I don't really get it (as always if tether is involved). If someone is printing tether to buy bitcoin, then who is selling bitcoin for tether and keeps the tether?
I mean, if I had substantial bitcoin, I'd not sell it for tether. Maybe I'd use tether as some intermediate currency, but in the end I'd either buy stocks or real estate or yachts. Or I would keep the BTC. But I would never sell BTC and keep tether. Who does that and why?
My understanding is that tether is printed (by Tether the company) and used to buy btc at just a couple exchanges (one is bitfinex, I forget the others) who are in on it.
This initial purchase drives btc-usdt up, arbitrage bots then buy btc-usd so that it matches btc-usdt. The media and people notice the price increase and jump into btc-usd because it's going up, narratives are created to justify why the price went up (paypal, fidelity, rich investor), btc-usd further increases, and now Tether (the company) sells its btc for dollars, so that they make a profit, and also to cover whomever else wants to redeem tether for usd, thus maintaining the illusion that tether is fully backed by dollars. Tether then decides to start the cycle again after a certain amount of time.
So, if the above is true then yes this is a scam and there's gonna be a lot of bagholders if/when tether is kaput (they are under investigation by NY AG).
Note, that since March 2020 Tether has printed $13 billion in tether. Is this really a result of organic growth/demand? (https://imgur.com/i78BTXg)
If arbitrage bots try to arbitrage between BTC-USDT and BTC-USD markets, and the USDT markets are the ones pushing the price up, then it's the arbitrage bots that would end up holding huge amounts of USDT. So what are they doing with it? They should mostly be trying to maintain equal holdings to handle arbitrage, so they would have to sell it on USDT-USD markets (or redeem it from Tether, if that's actually possible).
If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.
Thanks, that is very enlightening. So Tether are all about maintaining the apparition of a 1:1 backing of USD to USDT. It's the lynchpin of the whole scam. Otherwise the step above you mention around the arbitrage bots buying btc-usd no longer occurs, and the game is ruined for them.
Here's a study that performs analysis showing that tether prints the coins and someone at bitfinex uses them to buy BTC at optimal points to support it's price.
I have the same question. The only answer I can think of, is people that want to get out of Bitcoin but aren’t able to sell for real USD because of AML / tax purposes.
Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally.
It still doesn’t really explain who is holding almost $20 billion of Tether though.
I've been doing some small-scale arbitrage trading in Uniswap and other Defi exchanges. As part of that I hold a fair bit of Tether, USDC and other stable coins.
The reason being is that I want to keep my capital pegged to the dollar, but need something that's native to the Ethereum blockchain. If there's a trading opportunity, I need the ability to swap Tether for [X] token in a single blockchain transaction. There's no time to route actual dollar deposits from a real bank.
Considering that there's something like $13 billion locked in all the various defi protocols, that's a lot of potential demand for stable coins.
One large use for Tether is transferring value either for abitrage or to buy assets on another exchange not available on your current exchange. Sending real USD via the banking system could take weeks whereas sending Tether will take minutes. Also if Tether is trading below $1, Tether (the company) could buy them back and burn them for profit, assuming of course that each token is backed by one real USD.
> Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally.
I don't get this part. What can you buy using tether, even if it is worth only $0.70? (Well, obviously you can buy bitcoin but this doesnt make any sense to buy the bitcoin back that you just sold. What else can you buy?)
Tether's biggest holders presumably are people with cash balances at exchanges without us dollar banking. At such exchanges the account will show USD not tether.
>> then who is selling bitcoin for tether and keeps the tether?
People who believe (in varying degrees) that 1 USDT == 1 USD.
In countries with strict capital controls (China, Russia, etc), USD is inaccessible to most people. And the fact that USDT has been trading at 1 USD for the most part is the proof that most of its users either believe 1 USDT == 1 USD, or they simply don't care.
In these countries, you have large amount of OTC desks due to lack of access to exchanges. Those OTC desks have to provide liquidity for large amount of trading activities (very large but I wouldn't think it's anywhere close to the 13b USDT that was printed in the last 6 months), and therefore they have to hold sufficient amount of USDT for that purpose.
Once you have a group of people (miners, traders, etc.), USDT could act as as a token valued at 1 USD among those people, and at any given point, there would be a significant amount of people holding large amount of Tethers. After all, the Tether "FUD" has been ongoing for years and nothing bad seems to have happened, right?
> People who believe (in varying degrees) that 1 USDT == 1 USD.
I totally get that part. But then what? With USD I can buy, e.g, a house or a yacht. With USDT I can buy what? I guess only other crypto currencies. So what is the endgame here?
Tether is literally a short on bitcoin that is quick and cheap to transact in, it is keeping the price down rather than up. There's only 21 million bitcoins, but there's infinite tether. People really need to take a step back from mindlessly repeating things and think about what that actually means.
Go do a search of "tether site:news.ycombinator.com" to see how laughably wrong HN has been for the last 4 years on this subject. The adherents simply refuse to give up and many still identify with this "conspiracy"
I'm not sure we have enough eggs for the number of faces.
What conspiracy theories dude? We said it wasn't backed by dollars, lo and behold, $850 million or 30% of the entire backing amount at the time had been siezed by authorities for being the proceeds of money laundering. It was all held by CryptoCapital, give them a quick Google lol.
We said it wasn't backed by dollars, they admitted it wasn't backed by dollars and instead crypto and swaps, and other ious. We said you couldn't redeem them, you can't. We said they didn't have a banking relationship, they don't and didn't. Crypto advocates keep pretending none of this is real because number go up.
The fact it's still around doesn't invalidate a single thing anyone's said and if anything time showed this all to be quite accurate.
> Print tether, buy bitcoin, sell bitcoin for real money.
But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether?
> Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.
But day traders close their positions at the end of the day (or at least regularly) so they will not hold tether.
This doesn't create any net demand for Bitcoin, though, right? It's in one end and out the other.
Or is the theory that Tether is actually backed by Bitcoin, in a sort of circular way that is sustainable as long as the Bitcoin price goes up but would unravel disastrously if the price were to come down?
More likely (most definitely), they are using tether as collateral for their futures positions. It's not capital efficient to trade spot in most cases.
It also repeats the standard "mining death spiral" fallacy. In practice, of course, difficulty adjusts downwards if price drop makes some miners stop, making it easier for the remainder.
> And no tethers, to anyone’s knowledge, have ever been redeemed—except for when Tether burned 500 million tethers in October 2018, following the seizure of $850 million from its payment processor Crypto Capital.
They can be redeemed on https://tether.to but the minimum is 100K$ if I recall correctly.
A point that opponents of Tether repeatedly ignore is how easy a source of profit it is as business idea. The reason I do not believe all the Tether conspiracy theorys is that there there is too much easy money to be made without breaking the law and all that entails.
For example buy back tether yourself whenever the market is spooked that you may not be legit due to internet fud or have your collateral invested in US bonds.
IMHO, one of the issues with BitCoin is the prophecy that bitcoin will explode. It makes people engage in FOMO even worse than other investments because many people 'know' BitCoin will go to the moon and they are anticipating the hockey stick. It also makes people less skeptical of bubbles because it's expected. (disclaimer I own some bitcoin)
All tethers go to exchanges and they put on leverage. 18bln leveraged 10x. All players, like coinbase, Gemini a ok with this scam because it generate big price moves and a lot of money in fees for exchanges with real usd.
Readit News
I mean, if I had substantial bitcoin, I'd not sell it for tether. Maybe I'd use tether as some intermediate currency, but in the end I'd either buy stocks or real estate or yachts. Or I would keep the BTC. But I would never sell BTC and keep tether. Who does that and why?
This initial purchase drives btc-usdt up, arbitrage bots then buy btc-usd so that it matches btc-usdt. The media and people notice the price increase and jump into btc-usd because it's going up, narratives are created to justify why the price went up (paypal, fidelity, rich investor), btc-usd further increases, and now Tether (the company) sells its btc for dollars, so that they make a profit, and also to cover whomever else wants to redeem tether for usd, thus maintaining the illusion that tether is fully backed by dollars. Tether then decides to start the cycle again after a certain amount of time.
So, if the above is true then yes this is a scam and there's gonna be a lot of bagholders if/when tether is kaput (they are under investigation by NY AG).
Note, that since March 2020 Tether has printed $13 billion in tether. Is this really a result of organic growth/demand? (https://imgur.com/i78BTXg)
Most of the tether is in storage at the exchanges: https://i.imgur.com/eIKDzJl.png
So it looks to me that they know it's worthless.
It's not implausible to think that there's $13B of inflows to BTC this year.
This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges".
If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.
https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903
Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally.
It still doesn’t really explain who is holding almost $20 billion of Tether though.
The reason being is that I want to keep my capital pegged to the dollar, but need something that's native to the Ethereum blockchain. If there's a trading opportunity, I need the ability to swap Tether for [X] token in a single blockchain transaction. There's no time to route actual dollar deposits from a real bank.
Considering that there's something like $13 billion locked in all the various defi protocols, that's a lot of potential demand for stable coins.
I don't get this part. What can you buy using tether, even if it is worth only $0.70? (Well, obviously you can buy bitcoin but this doesnt make any sense to buy the bitcoin back that you just sold. What else can you buy?)
People who believe (in varying degrees) that 1 USDT == 1 USD.
In countries with strict capital controls (China, Russia, etc), USD is inaccessible to most people. And the fact that USDT has been trading at 1 USD for the most part is the proof that most of its users either believe 1 USDT == 1 USD, or they simply don't care.
In these countries, you have large amount of OTC desks due to lack of access to exchanges. Those OTC desks have to provide liquidity for large amount of trading activities (very large but I wouldn't think it's anywhere close to the 13b USDT that was printed in the last 6 months), and therefore they have to hold sufficient amount of USDT for that purpose.
Once you have a group of people (miners, traders, etc.), USDT could act as as a token valued at 1 USD among those people, and at any given point, there would be a significant amount of people holding large amount of Tethers. After all, the Tether "FUD" has been ongoing for years and nothing bad seems to have happened, right?
I totally get that part. But then what? With USD I can buy, e.g, a house or a yacht. With USDT I can buy what? I guess only other crypto currencies. So what is the endgame here?
Go do a search of "tether site:news.ycombinator.com" to see how laughably wrong HN has been for the last 4 years on this subject. The adherents simply refuse to give up and many still identify with this "conspiracy"
I'm not sure we have enough eggs for the number of faces.
We said it wasn't backed by dollars, they admitted it wasn't backed by dollars and instead crypto and swaps, and other ious. We said you couldn't redeem them, you can't. We said they didn't have a banking relationship, they don't and didn't. Crypto advocates keep pretending none of this is real because number go up.
The fact it's still around doesn't invalidate a single thing anyone's said and if anything time showed this all to be quite accurate.
Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.
But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether?
> Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.
But day traders close their positions at the end of the day (or at least regularly) so they will not hold tether.
Or is the theory that Tether is actually backed by Bitcoin, in a sort of circular way that is sustainable as long as the Bitcoin price goes up but would unravel disastrously if the price were to come down?
They can be redeemed on https://tether.to but the minimum is 100K$ if I recall correctly.
For example buy back tether yourself whenever the market is spooked that you may not be legit due to internet fud or have your collateral invested in US bonds.
[0]: https://newsroom.paypal-corp.com/2020-10-21-PayPal-Launches-...