get it and then
| convert into a different crypto pretty quickly?
|
| Most crypto trading actually takes place outside of the US.
| Imagine I want to predict the whole crypto market goes down, I
| want to short it. Ideally I'd like to short it relative to the
| USD, the world's reserve currency. But, as a random unregulated
| firm trading on an unregulated exchange, getting USD or
| something close to it is super painful from a compliance
| perspective, so ideally I'd prefer something that follows the
| price of the USD but is outside the scope of US regulators.
| Tether fulfils this shared need of non-US market participants,
| so they have incentive to keep acting as if it were real even
| though they know it's a scam. Tether then gets to extract a fee
| for this service by printing USDT.
| washedup wrote:
| Thanks for the context, it makes sense. The way I see it, a
| Tether collapse would simply remove some volatility and
| volume from other crypto markets, but it's possible that if
| this is putting huge sell pressure with shorting today, that
| crypto has a nice rebound after the dust settles.
|
| Thoughts?
| ipnon wrote:
| It is the most held stablecoin for accounts outside of the
| United States.
| washedup wrote:
| This is an interesting point from SEC's perspective... how
| can they manage that? Would the solution be to simply ban
| it's use in the United States (both Tether and Bitfinex)?
| ipnon wrote:
| Yes because the United States only has jurisdiction for
| United States residents. However the United States is the
| most influential country for financial regulations so we
| will see some knock on effects.
| thehappypm wrote:
| "most held stablecoin" doesn't really answer the question,
| though. Why hold stablecoins at all? If you hold actual USD
| in a bank account, you're trusting your bank. If you hold
| USDT you're trusting that Tether Ltd stays solvent. I
| understand there's not always so much trust in banks, but
| trusting this shady Tether Ltd company feels absolutely
| bonkers. Even buying Bitcoin feels safer!
| [deleted]
| tubbyjr wrote:
| How about Chainlink being a likely pick for an SEC lawsuit?
|
| - Tech is a literal JSON parser designed as a Rube Goldberg
| machine.
|
| - They came out with a whitepaper 2.0, even though not even 30%
| of what was promised in "WP" 1.0 was delivered.
|
| - All the founders are in the USA, and the company was initially
| in the USA when they ICO'd, but now their company magically
| migrated to the Caymans, even though their operations are
| completely in the US, San Fran and NY.
|
| - Literal 4chan coin, to the point, one of their execs, Mark
| Oblad, was some sort of staff at 4chan.
|
| - They dump $20-60M every 2 or so days, depending on what the
| price is (they dump the same amount of tokens, amount in USD
| depends on price). Yet have nothing to show for it, apart for a
| Lambo for the Russian founder's Papa, plus 2 of the founders
| bought a whole block of NY condos apparently.
|
| - Thousands of "Partnerships" done purely for marketing, to get
| 4channers/linkers to hopefully shill their products too, even
| though there is no actual partnering of any kind.
|
| - Rampant insider info leaks happening from their founders, for
| announcements and dealings that will pump or dump the price. I'd
| even be able to showcase some in court myself.
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