[HN Gopher] Shorting Tether
___________________________________________________________________
Shorting Tether
Author : yoelo
Score : 201 points
Date : 2023-01-08 15:00 UTC (8 hours ago)
(HTM) web link (fakemoneynews.substack.com)
(TXT) w3m dump (fakemoneynews.substack.com)
| deadlast2 wrote:
| Keep away. Obviously crooks involved in the tether from the
| beginning. These crooks are big financial institutions and you
| might get sucked in to a short squeeze.
| Invictus0 wrote:
| A short squeeze on a stablecoin? lol
| tornato7 wrote:
| Shorting stablecoins is pretty uniquely risk off because the
| price of Tether will not go much higher than $1.
| GlitchMr wrote:
| The problem with shorting cryptocurrency is that you are assuming
| that market is fair, when this is absolutely not the case - the
| market is heavily manipulated.
| paulpauper wrote:
| _So now we wait, paying 12.36% a year for the eventual pleasure
| of saying "I told you so". Seems like a pretty good deal to us._
|
| Not really. most of your money will be gone in just 6 years if
| nothing happens Obviously, borrowing in usdt is very good if it
| goes to zero.
| jboogie77 wrote:
| https://twitter.com/oppositeinvict2/status/15365109846549299...
| [deleted]
| hoschicz wrote:
| Note that interest rates on USDT went down now and now it costs
| around only 3 % APR to short it. I've been short for a year now
| and will be fairly rich if Tether burns to the ground.
| scotty79 wrote:
| How's that profitable when compared to buying bicoin year after
| the crash and hodling for 3 years?
| albntomat0 wrote:
| The probability of Tether collapsing and Bitcoin going
| to/beyond its previous peak are definitely different.
|
| They're also quite possibly inversely correlated (e.g. Tether
| collapsing could also tank Bitcoin).
| retube wrote:
| How are you managing the counterparty risk?
| EVa5I7bHFq9mnYK wrote:
| I'm willing to take the bet. Let's send $10k each to a reputable
| escrow. If after a year USDT trades under $0.9, you get $20k.
| Otherwise, I get it.
| bagacrap wrote:
| Their bet doesn't require tether to blow up in the next one
| year. It's only a total loss for them after 6 years or so.
| qeternity wrote:
| That is not the bet they are taking, the r/r is completely
| different.
| acjohnson55 wrote:
| I had this same idea a few months ago:
| https://mobile.twitter.com/AlanJay1/status/14187863191997808...
|
| I'd bet on USDT failing in 3 years. But I'd want to understand
| how the close-out works under the assumption that the non-
| stablecoin collateral in Aave crashes and the liquidation process
| isn't able to preserve the value of the pool. I haven't studied
| that in depth. My guess is there's non-negligble risk of not
| being able to get that return on the last leg of the trade, even
| if the hypothesis is right.
| c7b wrote:
| I guess most people who looked at crypto had that idea, and
| most people who thought about for more than a short moment
| probably came to similar conclusions as the OP (if you do it,
| do it through DeFi, and ideally only with what's probably play
| money for them). One thing they didn't mention that someone who
| just wants to play around should keep in mind is that you might
| incur tax reporting obligations.
|
| On the technical point: USDT isn't used as collateral in the
| protocol, apparently, so the main risk is that other assets in
| the collateral pool like Ether drop so sharply that the
| liquidation mechanism can't keep up / that the price oracles
| get messed up. That's a known unknown, there are also unknown
| unknown, eg bugs/unexpected behavior in the protocol. There's
| also the question whether/how you'd be able to convert your
| crypto holdings back into fiat dollars at that point (most
| centralized exchanges might be in trouble, with USDC you need
| to create a business account with Circle, but still seems like
| a feasible off-ramp).
| adrianchifor wrote:
| You know who already made tens of millions in profits and will
| continue to because of stories like this? Market makers that
| redeem billions of USDT for cash with Tether/Bitfinex every time
| it goes under $0.99. Borrow USDT on leverage, cash out at $1 to
| US bank, mint USDC with Circle, swap to USDT, repay USDT loan and
| bank the difference, rinse and repeat until it's back to $1.
| arez wrote:
| nobody is redeeming tethers with bitfinex, they don't even have
| proper banking anywhere and their accounts are constantly
| shutdown by various entities.
| Aperocky wrote:
| It's not a risk free proposition, it's probably a losing
| proposition in the long term.
|
| Every time it dips under $0.99, there's a chance it goes
| straight to $0 and cannot be cashed out anywhere.
| charcircuit wrote:
| >there's a chance it goes straight to $0
|
| Since Tether is fully backed the chance is really small.
| grey-area wrote:
| Tether is not fully backed.
| charcircuit wrote:
| There is no proof of this. Despite many people
| complaining Tether continues to pay out billions dollars
| to people redeeming tethers.
| bagels wrote:
| They merely claim it is fully backed.
| charcircuit wrote:
| No, they also have third party attestations that it is
| fully backed.
| bagels wrote:
| Apparently those attestations are relatively recent in
| their history, but also not very convincing:
|
| https://www.coindesk.com/markets/2021/03/30/tether-takes-
| ste...
|
| "as noted later in the article the composition of
| Tether's assets is not spelled out in the attestation"
|
| Meaning they may be backed by loans or fraud coins or
| anything.
| eli wrote:
| This will absolutely happen some day
| Aperocky wrote:
| If the feds rate prediction are true, probably within the
| year.
| bagacrap wrote:
| why? tether can survive a 4.25% overnight rate and not
| 50%?
| nateberkopec wrote:
| > Market makers that redeem billions of USDT for cash with
| Tether/Bitfinex
|
| Have people actually seen the receipts for this? I'm skeptical
| that this actually occurs.
| Marazan wrote:
| Hey, a highly reputable trader Sam Bankman Fried claims to
| habe done exactly that. His reputation is second to none.
| tgsovlerkhgsel wrote:
| Even if counterparty/protocol risk don't eat you, "the market can
| remain irrational longer than you can remain solvent" applies
| here and the interest can eat you.
| arez wrote:
| just short coinbase, if tether blows up, the whole crypto market
| will blow up, therefore coinbase will blow up. There's no way
| coinbases stock price wouldn't go down if tether and bitcoin go
| to zero
| cgb223 wrote:
| Has anyone found a reliable platform in the US to legally short /
| take out PUTs on a crypto currency in the US?
|
| I went looking last year and couldn't find anyone allowing this
| feature. Binance had something close but only on their .com site
| not their American .us site
| codexon wrote:
| There are options on bitcoin futures and the bitcoin etf bito.
| throwaway1777 wrote:
| Until regulators approve such things they won't be offered
| legitimately after all the saber rattling from the sec.
| marcrosoft wrote:
| IBKR has futures trading for bitcoin. You can go both
| directions with futures.
| wpietri wrote:
| You could do it the old fashioned way. You find somebody who
| thinks the value of their crypto will go up. You pay them to
| borrow their crypto for, say, a year. You then sell the crypto
| for dollars and in a year you hope you can buy it back for less
| than you made.
|
| The legal way to do it would be with an old-fashioned paper
| contract between two known parties. But as web3isgoinggreat.com
| has made clear to me, the more effective way to do it is to use
| some crypto site for the deal. If you're lucky, the
| tools/sites/curriencies you've used will just have gone out of
| business. And even if not, apparently you can just say, "Oops,
| I used the money to do other things so I'm not giving anything
| back to you."
| foobarian wrote:
| Wasn't ETH created just for this purpose by accomplishing
| these deals via smart contracts?
| c7b wrote:
| Yes, and they exist, that's also what the article's author
| ended up using.
| rabf wrote:
| Why not use one of the on chain solutions? Theres quite a few
| options platfoens ib defi.
|
| https://www.coingecko.com/en/categories/decentralized-option...
| matkoniecz wrote:
| Because Tether crashing down is very likely to destroy also
| them.
|
| AKA counterparty risk.
| tornato7 wrote:
| LedgerX offers legal crypto Derivatives in the US, but it's a
| pretty poor customer experience.
| [deleted]
| queuebert wrote:
| The problem is no one can calculate a Sharpe ratio for crypto.
| The variance is not well understood.
| chollida1 wrote:
| Sharpe ratio uses a backward looking variance as it tells you
| how you traded wrt to the volatility.
|
| I assure you, we can trivially look back to see the variance.
|
| I mean, how could we calculate a sharpe without knowing the
| return and volatility, we always use historical for both, its
| one measure of how we track portfolio returns, which again, are
| backward looking.
|
| Though sharpe isn't used as much as it was 15-20 years go due
| to it penalizing volatility in positive returns as much as it
| penalizes volatility in losses.
| Sebb767 wrote:
| It's a sidenote, but part ("Act") 1 has a strange structure. They
| start off with Tether doing dodgy business and most likely being
| insolvent (a very good and sound point), but then end with
|
| > Tether's most public executive, CTO Paolo Ardoino, uses a
| Twitter avatar that seems to be a pear with the face of the
| Joker.
|
| and
|
| > His wife, Claudia Lagorio, began working at Bitfinex as a
| Mobile Application/Frontend Developer in 2016. Three years later,
| she was appointed Chief Operating Officer of both Bitfinex and
| Tether.
|
| Those are extremely weak claims. The latter is at least a meager
| allegation of nepotism, although, without more context, it's
| really not that strong. The avatar, on the other hand, is a
| distraction at best. Ending the paragraph on those claims makes
| the argument appear a lot weaker, if not even disingenuous.
| notahacker wrote:
| Agree with you on the Joker avatar being pretty irrelevant, but
| there's a bit more than _just_ nepotism implied a growth-stage
| financial services company trading billions in assets which had
| already experienced serious regulatory and fund loss problems
| deciding the C level appointment their operational issues
| needed was someone with no prior finance experience but plenty
| of reason to be loyal to the founders who 'd been hired a
| little earlier to implement the UI for their app. Even in the
| hacker-founder world of Silicon Valley, that would be an
| unusual promotion path, for a troubled company in a regulated
| field like finance it's a red flag...
| ShamelessC wrote:
| It is written in the form of a casual blog post. Really, all he
| is saying is that he doesn't respect these people on a personal
| level and "knows the type" (or what have you). If you disagree,
| that's fine, but if you want a more formal type of discourse,
| pay some journalists.
|
| It also _does not_ strike me as "weird in context", but I guess
| you're just hoping people don't actually read the thing (which,
| fair enough - no one does here).
| jeffreyrogers wrote:
| For it be worth doing for a hedge fund they'd need to be able to
| put on a sizable trade. Let's say $1mm but probably a lot more.
| Is there enough liquidity to do this? I have no idea.
| josh2600 wrote:
| I feel like most people look at stablecoins and say "this is such
| an easy business!" and in a way they're right, but they're also
| wrong.
|
| Stablecoins derive stability through a system. This system uses
| collateralization to present a fixed price. In its most
| simplistic form the system has $1 for every $1 in it.
| Unfortunately, in such a system, there is no point in the
| virtualization, which is called hypothecation in finance.
|
| Hypothecated assets exist to allow asymmetric risk. Think of it
| this way:
|
| * Alice runs a bank and has dollars in it.
|
| * Bob runs a stablecoin and wants it to be backed by dollars.
|
| * Alice says "you can mint $1 of hnUSD for every dollar I have in
| my bank."
|
| * Bob mints 1 hnUSD.
|
| * Alice invests the dollar in their bank into US treasuries to
| earn a yield backed by the full faith and credit of the United
| States Government.
|
| * Bob is free to use his hnUSD for whatever he wants to do in his
| ecosystem and Alice will be able to redeem it when he brings it
| back to Alice's bank when she sells her US treasury.
|
| The problem in all of these systems is actually hauntingly
| simple: Liquidity is king.
|
| In the event that Bob needs dollars quickly, Alice may not be
| able to sell treasuries quickly. This is called a liquidity
| crisis.
|
| Before we start pointing fingers at cryptocurrency, take a second
| and think about how banks work. All of banking is built on
| hypothecation and risk management. The businesses that stand the
| test of time in finance are the ones that manage risk most
| effectively. There is a time to be bullish, and a time to be
| bearish. Having the wisdom to know the difference is often won
| only with battle scars.
|
| I am thankful for the public-private partnership that facilitates
| humanity's collective dream through finance. I am hopeful that we
| can learn the lessons of the past to not repeat history's
| mistakes.
|
| The future of finance is on-chain governance/on-chain proof of
| reserves/on-chain liquidation.
| lvl102 wrote:
| It's been more than a decade and it's still not that cheap to
| short crypto. I am 100% convinced that's by design. If you think
| equity is rigged, crypto is a complete circus. I rather not deal
| with it even if money can be made. It's going to slam you at some
| point.
| 323 wrote:
| Nobody is stopping you from creating an "unrigged" way of
| shorting crypto. If what you say is true, you will have huge
| demand.
|
| Also, you can short crypto on CME. Is that rigged too?
| s28l wrote:
| > Also, you can short crypto on CME. Is that rigged too?
|
| I think your first point is fair, but I think you're
| overselling things here. Yyou can only short Bitcoin, not all
| crypto, but the real issue is that the Bitcoin futures curve
| is in backwardation, which implies a certain financing cost
| to go short.
|
| The settlements for the various contracts can be found
| here[0]. Nearly all of the volume is concentrated in the
| front month contract (Jan 23 at the moment), so if you want
| to be able to trade any size at all, you'll have to do so by
| selling that contract.
|
| However, the issue is that the future price is consistently
| lower than the spot price. So if you bought a Bitcoin today
| and then sold a future for the front month (i.e. so you
| locked in the price you could sell the Bitcoin at in the
| future), you would be guaranteed to lose money.
|
| And you will effectively have to do exactly that every month:
| as your short contract approaches expiry, you'll need to roll
| it over for the next month's contract. As the front month
| gets closer to expiry, its price will trend to the Bitcoin
| spot price, meaning you'll have to buy it back at a higher
| price then you will get when you sell the next month
| contract.
|
| I don't have access to the historical settlement prices for
| the CME contracts at the moment, so I can't estimate the
| exact roll cost you'd pay over the course of a year. If we
| guess that it's about $100 each roll, then you'd pay $1200
| over the course of the year per bitcoin (as well as having to
| commit 50% of the price of bitcoin in margin).
|
| The OP posted 185 USDC net as collateral and has a short
| position of 450 USDT, which he's paying about 13% on. In the
| CME case, the collateral requirements are higher (50% of the
| notional shorted) but the financing cost is lower (less than
| 10% of notional shorted).
|
| [0] https://www.cmegroup.com/markets/cryptocurrencies/bitcoin
| /bi...
| 323 wrote:
| The fact that bitcoin is so expensive to short shows that
| it's risky to provide a cheaper way.
|
| Otherwise someone would offer cheaper options and undercut
| all the existing market makers.
| djtango wrote:
| On OddLots they interviewed someone who shorted Luna and borrow
| fees were insanely high in part due to the fact that it would
| yield 20%.
| vgatherps wrote:
| > It's been more than a decade and it's still not that cheap to
| short crypto
|
| Is not true, you have been able to short in derivatives markets
| for ages and frequently get paid for it.
|
| > I am 100% convinced that's by design.
|
| Nothing about crypto prevents to one entity from lending to
| another at a rate of their own choosing.
| jupp0r wrote:
| There's also the risk of collateral damage to BTC and other
| crypto assets. That sweet money you are making is coming from
| somewhere.
| ansible wrote:
| Man, I'd love to short Tether too. But that would mean giving
| actual USD to some other exchange, and I'm yet to be convinced
| that there are any exchanges who aren't running some kind of
| fraud scheme as well.
| tornato7 wrote:
| You can short tether purely with ETH collateral on-chain, and
| then you're not exposed to any exchange risk. Of course you are
| then exposed to ETH price risk.
| polygamous_bat wrote:
| It's like sawing off a tree branch you are sitting on: if
| Tether falls Ethereum prices will be severely impacted as
| well.
| jqpabc123 wrote:
| Tether is the support mechanism underlying the entire crypto
| market.
|
| You're basically betting that the crypto market will collapse ...
| but the exchange/broker/whoever you're dealing with will survive
| and have the necessary funds to cover your short.
|
| It all seems rather contradictory to me --- you think it's all
| going to collapse ... but at the same time you're willing to bet
| that your little chosen piece of it will somehow survive just
| fine. And not shutdown withdrawals at the first sign of trouble
| (like others have done) so you can collect your payout.
|
| This is almost like playing the lottery --- winning is pure dumb
| luck beyond your control.
| logifail wrote:
| > You're basically betting that the crypto market will collapse
|
| By coincidence, my wife was watching The Big Short (2015) with
| our eldest two kids tonight, it really is worth watching
| [again] if you've not seen it [recently].
|
| > ... but the exchange/broker/whoever you're dealing with will
| survive and have the necessary funds to cover your short
|
| Michael Burry has pretty much _exactly_ that conversation with
| Goldman in the film.
| spaceman_2020 wrote:
| I've been deeply involved in crypto the past 3 years and everyone
| in the space knows that Tether is a scam. No serious investor
| holds USDT over USDC in their personal wallets. Tether only
| exists as a way to trade on centralized exchanges.
|
| The problem is that everyone in the system is so deeply reliant
| on USDT that they will do everything possible to prop it up.
|
| Honestly, the only thing that can bring down Tether at this point
| is either the collapse of one of the major central players (such
| as Binance) or government action.
| sshine wrote:
| > everyone in the space knows that Tether is a scam
|
| For those interested, Coffeezilla did a piece on Tether:
|
| https://youtu.be/-whuXHSL1Pg
|
| And yes, it's a scam.
|
| Hodlers seem to tolerate it because crashing Tether would
| impact their net value. It's sad.
| crtified wrote:
| To finesse the idea of major central players whose downfall
| would collapse Tether:
|
| Tether has remained relatively unaffected by major exchange
| collapses and disappearances over the years, including the very
| recent implosion of the world's second-biggest (after Binance)
| crypto exchange FTX. Barely a blip on their radar.
|
| So I posit that Binance is probably the _only_ exchange whose
| downfall may (may!) collapse Tether. And even then, Tether
| would be one among many, in that scenario.
|
| Apart from that, the only entity whose collapse might also end
| Tether is perhaps "Tether itself". Unless anyone has other
| ideas? So it would seem to me that the government action is
| more likely to impact them than anything else at this stage.
| [deleted]
| gitfan86 wrote:
| During the '07 housing crisis people bought "Synthetic CDOs"
| which where actually bets on a particular set of mortgages
| defaulting.
|
| For example, they bet that a group of mortgages where the
| borrower had no proof of income and a mortgage with a very high
| interest rate in a location where prices were falling would fail.
| It seems like a reasonable bet, but they didn't take into account
| that the people taking these bets had no limit to how many times
| they could take the bet. Eventually they had enough money to just
| payoff the mortgages and win the bet.
|
| I would be very concerned here that the same type of risk could
| happen
| qeternity wrote:
| You're confusing a synthetic collateralized debt obligation
| (CDO squared) with a credit default swap (CDS).
| gitfan86 wrote:
| Good, the last thing I want is to be an expert in the details
| of the obfuscation and misdirection of the scammers on Wall
| St. during '07
| WinstonSmith84 wrote:
| More like "Shorting Tether for Fun and Slow Bleeding"... 8 years
| of FUD and still here, it doesn't take 8 years to do a safe 2x in
| crypto, not even in trad-fi.
| albntomat0 wrote:
| Something existing for a long time increases the probability of
| it being stable, but does not guarantee it. It could be that
| Tether falls apart in a certain set of conditions that just has
| not happened yet, such as FTX/Alameda being exposed by bad
| crypto conditions in 2022. It took Theranos 15 years to fall
| apart.
|
| For the majority of folks to be convinced, Tether both has to
| exist for a long while, and provide a basic level of
| introspection into how the reserves are handled.
| alisiddiq wrote:
| The way I look at it - Its not a matter of if, its a matter of
| when. Even the die hard crypto bros know tether is nothing but
| a giant ponzi scheme.
| wpietri wrote:
| Yes, if there's anything I've learned from the crypto markets
| lately it's that a few years of (apparent but vigorously
| unaudited) success is proof that it is very safe and won't come
| apart precipitously.
| WinstonSmith84 wrote:
| not sure whether this was sarcastic, but if it really is,
| then you shall just extend your time horizon. Those who
| bought bitcoin at the worst moment of 2014 are still now at a
| comfortable ~20x (and roughly ~2x on the spx)
| wpietri wrote:
| Oh wait, is the game we're playing Pick an Arbitrary Time
| Period That Lets Me Be Right? How fun, let me try.
|
| In which case I am happy to extend my time horizon. We
| could go back 15 years, where all of this stuff was
| worthless. We could go back 20 years where the online
| currencies Beenz and Flooz had just collapsed into
| worthlessness. We could go back 150 years to the wildcat
| banking area, the last time we let chumps just make up
| magic money, which was such a disaster that it was
| foundational to the modern regulatory regime. Or how about
| we go back 300 years and look at the South Seas Bubble and
| Isaac Netwon's time reforming British currency so it was
| less of an exploitable clusterfuck.
|
| You're right, extending my time horizon really does help
| put cryptocurrency in perspective.
| reducesuffering wrote:
| How does that help whether to buy or sell in 2023? You
| could say the exact same paragraph last year, but someone
| would've bought and lost 2/3 now. That means it could
| happen again.
| wpietri wrote:
| Hey now. The Bitcoin price is heavily dependent on
| financially naive people putting dollars in. If you're
| just going to run around countering hype with facts and
| reasonableness, how are they going to get the bubble to
| reinflate?
| paulryanrogers wrote:
| Must all criticism of Tether be FUD? Their past behavior alone
| makes me skeptical that it'll ever be trustworthy no matter how
| rich the gold mine they may have fallen into.
| lawn wrote:
| The thing is that any and all criticism can be dismissed with
| "FUD", and that the person can continue to live in their own
| bubble and avoid the bother of cognitive dissonance.
|
| It feels very similar to the thought stopping techniques that
| destructive cults use. Trump's word for this is "fake news".
| WinstonSmith84 wrote:
| Nope, there is a lot of legitimate concerns but the fact is
| that they are still here. Taking a trade is about taking a
| bet with a probability to win/lose, and it's just that
| betting against Tether is worth at most a meagre 2x with a
| lot of related risks as outlined in the article, whereas
| there are much faster and safer way to do a 2x in crypto.
|
| After all, big money tried: spreading cheap FUD at the worst
| moment (FTX), betting heavy against... It didn't work out for
| them, but they tried and relative to their size, it didn't
| even cost them that much, I'm sure and it was worth the shot
| (as despicable as it looks).
| paulryanrogers wrote:
| So evidence that this article is FUD is that Tether is not
| yet bankrupt?
|
| Couldn't the same have been said of FTX right up until the
| moment its insolvency became public knowledge?
|
| I'm curious what you consider safer ways to double ones
| money in crypto.
| rthomas6 wrote:
| I still like DAI. Nobody seems to have heard of it or remember it
| exists, but it's a stablecoin that doesn't rely on "trust me
| bro". It's soft pegged to the dollar through its algorithm. While
| the crypto world seems to have been almost entirely replaced
| people interested in and having a basic understanding of the
| technological side of it with people who want to get rich quick
| while understanding nothing, DAI has remained successfully pegged
| to the dollar. Not perfect but also not likely to take a
| permanent dump.
| greenthrow wrote:
| Algorithmic stablecoins are not a good idea. See: Luna/Terra.
| m00dy wrote:
| Algorithmic stable coins are the future, they just need a
| reliable utility.
| polygamous_bat wrote:
| Are you saying... they're a solution looking for a problem?
| yokem55 wrote:
| The main difference between MakerDAO/DAI and Luna/UST is that
| Maker doesn't accept their native token as collateral. You
| have to use collaterals external to the protocol which won't
| inflate in response to where DAI is relative to a $1 peg.
|
| In contrast, UST only had LUNA as collateral, and ended up
| minting more and more LUNA as UST fell off it's peg.
|
| That's not to say that DAI doen't have it's own risks as they
| have a lot of potentially censorable USDC as collateral,
| there could be situations where they can't liquidate
| borrowers fast enough if a collateral falls in USD price too
| fast, and they run their own oracles which could fail or
| misbehave. Not to mention the DAO has a fair amount of
| governance drama on a regular basis. But those risks are
| quite distinct from what took luna/ust down.
| G3rn0ti wrote:
| > Algorithmic stablecoins are not a good idea. See:
| Luna/Terra.
|
| DAI is _not_ an algorithmic stable coin. (1) While DAI is
| based on smart contracts it is backed by a mixture of other
| cryptos and stable coins (not Tether but USDC, IRC). If you
| really want to keep money in the form of stable coins please
| use either DAI or USDC and not Tether.
|
| (1) https://kriptomat.io/cryptocurrencies/dai/what-is-dai/
| dominojab wrote:
| [dead]
| uconnectlol wrote:
| What exactly is hard about running a fiat backed stablecoin?
| Don't you just accept money for your token and invest it in low
| risk crap? Isn't this exactly what a consumer bank does? Even
| Paypal does this [1].
|
| So is the issue that they just (allegedly) got greedy and made
| high risk investments? Can't Google or some company just make
| their own stablecoin overnight and have guaranteed profit then?
| Of course only if it fits with their PR.
|
| 1. https://www.paypal.com/us/webapps/mpp/ua/useragreement-full
|
| > Any PayPal balance you hold represents an unsecured claim
| against PayPal and, except as provided below, is not insured by
| the Federal Deposit Insurance Corporation (FDIC). PayPal combines
| your PayPal balance with the PayPal balances of other PayPal
| customers and invests those funds in liquid investments in
| accordance with state money transmitter laws. PayPal owns the
| interest or other earnings on these investments. However, the
| claim against PayPal represented by your PayPal balance is not
| secured by these investments and you do not have any ownership
| interest (either legal or beneficial) in these investments. These
| combined balances are held apart from PayPal's corporate funds,
| and PayPal does not use these balances for its operating expenses
| or any other corporate purposes. Additionally, PayPal will not
| voluntarily make these balances available to its creditors in the
| event of bankruptcy.
|
| Note: quote obtained by proxy (https://www.paypal-
| community.com/t5/My-Money-Archives/Does-p...) as Paypal
| needlessly block my shared IP.
| dzdt wrote:
| What's hard is the temptation. If you are running a fiat backed
| stablecoin with a big market cap, and you are willing to be a
| bit dishonest you can make yourself obscenely wealthy. There is
| no one making you keep your hand out of the cookie jar.
| Resisting that is hard.
| mlyle wrote:
| And here "a bit dishonest" is just a matter of leverage.
| Slightly increase the risk, and _on average_ you 'll come out
| ahead and have extra money you can siphon off.
|
| This is one reason why economic downturns always expose
| fraud.
| NoboruWataya wrote:
| The stuff banks invest in isn't really "low risk", they invest
| in things like long-term loans that have a non-negligible risk
| of default. In order to be properly safe, a stablecoin would
| need to invest in much lower risk investments like money market
| funds and high quality commercial paper, which tends to have
| very low returns. The stablecoin would also need to have proper
| custodial arrangements in place which would cost money.
| Companies like PayPal do something similar as a way to avoid
| holding many millions in a bank account (which, as well as
| being subject to the credit risk of the bank, could attract
| significant fees and possibly negative interest). They almost
| certainly don't make significant profit from the practice.
|
| What you are describing does happen, but it's not banks that do
| it, it's money market funds.
| TacticalCoder wrote:
| > invest in much lower risk investments like money market
| funds and high quality commercial paper, which tends to have
| very low returns
|
| As I wrote in the other comment: Coinbase says the tens of
| billions of USD backing their USDC are in short term US
| treasuries. ATM the return on these is 4.7% yearly? 4.7%
| yearly they pocket on _more than $50 billions_. Without
| giving the returns back to the USDC holders (as far as I know
| people keeping USDCs in their own private wallets do not get
| any yeld).
|
| Or is Coinbase not actually putting these tens of billions in
| short term US treasuries (which mean they'd be lying)?
|
| Or am I misunderstanding what's the yearly return on these
| short term US treasuries?
| dmoy wrote:
| The return on US treasuries is usually lower than
| inflation. You lose real money by keeping only US
| treasuries. It could maybe be done with TIPS, but that
| would be a little tricky to accomplish.
|
| For example a couple years ago, 1 year treasuries had a ~0%
| rate.
| 0x53 wrote:
| Yes, but it doesn't matter if the money you are losing to
| inflation is being lent to you for free. Although
| coinbase does pay a small percentage to usdc holders on
| their exchange I think it is one of the ways to convince
| people to switch away from tether.
| JackMcMack wrote:
| Inflation is irrelevant if your stable coin is pegged to
| the currency that is inflating.
| jiggawatts wrote:
| Just to expand on the comments made by other places: The
| _holders_ of Tether lose money (effectively) due to
| inflation. The owners of Tether the corporation (Binance)
| can collect the interest, which is cash money. Billions
| is billions.
|
| They only have to repay the _face value_ of the deposited
| cash. Yes, the real purchasing power goes down over time,
| but that 's not their problem!
| hbrn wrote:
| > 4.7% yearly they pocket on more than $50 billions.
| Without giving the returns back to the USDC holders (as far
| as I know people keeping USDCs in their own private wallets
| do not get any yeld).
|
| They do if your USDC is in Coinbase account.
|
| https://www.coinbase.com/blog/coinbase-customers-around-
| the-...
|
| Of course you won't get any yields on private wallets, how
| would that even work?
| TacticalCoder wrote:
| > What exactly is hard about running a fiat backed stablecoin?
| Don't you just accept money for your token and invest it in low
| risk crap?
|
| That's what Centre (Circle+Coinbase) is doing. They're emitting
| USDC and publish the individual identification numbers of every
| single short term US treasury (and the bank at which they're
| held) they buy with actual USD from customers. I don't know,
| from their terms of services, what happens with the
| returns/yeld on these treasuries.
|
| For now that interest rates went up suddenly Centre is getting
| several percent on tens of billions (!) yearly. They're
| certainly not distributing the yeld to each individual address
| owning USDC.
|
| So it looks like Centre may be a _very_ profitable company by
| now.
|
| But tether's case is believed to be different: many believe
| they never had anywhere near the amount of real USD backing the
| USDT they emitted and that they emitted USDT mostly out of
| their arse, tens of billions of them, and used these to pump
| the price of BTC (and of the whole ecosystem).
| lkrubner wrote:
| "got greedy and made high risk investments? Can't Google or
| some company just make their own stablecoin"
|
| Interesting that you contrast "greedy" with "Google". Why would
| Google want to ruin its own profits by investing in what you
| call "low risk crap"?
|
| The problem with "low risk crap" is that it pays low interests.
| If Google were to invest in "low risk crap" then that would
| drive down Google's margins and profits. This is the opposite
| of what investors in Google want.
|
| If Google could make large profits running a stablecoin, then
| they already would have set it up.
| elif wrote:
| tether, at no point in its history, has pretended to claim a
| 1:1 ratio of tether to actual dollars received or in reserve.
| They regularly mint huge chunks of coin and give them to
| exchanges under legal agreements that have nothing to do with
| cash transfers.
| suggestion wrote:
| This is plainly false. You can use any search engine and cap
| the date at 2020 and search tether fully backed.
|
| https://duckduckgo.com/?q=tether+fully+backed&t=fpas&df=2015.
| ..
| jiggawatts wrote:
| "Tether says" is the crypto equivalent of "Putin says".
|
| Nobody believes them, especially since the company lied
| repeatedly in the past. They lied about the co-ownership by
| Binance, they lied about printing money out of thin air,
| they lied about getting a proper audit, and all but a few
| of the founders are fraudsters with a history of lying.
| Marazan wrote:
| What the actual fuck are toy talking about?
|
| Yes they did. They claimed every Tether was 1:1 backed by US
| Dollars.
|
| Not assets with equivalent dollar value but full on actual
| dollars.
|
| They kept doing so until they lie was fully exposed. Then
| they changed their story.
| lamontcg wrote:
| > What exactly is hard about running a fiat backed stablecoin?
|
| That probably isn't what Tether is doing. They're likely
| running a crypto-loan backed stablecoin pegged to the dollar.
|
| A fiat backed stablecoin is a bit useless since it just looks
| like bank deposits and withdrawals. Lending USDT against crypto
| collateral is both what they've explicitly stated that they're
| doing and it makes them look a bit more like a central bank
| (and the issuance of Tether tends to fuel trading bots that
| push the price of crypto up which leads to more issuance of
| Tether in a nice positive-feedback loop in a way that should
| make any student of supply and demand perfectly happy).
|
| They've named their crypto-collateralized loans "Commercial
| Paper" which has been a huge success and managed to get
| literally everyone searching and speculating about what kinds
| of CP they've been buying up in the real world, when the real
| answer is pretty much none--creating a great distraction.
| [deleted]
| actinium226 wrote:
| I, for one, think I'll get in on this trade with some play money
| just because this seems like a nice way to learn about smart
| contracts and defi and _maybe_ get paid to do so.
| spaceman_2020 wrote:
| Borrowing and lending requires a lot of transactions. Make sure
| to do it on a cheaper blockchain (NOT Ethereum) otherwise
| you'll end up paying a ton of money in fees.
|
| I would recommend Polygon (Matic) or AVAX since they're much
| cheaper than Ethereum and have decent liquidity on AAVE.
| c7b wrote:
| Just make sure that you know whether/how you need to report
| this in your taxes.
| ptero wrote:
| I admit that I only skimmed the article, but the first thing that
| jumps at me is counterparty risk; the same risk the author is
| trying to avoid in his rejected "just short Tether" option. The
| proposal seems to put a bunch of crypto exchanges in the
| transaction path which, thinks me, can bring trouble* should the
| Tether collapse the way FTX did.
|
| More generally, while Tether may be a house of cards that will
| eventually collapse, placing a bet on it has actual costs. And
| "the market can stay irrational longer than you can stay solvent"
| is an adage worth remembering. My 2c.
|
| *either directly, by failing to deliver the winnings should the
| trade go the authors way; or indirectly, via clawbacks when
| govvies and lawyers go after those who made profits to
| (minimally) compensate those who was left holding the bag.
| dktp wrote:
| Act III describes this risk and Act IV addresses how they dealt
| with it
| ptero wrote:
| I think Act IV describes _shifting it_ to a different defi
| counterparty, which might carry lower counterparty risk. Or
| not.
| arisAlexis wrote:
| Please refrain from doing what OP is proposing for your pocket's
| sake
| pearjuice wrote:
| Lots of people have been saying Tether is a fraud for years now.
| Even some very smart and highly regarded people; patio11 comes to
| mind. Yet in all those years, Tether had no major depegging
| event, bankrun or any other noteworthy chain reaction whilst big
| frauds unwinded, hacks happened and over-collaterized bubbles
| popped. I'm not saying Tether isn't a fraud, but I feel the
| chance it falling as an unbacked stable coin is long gone. More
| likely they will end up OFAC sanctioned (such as happened with
| tornado cash) for roleplaying as the federal reserve.
| getToTheChopin wrote:
| It's a clever trade, and I appreciate that the author pointed out
| the main drawback:
|
| > What does that mean? Essentially that we're exposed to the risk
| of something going wrong with Aave itself and not being able to
| get our money back. (Aave's own explanation of its risks is
| here.) In order to withdraw our money from Aave, Aave actually
| needs to have the money we want to withdraw. When we deposited
| USDC collateral on Aave, Aave lends out that USDC to other users
| who deposit their own collateral on Aave. At the time of this
| writing, about 53% of Aave's USDC is lent out.
|
| Author states that they only have "a couple hundred dollars"
| risked on this trade. Seems that they're just looking to win
| Internet points by being able to say that they shorted Tether.
| SilasX wrote:
| Yeah I was going to say these are ridiculously small numbers to
| try the bet with -- each of those transactions mentioned was
| around $3 worth of ETH, which adds up fast. I wouldn't try
| something like this for less than $5k.
| yborg wrote:
| The author's Internet point is that they think Tether is bust
| and why big money is not shorting it (you can't find a
| counterparty to make a big trade with that is any less dodgy
| than Tether itself). They then describe a mechanism for making
| the trade in which the counterparty is a DeFi protocol that is,
| of course, just as dodgy as Tether itself.
|
| The whole ecosystem currently remains a giant confidence game,
| as Matt Levine described well in a recent article. This doesn't
| mean there isn't a lot of money to be made - casinos make a lot
| of money at an activity with no direct economic value - but
| right now you are best served only putting in money you can
| easily lose.
| SilasX wrote:
| _Some_ of the crypto platforms are scam[1], but no one
| seriously claims Aave Or Compound, the defi borrowing
| platforms you can do this with, are scams. There is, of
| course, always the risk of unforeseen bugs that prevent
| withdrawls, or crashes that happen so fast the collateral can
| 't be liquidated in time. But that's different from saying
| that Aave or Compound are themselves "confidence games" that
| can't be expected to pay you back when you're right.
|
| I know for my part, I made non-trivial money on Compound
| shorting MKR, LINK, and UNI (the Uniswap token) with BTC/ETH
| as collateral.
|
| [1] Whether you replace "scam" with "confidence game" is
| irrelevant to this point.
| ivalm wrote:
| I think the claim is that usdt crash will be highly
| correlated with all other crypto going to zero, so _any_
| crypto collaterized counterparty will fail. Ability to
| payout USDT short relies on confidence in other crypto.
| SilasX wrote:
| I got that part. But the claim here would be that _your
| USDC collateral_ would go to zero. Yes, USDC is "a
| crypto" and if you lump it in with all crypto, you will
| casually think it will magically go to zero too, despite
| being backed with non-crypto assets and a level of
| conventional oversight from the financial markets.
|
| Or is the whole idea that it's somehow deeply insightful
| to not make this distinction?
| ivalm wrote:
| You're right that if the short is entirely usdc
| collaterized. But reading the blog:
|
| > Still, just over half the collateral on Aave is ETH or
| stETH, and another 13% is wBTC. Aave's designed to
| liquidate positions before the become under-
| collateralized. Let's hope that happens fast enough if
| Tether depegs.
|
| That sounds like you still have counterparty risk with
| regular crypto going to 0 due to pool liquidation (your
| collateral is not custodially held, but is in a pool).
| grey-area wrote:
| They didn't say scam but confidence game.
|
| If confidence collapses, tether will collapse and the rest
| of these 'defi' platforms will turn out not to be as
| decentralised as they thought, as they also depend on the
| confidence game.
| Aperocky wrote:
| Big money is not shorting it because there's no way to short
| it at scale.
|
| There are no broker that will survive to close the short, and
| you need a broker to short.
| dghlsakjg wrote:
| USDT is super interesting since it doesn't behave like a
| normal market priced asset. You know it won't ever go up in
| value, and you know that if it goes down, it goes down to 0
| VERY QUICKLY, with maybe a chance of a claim against
| unverified assets that might pay out after years of
| litigation.
| alienalp wrote:
| In past USDT depeg to around 0.9$ for short time. This is
| very unlikely to be the case since even if they are
| insolvent they have a reserve. You probably think that
| way because of LUNA crash which was backed by almost
| nothing. For example in defi stablecoins with issues do
| not depeg to zero or anywhere close to zero if they are
| still backed to some extent.
| dghlsakjg wrote:
| Our opinions differ in that you trust Tether's reserve. I
| don't.
|
| It has been more than 5 years since they were audited. By
| their own admission, they have 10 billion of their 66
| billion dollars in unsecured loans and "other
| investments".
|
| An org whose entire raison d' etre is to hold money
| should be pretty open to outside audits. It should
| actually be a pretty easy audit.
|
| Why have they been foot-dragging so long?
| OJFord wrote:
| That's the same thing GP is saying - nobody reliable, not
| 'in the game', wants to take the other side of the trade.
|
| (Presumably there is a price at which they do, but also at
| which nobody's remained interested.)
| Aperocky wrote:
| want vs reality. In fact, I would want to bet against
| USDT with a reasonable proportion of my savings, but
| there are no safe way to ensure such a contract will be
| honored in the case that it actually went to 0.
| nico wrote:
| > The whole ecosystem currently remains a giant confidence
| game
|
| Money is also a giant confidence game. Any human system is
| that. It's all made up.
| omgsean wrote:
| Money largely gains its value from its ability to be used
| to pay taxes. If there is someone who controls land and an
| army and says "this is valuable and you have to pay a
| certain amount to me at certain intervals" then it is
| valuable, at least within that political configuration.
| G3rn0ti wrote:
| > Money largely gains its value from its ability to be
| used to pay taxes.
|
| Even for contemporary fiat currencies today this is
| neither historically nor theoretically true. Currencies
| gain their value largely from being convenient in
| settling trades and being a measure of value when
| calculating costs, risks and profits. Ultimately, it does
| not really matter what this money is based on e.g. gold,
| paper or digital information.
|
| For anybody interested in this perspective and in a more
| general criticism of fiat money I strongly recommend
| reading "Ethics of Money Production" by Jorg Guido
| Hulsmann. (1)
|
| (1) https://books.google.de/books/about/Ethics_of_Money_P
| roducti...
| TheRealPomax wrote:
| ...and... where were you going with that?
|
| Just because we made something up doesn't mean there aren't
| different levels of stability for that made up model, or
| different levels of real world results from acting on those
| models.
| actionablefiber wrote:
| Funny how the only entities that let you short Tether are the
| ones that will go bust and won't be able to pay you back if
| you're right.
| scotty79 wrote:
| Isn't it nice that one of the main dangers to your stable
| coin doesn't exist because shorting it is not profitable
| enough for the risk?
| toss1 wrote:
| You want to imply that the short is unprofitable because
| the asset is so good that it'll never decline in value.
|
| That is the exact opposite of the reality (and misses the
| entire point of the article).
|
| The point is that shorting tether is likely to be
| enormously profitable, but you won't be able to collect
| your profits
|
| This is because no well capitalized and stable broker or
| exchange will touch Tether, and the only counterparties who
| might lend you the Tether to short are extremely likely to
| go bankrupt when Tether does collapse.
|
| So, you'll put your millions of dollars at risk on deposit,
| pay your interest, and end up with a $100 million or
| whatever profit, owed to you by a now-bankrupt exchange, so
| your profit will never arrive at your bank account, and
| your best case is suing the husk of a bankrupt exchange
| whose shady owners absconded to a non-extradition country.
|
| The trade is bad because only disreputable and
| insufficiently capitalized counter-parties will touch it,
| not because Tether is great in any way.
| scotty79 wrote:
| > You want to imply that the short is unprofitable
| because the asset is so good that it'll never decline in
| value.
|
| Absolutely not. I think tether is garbage that benefits
| almost noone except its creators.
|
| I'm just amused by the fact that stability of a bad thing
| is increased because betting against it is worse than for
| it.
|
| > The point is that shorting tether is likely to be
| enormously profitable, but you won't be able to collect
| your profits.
|
| Hence not profitable at all. :-)
|
| Betting for it is risky, betting against it is risky.
| Maybe that's a huge part of its stability? Like stability
| on the edge of the knife held over lava pit. Nobody
| benefits from going to either side despite equilibrium
| being uncomfortable?
| grey-area wrote:
| No it's stable because they're lying about what it is
| backed by. It's easy to make a scam look superficially
| stable if you are not called on it or make it impossible
| to call you on your promises.
| scotty79 wrote:
| They have 66bn, of actual money that people paid for
| tether, in circulation. It won't be that easy to bring it
| down.
|
| Also the question is, do people really want to call them
| on their promises. That's another thing noone would
| benefit from.
| rippercushions wrote:
| It's exceedingly unlikely that Tether has anything close
| to 66B of "real money" backing it.
|
| The most likely theory at this point is that most of it
| is FTX-style IOUs from other crypto companies marked at
| absurd pre -crypto winter valuations, which will collapse
| like a house of cards the instant they are touched or
| even exposed to light.
| rhaway84773 wrote:
| What this post does more than anything (and I think that is
| the goal) is illustrates that for all the crypto bluster,
| it's currently a terrible financial system that has all sorts
| of massive risks that are not just hypothetical but have
| already been realized.
| sebzim4500 wrote:
| Exchanges typically back client USDT/USDC assets partially
| with USD and partially with fixed interest products. If USDT
| goes to zero some of the big exchanges will make billions.
| These are your counterparties when you short USDT vs USD.
| dmurray wrote:
| This isn't really true and the guy saying "If someone showed
| me a way to do it with Goldman Sachs as a counterparty, I'm
| in" is also misstating things, perhaps intentionally.
|
| I'll take the long side of the Tether bet for 30% a year
| (I'll buy one-year Tether forwards at 70c).
|
| I'm not as creditworthy as Goldman, but for small amounts,
| it's pretty close. I could collateralize the trade with my
| house, and in any case I don't have the kind of correlated
| portfolio that means if Tether goes bust, I can't pay you.
| But enough about me - some trader at Goldman will absolutely
| do the same deal! Maybe they can even do it for 72c.
|
| There is a market-clearing price for this trade if done
| between two creditworthy parties. I don't know what that
| price is because there isn't a big public market for it, but
| if you shop the trade around, you'll find a price.
|
| The people bemoaning they can't short Tether mean they can't
| short it _at what looks like it should be the right price_ ,
| say, paying 5% a year to borrow it. But that's not the right
| price! That's the price that already includes you taking a
| lot of wrong-way counterparty risk. Against Goldman, the
| price is 20% or 30% or something, and you can do the trade,
| but you don't want to.
|
| So the fair price of one-year Tether forwards is 75c or
| whatever, but the spot price is clearly $1.00. How do you
| reconcile this in financial markets terms, that the prices
| don't converge? Same reason other commodity futures might
| have backwardation - holding Tether provides some value to
| its owners. Like having steel today allows you to build a
| skyscraper and start collecting rent, so spot steel trades
| higher than future steel if the construction business is
| good. In Tether's case, that value is the freedom to
| participate in other crypto trades, or perhaps to escape even
| riskier assets in China, or something else.
| Nowado wrote:
| There's also a scale issue. If a product is not
| standardized, that Goldman trader isn't going to work with
| 'a couple hundred dollars' mentioned in the piece.
| drexlspivey wrote:
| When you are shorting something you _receive_ money and you
| are the one that needs to pay back not them.
| darawk wrote:
| All the people mindlessly saying "counterparty risk" clearly
| didn't read the article. He has thought about this carefully. His
| counterparty in this case is Aave, a DeFi smart contract. Smart
| contracts famously get hacked frequently, of course, but Aave has
| been around a long time, and it's probably reasonable to be
| somewhat confident in its security, at this point.
|
| The second thing you have to worry about is Aave's liquidation
| mechanism: under the market conditions implied by a Tether
| collapse, will Aave's liquidation mechanisms function efficiently
| and effectively? The answer to that question would depend on
| exactly how the collapse unfolded (i.e. how quickly it was
| certain, the degree of insolvency, how much the market moved how
| fast, etc). _However_ , it is important to note that the only
| thing at risk here for him is the profit from his short plus the
| collateral factor haircut, not the entire principal. The trade he
| did was to deposit $x usdc on Aave, borrow $y usdt, and then sell
| that usdt back to usdc. That means he physically has CF *
| principal USDC in his possession, and no matter what happens,
| Aave can't take that away from him. Now, he looped this twice, so
| it's actually CF^2 * USDC that he has, but that's still not that
| big a risk.
|
| Finally, he has to worry about the solvency of USDC. However,
| USDC is regulated in the US and has fairly real audits. Almost
| nobody seriously thinks USDC is insolvent. I think there is very
| little to worry about here.
|
| Personally, I think Tether is pretty obviously at least mostly
| solvent, and I think shorting it is a dumb trade that will lose
| him money. But he's going to lose money paying the interest, not
| losing his principal. People have been predicting a Tether
| collapse for literally years now, and despite all the market
| stress and volatility which should have clearly exposed their
| supposed fraud, they're still standing, and the peg trades with
| solid liquidity at $1 today.
|
| My own theory of what's actually going on here is that Tether is
| intentionally obtuse, because it allows them to make seignorage
| profits against their own users. If you issue a stablecoin and
| you know you are solvent, then you can hint to the market that
| maybe you're not, and buy (your own) assets that you know are
| worth $1 at a discount, making a tidy profit in the process. I
| think this is their real strategy, always has been, and they've
| gotten very rich doing it. It's possible they've been under-
| collateralized at various times, and maybe are even slightly so
| now, but I seriously doubt they are currently insolvent to the
| degree people like this think.
| mypastself wrote:
| Provided USDC is indeed fully solvent and remains pegged, a run
| on USDT might even strengthen its position through an influx of
| new customers. However, if the USDT failure causes the crypto
| cataclysm some are anticipating, couldn't Coinbase be exposed
| to such an extent that the company becomes insolvent?
| darawk wrote:
| Even in the event that Coinbase became insolvent,
| theoretically that shouldn't impact USDC. USDC has entirely
| separate reserves that are in short term debt instruments
| (i.e. T-bills) and cash equivalents, uncorrelated to the
| crypto ecosystem, and very safe.
|
| Even if the parent company of USDC (which is actually Circle,
| not Coinbase) were to become insolvent, that theoretically
| doesn't impact USDC at all, other than maybe USDC would have
| to wind down operations, and then people would just redeem
| for USD.
|
| The only scenario where USDC holders would be in trouble is
| if Circle violated their agreements and started making unsafe
| self-dealing investments with the USDC deposited funds. That
| is something that theoretically could happen, but since the
| operators are in the US, they would certainly go to prison
| for it. And we have reasonably reliable audits that state
| clearly that, at least so far, this has not happened.
| foobarqux wrote:
| > I think Tether is pretty obviously at least mostly solvent.
|
| 95% solvent at a bank-like entity (where you are supposed to be
| able to redeem at par) is a bank run.
|
| > My own theory of what's actually going on here is that Tether
| is intentionally obtuse
|
| They have been proven to have committed fraud and lied in the
| past (NY settlement). They have an incredible number of red
| flags, including management that has committed fraud in
| previous companies, refusing basic transparency and a shadowy
| executive team (e.g. refusal to identify CIO, CEO has basically
| never spoken publicly). I don't know of any organization in
| history of anywhere near this size that has had as many red
| flags. 100% guarantee that they have participated in major
| wrong doing beyond the NY settlement. Organizations on the up
| and up have no reason to act the way they do. Your theory that
| a bank-like entity would pretend to be insolvent is
| implausible: the main thing a bank depends on is its solvency,
| it's too 4-d chess to think you can somehow manage to persuade
| the market that you are a little-bit insolvent.
|
| That said, as the article points out, making money on this
| apparent wrong-doing is more difficult for a number of reasons.
| One of which not mentioned in the article is that they may have
| done some fraud that doesn't affect the value of tethers. For
| example, they were undercollateralized for a time but now
| higher interest rates have made them whole. Or they are
| laundering money but are fully collateralized (though I would
| expect a money laundering charge to tank the value of tether
| also).
| notahacker wrote:
| > If you issue a stablecoin and you know you are solvent, then
| you can hint to the market that maybe you're not, and buy (your
| own) assets that you know are worth $1 at a discount, making a
| tidy profit in the process
|
| This doesn't seem like a particularly great strategy, compared
| with the alternative of running a stablecoin and exchange that
| _doesn 't_ look dodgy (or indeed an actual fraud which is at
| least insanely lucrative). Don't think earning the spread on
| deviations from the peg (which Tether-believers compete with
| you for) is really all that great compared with the returns
| from having a lot more trusting customers paying a lot more in
| fees to use your exchange and the returns from safely investing
| a lot more USD given to you in exchange for Tether. And that's
| before taking into account the downsides of running something
| that _looks_ like a criminal operation, like dealing with
| investigators
| darawk wrote:
| > This doesn't seem like a particularly great strategy,
| compared with the alternative of running a stablecoin and
| exchange that doesn't look dodgy (or indeed an actual fraud
| which is at least insanely lucrative).
|
| It is very much _not_ insanely lucrative to run a normal
| stablecoin business. At least, not until very recently. Cash
| equivalent yields have been extremely low for the past
| decade, until the last year. USDC 's net income numbers are
| public, and they suck.
| notahacker wrote:
| That's why I said that running a full blown fraud was
| insanely lucrative, not the normal stablecoin business.
|
| I can't see why earnings from buying the dip on USDT would
| be _more_ impressive than the cash equivalent yields and
| exchange fees they 're forgoing by looking dodgy though,
| never mind lucrative enough to take on the substantially
| increased regulator hassle and risks of liquidity crunches,
| cash asset freezes or even jail time associated with
| looking like a scam.
| hiq wrote:
| > My own theory of what's actually going on here is that Tether
| is intentionally obtuse, because it allows them to make
| seignorage profits against their own users.
|
| From https://www.bloomberg.com/news/articles/2022-12-14/hedge-
| fun...:
|
| > Tether concealed the loss of more than $850 million of
| reserves to a Panamanian entity called Crypto Capital Corp. as
| recently as 2018, the New York Attorney General found. In a
| separate case, the Commodity Futures Trading Commission found
| Tether didn't have enough fiat reserves to back circulating
| tokens more than two-thirds of the time, in a period between
| 2016 and 2018.
|
| so it's more than just being obtuse.
|
| I don't think they're playing with the trust of their own
| stablecoin to get cheap USDT, it'd be better for them to be
| more trustworthy and have more USD to invest in safe
| investments with low interests, but they're probably losing
| some market share to more trustworthy (US-based) stablecoins
| because of how shady they look.
| darawk wrote:
| > I don't think they're playing with the trust of their own
| stablecoin to get cheap USDT, it'd be better for them to be
| more trustworthy and have more USD to invest in safe
| investments with low interests, but they're probably losing
| some market share to more trustworthy (US-based) stablecoins
| because of how shady they look.
|
| I think as of today that is a true statement, because yields
| on safe investments are now so high. But for the last decade
| I think it has been quite false. If Tether had only been
| investing in treasuries and had no other revenue strategy for
| the past 10 years, their profits would not be nearly as high
| as if they had pursued the strategy I suggested. And
| remember, for many years they were literally the only game in
| town, they had no competition to worry about.
| 0x53 wrote:
| Currently you can get a variable rate of around 3% on compound
| finance. https://v2-app.compound.finance/ might be a cheaper way
| to do this.
| paulusthe wrote:
| You don't have to short tether specifically. If tether goes
| under, everything will go under. Just short whatever large ish
| coin which has cheapish carrying costs.
| itake wrote:
| The difference though is tether can only go down and when it
| does it goes to zero. If you short a large ish coin you're
| exposed to value increases and the unlikely hood of the count
| going to zero
| low_tech_love wrote:
| "Tether's large enough by now, and significant enough to the
| crypto ecosystem, that crypto's major players will likely do just
| about anything they can to stop it from failing." Where have I
| heard that before...
| nickpinkston wrote:
| Note that the current Tether investigation just moved to the SDNY
| DOJ office that handles the biggest financial cases.
|
| This time they're looking into possible bank fraud committed by
| Tether [1], while their previous case was settled without
| admitting wrongdoing [2], but their investigation showed Tether
| wasn't fully backed for activities in NY, while their records of
| their backed assets have been sealed and CoinDesk / others were
| denied their FOIA request to access them due to "adverse business
| impact" - so it seems like there's a whole hell of lot of smoke
| around their likely fire...
|
| From [2]: "Meanwhile, Tether has resolved government accusations
| that it overstated its holdings. From June to September 2017,
| Tether never had more than $61.5 million in funds while about 442
| million coins were in circulation, the Commodity Futures Trading
| Commission said last year."
|
| [1] https://www.bloomberg.com/news/articles/2022-10-31/tether-
| ba...
|
| [2] https://ag.ny.gov/press-release/2021/attorney-general-
| james-...
| [deleted]
| faangiq wrote:
| Good luck cashing out that USDC broski ...
| charcircuit wrote:
| Tether is 100.38% backed by assets. This means they can always
| trade Tether for USD. About 80% of their assets are liquid
| meaning that Tether's supply can shrink by up to 80% and they can
| still pay out within a couple of days.
| britneybitch wrote:
| Even if your premise is right, your timing has to be right too.
| The SP500 has doubled since 2014 which lines up with the
| traditional 7% per year. Meanwhile they're paying 12% per year to
| short, so their approach is a compounded 22% worse[1] than VTSAX-
| and-chill (before even considering capital risk). This is still
| gambling, just not in the usual direction.
|
| [1]: 1.07/(1-0.12) = 1.22
| loeg wrote:
| Sure but the author put less than $250 into this scheme and is
| not viewing it as an investment.
| arisAlexis wrote:
| Yes it's a click bait exactly. Projects like a smart trade
| but not really since even OP thinks it isn't. Weird.
| loeg wrote:
| It is not click bait. It's a thoughtful discussion of the
| challenges of shorting Tether, and a personal anecdote
| about attempting to overcome those difficulties.
| arisAlexis wrote:
| It is a click bait because the articles goes: Shorting
| Tether is a great idea and ends with ah actually it's not
| a good idea , expensive so I put 200 eur in something
| with extreme risk to short it. Yes, it is click bait
| aardvarkr wrote:
| I agree with your premise but the s&p isn't going up by 7%
| right now and the author is just taking a calculated risk.
| That's his business. If he thinks Tether is going to collapse
| then he'll make a massive return on his investment.
|
| He's essentially gambling $46/yr to get a $450 payout if Tether
| collapses.
| edmundsauto wrote:
| The most important line in finance is "Past performance is no
| guarantee of future results". This is generally treated as a
| warning label: Don't assume an investment will continue to do
| well in the future simply because it's done well in the past.
|
| However, what it really means is that nobody can predict
| future performance, even with historical data. I think it's
| negativity bias that this phrase is used to apply to
| downside; it should also be used when considering upside.
| (The reason, I think, is many people prefer to miss out on
| upside rather than experience downside, ie we are risk-
| averse.)
|
| Over some future time frame, the S&P will go up again. It
| doesn't feel like that will be soon, but as I always admit to
| myself: I am really bad at predicting the future.
| arisAlexis wrote:
| If Tether collapses Aave will collapse too, the plan is
| hilariously defective
| seviu wrote:
| Aave as a token might collapse but Aave is a protocol, and
| it will continue working as designed. When Ethereum
| collapsed to sub 900$ we could all see how robust these
| decentralized protocols are. The price of the token has
| nothing to do with how Aave works.
| arisAlexis wrote:
| I am talking about the protocol. They are untested
| protocols with potential design flaws or potential hacks.
| We have seen these happening for tens of billions of
| losses for years now. Waiting for something to collapse
| in something that can collapse is total irrationality.
| OscarCunningham wrote:
| > s&p isn't going up by 7% right now
|
| It always sounds weird to me when someone uses the present
| continuous tense to refer to the rate of change of stock
| prices. Like, how are you taking the one-sided derivative of
| a fractal?
| tedunangst wrote:
| Pick a shorter timeframe like one month, calculate
| annualized rate.
| mgaunard wrote:
| That's a bad idea, since equities have a lot of calendar
| events and a given month is never representative of a
| year's performance.
| OscarCunningham wrote:
| Then you'd say 'the S&P hasn't been going up at 7%
| recently'.
| tedunangst wrote:
| The pedantry hasn't been making you a more effective
| communicator recently.
| TheRealPomax wrote:
| Welcome to finance: if you're not being pedantic, you're
| probably trying to sell a lie. Verb tense absolutely
| matters.
| tedunangst wrote:
| Does anybody here believe aardvarkr was trying to sell a
| lie with their casual verb tense?
| bagacrap wrote:
| pick 3 months and try it.
| bagacrap wrote:
| Since October 12 it has been going up at an annualized ~30%
| rate.
|
| Where it goes next is anybody's guess.
| scotty79 wrote:
| > massive return
|
| Just around 100%. That's not massive for crypto gambling.
|
| You could just buy BTC and have 600% in less than 3 years if
| only BTC won't break out of its 12 year trend.
|
| And that's a very conservative gamble.
| eli wrote:
| Not if you believe BTC is wildly overvalued. I personally
| don't think it sets a new record high, ever, and is mostly
| down from here
| swyx wrote:
| look i'm as skeptical as the next HN'er but the evidence
| of past history is against you and "ever" is a very long
| time...
|
| BTC doesn't have to win mass adoption for it to set new
| highs, it just has to be the "store of value" (i know, i
| know) for enough people and for the next QE cycle to
| start in 3 years to get going again
| eli wrote:
| Instead of price history look at utility history: It's
| never been anything other than a speculative asset or a
| temporary medium of exchange for criminals. There's no
| future here.
|
| Future returns on BTC cannot be compared to the S&P!
| broast wrote:
| Is there currently new and previously not knowable
| information regarding its utility compared to when the
| price was going up?
| eli wrote:
| No, it's never been particularly useful.
|
| Do you believe a popular pyramid scheme has demonstrated
| utility? If a pyramid scheme made people a lot of money
| in the past does that suggest it has long term value?
| broast wrote:
| People similarly argue that stocks are a pyramid scheme
| but that doesn't stop them from existing.
| wmf wrote:
| Gold is also speculative and it's much larger than BTC. I
| hate crypto but $100K BTC is completely possible.
| eli wrote:
| Anything's possible but gold is useful and has intrinsic
| value. Bitcoin isn't very similar. I don't think one
| implies anything about the other.
| scotty79 wrote:
| So you don't believe that scarcity can capture and hold
| any value? Only utility can do that?
| ma3gl1n wrote:
| There is a finite amount of BTC, but infinite amount of
| cryptocoins
| scotty79 wrote:
| True, however none of them became actual competition for
| bitcoin. Not even ETH which is strong number 2.
| lanstin wrote:
| Isn't scarcity relative to demand? I mean each cubic
| meter of soil is globally unique, but no one cares. And,
| in the long term, demand plausibly has a relation to
| utility?
|
| I do speculate that part of the appeal of a non-
| loan/investment based store of value to very rich people
| is that hey wish they could keep all their wealth in a
| vehicle that didn't involve investing in the overall good
| of society, but that is a childish wish - wealth is
| inextricably linked with the prosperity of the society in
| which it is enmeshed. A billionaire in a society ravaged
| by disease, hunger, and conflict, shorn of the comforts
| of science and technology, will be poorer by far, in
| terms of objective measures, than a billionaire in a
| society where the people are educated and science and
| medicine are widely available, especially over he
| generations.
| scotty79 wrote:
| It's related to the demand. That's why unique things
| might not be scarce especially when there's a lot similar
| things.
|
| That's why NFTs are not scarce even though they are
| unique.
|
| Personally I would also wish that billionaires kept their
| wealth in things unrelated to the real world. Because
| when they put it in the real world they hike up the price
| for everybody by creating illusion of demand that really
| isn't there because they won't use what they bought.
| this_user wrote:
| This because something is scarce, doesn't make it
| valuable. Claims to the contrary are just another example
| of crypto bros not understanding economics or human
| behaviour. Otherwise, a whole bunch of people with boxes
| of Beaning Babies would be rich by now.
| scotty79 wrote:
| Were beanie babies truely scarce? The way Rambrant
| paintings are?
| the_gastropod wrote:
| I've got some fresh toenail clippings you may be
| interested in! I only clip my toenails about twice a
| month, and probably will cease production entirely within
| 45 years.
| anonymouskimmer wrote:
| There are a limited number of pure collectors, or even
| FOMO collectors. And much of this collection value comes
| about through increasing limitation of an item(1), along
| with a population increase (making more collectors)(2),
| and increasing wealth of current collectors used to bid
| up the price on collectibles (wealth increase through
| means other than their collection, obviously).(3)
|
| (1) - If you buy bitcoin now you might be part of
| increasing the price of a bitcoin by increasing its
| rarity through the means of losing your private keys. But
| this doesn't benefit you.
|
| (2) - We're reaching the point where our carrying
| capacity is starting to hit limits. Maybe in a few
| hundred years we'll have space colonies to keep
| increasing the population, but: 1) This won't benefit
| you, as you probably won't be around then; 2) There will
| be other collectibles that the then population may be
| more interested in. It is the case that certain
| collectibles are incredibly rare (single digit numbers),
| but also cost less then $10k, simply because there are
| not that many interested collectors.
|
| (3) - If you sink most of your investments into crypto
| this limits the ability of your wealth to grow outside of
| your collection.
| [deleted]
| NicoJuicy wrote:
| Evidence of history?
|
| It took COVID to get Bitcoin back up. That's it
|
| Not history, just a rare event.
|
| No one cares about Bitcoin anymore.
| BlueTemplar wrote:
| You seem to have forgotten the other... IIRC 3 (?) times
| it has gotten back up ?
|
| (But feel free to short bitcoin of course - not the kind
| of risk I would take.)
| marvin wrote:
| Your tulip futures from 1637 would still be out of the
| money, even though global tulip consumption is much, much
| higher and the Netherlands is the world's leading
| supplier.
| shadowgovt wrote:
| BTC hasn't been around long enough for it to have a past
| history to be evidence against the belief it will
| downtrend. Not relative to other currencies or
| commodities.
|
| That's like putting a match to gunpowder and claiming
| based on the trend of the first few microseconds, the
| flame will engulf the world.
| scotty79 wrote:
| Bitcoin doesn't raise exponentially. It slows down over
| time. Each swing cycle is shallower than previous one.
|
| It's more like putting a match to a gunpowder and
| theorizing that at some point some equilibrium will be
| reached at greater volume than currently observed.
| Tepix wrote:
| If you assume that Tether is going down, BTC will crash,
| too.
| jmathai wrote:
| Humans are terrible at gauging risk. I think the parent
| comment was highlighting the risk component of this.
|
| VTSAX-and-chill is gambling also. But the risks are so wildly
| different that Tether is closer to buying lottery tickets
| than index funds.
|
| Everyone does what they want with their money but there seems
| to have been an explosion of "massive returns" content that I
| think is generally harmful.
|
| (I'm neither saying that this post is or isn't harmful.)
| wjnc wrote:
| I'll just go out and enjoy "neither A or B" instead of "not
| A or B" or "A nor B". I had to parse "neither is or isn't
| harmful".
| dghlsakjg wrote:
| I don't have a deeply researched position behind this, but
| my feeling has always been that (long term, I say again,
| LONG TERM) VTSAX and chill is the same bet as holding cash.
|
| If your VTSAX ends up being worth nothing long-term, there
| is almost certainly no chance that your currency survived
| the same event.
| jmathai wrote:
| Curious about this. The geometric mean of return for the
| S&P500 is about 7% over several decades. The longer the
| time horizon the more likely you'll hit 7%.
|
| Why do you think it's similar to holding cash?
| dghlsakjg wrote:
| Not that its the same return as holding cash (clearly
| that isn't true), just that if VTSAX doesn't pay off as a
| bet long term, it will be because the dollar has ceased
| to be valuable.
|
| Basically, a bet on VTSAX is underpinned by faith in the
| dollar. If either one crashes the other is worthless.
| csomar wrote:
| I don't get how everyone misses this part. Assuming counter-
| party risk is 0. This is still not a risk free trade by any
| mean, even if Tether collapses at certain point in the future.
|
| At such high interest rates, you need to close the deal soon
| otherwise you are bleeding your capital really fast. The
| interest compounding also means you are losing your money in a
| compounding fashion.
|
| If the author started shorting Tether 5-6 years they'd never
| turn cashflow positive and they'd be nearing bankruptcy where
| they lose all their monies.
| canadianfella wrote:
| [dead]
| williamsmj wrote:
| They are investing $250. The author realizes that this is not
| a great trade. It's a proof of concept.
| SilasX wrote:
| Did we ... need proof of this concept? Here's a thread just
| on _this_ forum, from over a year ago, explaining exactly
| how to short Tether via the trade the author is "proving":
|
| https://news.ycombinator.com/item?id=28796356
| iamben wrote:
| My take was this is less about proving a concept and more
| a nerdy/amusing/I don't mind losing money way of saying
| "I strongly believe Tether is a house if cards that will
| blow over at some point".
|
| Hence the last line - "for the eventual pleasure of
| saying "I told you so"."
| [deleted]
| danuker wrote:
| > the traditional 7% per year
|
| Which is actually 10% if you include dividends. But it's about
| 6.56% if you adjust for inflation.
|
| https://totalrealreturns.com/
| nlittlepoole wrote:
| I partake in this trade. There are other DeFi markets than Aave
| with better rates (6% to 9% range) for borrowing Tether. I also
| don't only use one market or one chain to hedge a bit smart
| contract risk. I also didn't sell Tether and just hold cash.
| Maxing out my I Bonds allocation and then buying treasuries has
| offset the interest on Tether such that I've been slightly net
| positive for the last 18 months on my position. This is all
| gambling money, no money I actually need day to day is tied up
| in this and my retirement/savings are invested an a traditional
| portfolio of stocks/bonds/real estate.
| aeternum wrote:
| Why do you believe that Tether is investing in riskier assets
| than treasuries and equivalents? With so much capital, and
| all the scrutiny they've had for many years and throughout
| many cycles it seems incredibly foolish to do anything else.
|
| Tether effectively has a risk-free golden goose, it seems
| quite foolish to slaughter it in an attempt to gain slightly
| more alpha.
| hiq wrote:
| 1. doesn't this describe FTX just as well?
|
| 2. if they're not doing anything shady, how come they can't
| be more transparent than they are?
| chollida1 wrote:
| > Why do you believe that Tether is investing in riskier
| assets than treasuries and equivalents?
|
| That's easy. I can assume US treasuries will be here in 3
| month, or a year or 10 years, and almost everyone will
| agree with me.
|
| Almost no one would agree with close to 100% certainty that
| Tether will be here in 10 years or a year or even 3 months.
| SilasX wrote:
| Even Aave itself has better rates -- the figure the author is
| quoting is from the the platform's option to lock in a fixed
| rate for your loan. Currently you can lock in 12.24% [1], but
| you can also borrow at the variable rate, starting at 3.15%.
|
| Now, that _does_ subject you to uncontrollable variation, but
| if you look at the chart, it 's historically stayed at a very
| low level. Even the occasional spike you see is only for a
| day or two and has little impact on the annual average. [2]
|
| Furthermore, the whole time, you're getting credited for
| interest accrued on your collateral. (1.18% on the USDC here
| -- so, all in all about a 2% annual carrying cost, not a bit
| issue if you think the crypto market are on borrowed time!)
|
| "But what about the case where USDT borrowing surges and you
| have a _persistent_ high rate? "
|
| If that happens at all, it's probably because everyone else
| is dumping Tether, meaning its price is probably falling, and
| it's a great time to close the short anyway!
|
| [1] https://app.aave.com/reserve-
| overview/?underlyingAsset=0xdac...
|
| [2] People often miss that "omg high interest rate" for a few
| days translates into a very little expense in absolute terms.
| It was especially bad when banks were complaining about
| having to do one-off overnight loans on a very temporary
| basis for 4% rather than 2%, supposedly meriting Fed
| intervention!
| robocat wrote:
| > People often miss that "omg high interest rate" for a few
| days translates into a very little expense in absolute
| terms
|
| That is assuming crypto rates are like USD bank rates.
|
| Do you know any structural reason the rates can't spike to
| a Megapercent (annualised) rate or higher? If you are being
| charged interest, and the rate spikes, you could lose your
| collateral quite quickly (and it seems likely trading would
| be stopped so you might not even be able to close out).
| mouse_ wrote:
| Money printers bad. Including the Federal Reserve (since its
| inception 109 years ago, the US Dollar has lost 96% of its
| value.)
|
| There is an argument that deflationary currencies are bad because
| people will not want to spend them as they accrue value, but that
| value has to go somewhere; either stays in your pocket with
| deflationary currency or goes to some billionaire's fourth
| yacht's heated seats with inflationary.
| wpietri wrote:
| The Federal Reserve has done a pretty good job on inflation in
| recent decades:
| https://www.macrotrends.net/countries/USA/united-states/infl...
|
| The 1970s were bad, but we had a 40-year period of low, stable
| inflation, which is the goal. Now's not great, but it's not the
| Federal Reserve's fault; between a global plague, supply chain
| disruption, and a land war in Europe, inflation is up across
| the globe: https://tradingeconomics.com/country-list/inflation-
| rate
|
| Compare that to the economic chaos that was much more common
| before the rise of strong central banks and I'd say "Federal
| Reserve baaaaad" is somewhat lacking in nuance.
| bottlepalm wrote:
| Global plague nope, supply chain disruption nope, a land war
| in Europe nope.
|
| Printing 13 trillion dollars for corona stimulus, yep.
|
| Though I guess that's more the fault of the legislature than
| anyone else.
| WinstonSmith84 wrote:
| Yeah ... But I think he must have been sarcastic with "The
| Federal Reserve has done a pretty good job on inflation".
|
| The FED can't be totally blamed, respective governments
| share a big part of the incompetency
| mouse_ wrote:
| +1
| mouse_ wrote:
| In those times of economic chaos, a working class individual
| could afford a house and food for his family.
| ansible wrote:
| > _In those times of economic chaos, a working class
| individual could afford a house and food for his family._
|
| Should that really be a surprise when we see the growing
| disparity in income between the average worker and the
| CEOs? The rich have been keeping a greater and greater
| percentage of corporate profits for themselves. And it now
| isn't being siphoned off by the government because the rich
| have also lobbied to have the top-income tax rates lowered
| and lowered.
| wpietri wrote:
| They're not wizards. Their job is to manage monetary
| policy, and I think they do a decent job of it.
| ansible wrote:
| > _Money printers bad. Including the Federal Reserve (since its
| inception 109 years ago, the US Dollar has lost 96% of its
| value.)_
|
| You don't seem to understand how fiat money is supposed to
| work, and how a stable economy is supposed to function.
|
| Deflation is bad (where the value of a dollar increases
| relative to the average cost of products). Your economy can
| enter a deflationary spiral which is super bad and disruptive.
|
| So ideally you would have a stable value relative to products
| and services. But how do you deal with progress and
| productivity increases? A farmer 100 years ago was plowing
| fields with a horse, and now can handle much larger farms with
| a tractor. We're producing a lot more of other resources and
| finished goods as well, and these are purchased by a much
| larger population. Well, you increase the money supply to match
| the economic activity.
|
| Keeping inflation to exactly 0% is very difficult, and erring
| on the side of inflation isn't so bad, so that's what we try to
| do. The point isn't to have each dollar stored in a bank to
| automatically (magically) increase in relative value (to
| products and services) without any effort. If you want more
| money, you need to _make_ more money.
| mouse_ wrote:
| In a deflationary spiral, both unemployment and the cost of
| goods go down. It is considered a time of prosperity for the
| layman. Any worldview in which this is a bad thing can only
| be considered an evil one.
|
| Sure, inflation is cool because it shrinks our debt to
| nothing, but then what is our economy and social structure
| based on? Only lies. Even children can see now how this
| system is collapsing under the weight of its own absurdity
| and demoralization. I've had it to here with these banker-
| centric rationalizations of why it's a good thing that the
| average employee gets screwed harder and harder each year.
| kemotep wrote:
| Can you please provide evidence to your claim that
| deflation leads to lower prices and unemployment? That is a
| claim that contradicts most modern understandings of
| economics.
|
| The last major deflationary event in the United States was
| the Great Recession and personally that seems a little out
| of touch to be calling that a time of prosperity for the
| layman.
| matkoniecz wrote:
| > since its inception 109 years ago, the US Dollar has lost 96%
| of its value
|
| I bet that 109 years after Bitcoin/ETH/FTX/Dogecoin/etc will be
| created they will fare far worse.
| ansible wrote:
| > _... Dogecoin ..._
|
| I remember when this blockchain was created. People were
| transferring Doge to each other _for fun_. That was the whole
| point, it was just goofing around and making jokes. And now
| you can buy it at ATMs in gas stations. What a world we live
| in.
| mouse_ wrote:
| Sure. Is that the standard we want to be comparing to,
| though?
| vgatherps wrote:
| An potential failure case for defi is that some contract:
|
| * Is looking at USDT pairs as well as USD pairs for a price
| oracle and doesn't handle USDT pairs going to infinity well (i.e.
| BTC/USDT skyrockets) when tether goes to zero
|
| * Effectively hardcodes the value of Tether to $1 (can happen by
| accidentally treating a X/USDT pair as an X/USD pair)
|
| I suspect that the major lending protocols (AAVE, Compound) have
| enough attention and effort to not make such a basic mistake but
| there's a whole wide world of less competent protocols out there.
|
| This can happen to centralised venues as well of course but as
| far as OP is concerned those are too risky for the tether trade
| (an assessment I agree with).
| tornato7 wrote:
| This indeed happened to a few protocols that had the value of
| UST hard-coded at $1. The big players mostly use Chainlink
| though, which uses a diversity of price sources and doesn't
| make that type of assumption.
| m00dy wrote:
| > If USDT collapses to a price of, say, $0.01 USD / USDT, you can
| buy up 100M USDT for $1M USD, and hand back that Tether to
| Genesis to satisfy your loan.
|
| Why would Genesis be still alive after Tether's collapse ?
| HomeDeLaPot wrote:
| The article goes on to raise that exact point. Did you stop
| reading halfway through?
| jtsiskin wrote:
| ...keep reading :)
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