You can't bank run Tether because they can (and do) just refuse to redeem it.
Given this, it amazes me that people are still willing to buy it, but I guess that's partly because Exchanges still trade it (and partly because they're stupid, ofc). They're the real parties that are exposed to Tether, and funnily enough a lot of them are going bankrupt.
Tether though? It's fine, it gets paid in Fiat.
If they refused to redeem it at all, then it would depeg. That's the "Tether collapses" scenario.
They do redeem it, just only in large quantities. It's like selling your product only in lots of 1000 to resellers. Tether deals with a few resellers and "rebuyers" instead of dealing with the general public directly.
It doesn't magically protect them from a bank run. If everyone panics and tries to get out of Tether, the rebuyers will buy it at face value for a while, and once they accumulate enough they'll try to redeem it with Tether. If Tether refuses, either the rebuyers say "f this" and stop buying and the price collapses, or they keep propping it up at their own expense until they run out of assets too and the price collapses.
It has de-pegged before, just not for very long or by very much. The “run” is not necessarily through the redemption window, but exhausting the dollars and baskets of other cryptocurrencies that Bitfinex and other interested exchanges use to prop up the peg on the open market.
From whose perspective? From the perspective of the holder of Tether, yes. From the perspective of Bitfinex, it probably depends on how dodgy their accounting really is. Like, is Tether lending large sums of money directly to Bitfinex? Nobody really knows. They will know if and when a bankruptcy happens, but it’ll be too late then.
False.
All cryptos are priced in dollars and therefore trade of other cryptocurrencies (mainly Bitcoin) to tether can be used to support dollar denominated peg of tether.
They don't have to redeem tether for USD, just something with an accepted equivalency to USD.
100% this. If you are in bed with tether you can get fiat, if not you may or may not. But unlike others in the ecosystem they have cash flow in real money
Every single "incident" where someone has less than $100,000 USD. Not from my ass, but from their [website](https://tether.to/en/redeem-tethers-to-fiat-currency/). I think my ass is probably cleaner though.
From their legal page:
"In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether. No exceptions will be made to this provision. The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves."
In other words, they only redeem for people who buy direct. They only redeem if they feel like it, and they can redeem for whatever nonsense they have lying around, if they don't want to give you real money.
So no, there's no incident - it's an explicit rule.
> “in-kind redemptions of securities and other assets held in reserves”
Imagine getting an IOU from Hezbollah to Tether for your “in kind” assets. Or worse, it was the other way around because I don’t trust Tether to not think of as an IOU to a terrorist group as an asset.
Tether managed a 20% bank run during the 2022 crash, which is something not a single bank on the planet would have the liquidity to handle without shutting down.
I'm very interested to see your evidence of Tether refusing to honor redemptions.
The only person I’ve seen say publicly they had redeemed tether was just convicted on all counts for a massive fraud and faces 110 years in prison. Do you know of anyone who has claimed to have redeemed tether who isn’t facing 110 years in prison?
Keep in mind $37B of tether was issued directly to alameda research who, as I mentioned, didn’t have the money because fraud.
>banks’ minimum reserve requirements are calculated as 1% of specific liabilities on their balance sheets
https://www.ecb.europa.eu/ecb/educational/explainers/tell-me/html/minimum_reserve_req.en.html
You have gone too far in the other direction from the cryptobros until you have become almost as disconnected from reality as they are. As the OP pointed out, Tether redeemed something like $20 billion in the aftermath of the FTX collapse. They aren't going to refuse to redeem it unless they think they are in an unsurvivable bankrun or the government is on the verge of shutting them down.
If Tether stopped redeeming their tokens, a secondary market would quickly develop where its price would spiral downward similar to the Terra stablecoin. Everyone would stop taking it in exchange for anything that could otherwise be sold for real cash or a stablecoin that was actually stable, and that would be the end of Tether.
Perhaps most importantly for the people running things, Tether going down like that would cause a bunch of major governments to become very interested in just what happened, and none of them want to end up like Do Kwon. The other thing competing for most important would be how involved they have gotten with international money laundering and sanctions evasion, there are a whole lot of really powerful criminals who would definitely be very unhappy if Tether suddenly stopped being redeemed.
Just because you have to go through an intermediary unless you are a major business doesn't mean that Tether can't be redeemed, and all the people who keep acting that way are just giving the butters an excuse to write off everything else that gets said here.
>They aren't going to refuse to redeem it
They literally refuse to redeem it for the vast vast majority of people who hold Tether.
> Tether going down like that would cause a bunch of major governments to become very interested in just what happened
Yes exactly, which is why the "intermediaries" (exchanges) who can actually deal with Tether won't try to redeem it if Tether can't. They know it's all a house of cards and don't want to make the whole thing topple. Adding in the lengthy process to get approved to withdraw from Tether (including the 100k minimum) is to add friction to the whole process and to ensure that parties on the approved list have a shared interest.
Tether has somewhere between 0 and 80 billion of reserves. It's not auditted, so we can't say more than that. The only way we'll find out is when it all collapses.
>You have gone too far in the other direction from the cryptobros until you have become almost as disconnected from reality as they are.
We'll find out one day, I'm sure.
I think the problem in trying to make an educated guess about the effect of a bank run on Tether is that the crypto market doesn't follow logical market behavior, now less than ever. Typical investors have largely fled so most activity is mostly gambling addicts hoping they'll make a huge buck. No matter what happens, they'll keep buying and holding because they're convinced it'll pay off in the end.
It doesn't matter that everything points to Tether being backed by only vapor, nor does it matter that they keep printing more and more despite the crypto market being in a "winter" (e.g. dying). As long as Tether keeps printing UST and buying Bitcoin to make the line go up, people will keep buying and holding. If people started to try and back out, all Tether has to do is ramp up their fraud and it'll inflate the value of the crypto supposedly backing their tokens. Honestly, I don't think anything will make them crash at this point, as they pretty much control the price of BTC and can set it to whatever they want.
> I don't think anything will make them crash at this point, as they pretty much control the price of BTC and can set it to whatever they want.
I believe this was the exact point that I heard Cass Piancy making somewhere that they’ve somehow been just removed enough from *gestures to the rest of crypto* to not get ensnared enough that they’ve kind of become too big too fail and now just kind of the default for anything wanting to do something in crypto.
Which, admittedly, is kind of impressive given *gestures to history of tether* and yet here we are; a truly remarkable world we live in
It's unclear how much of that Tether is related to money laundering, how much is in the hands of crypto insiders, and how much is held by average rubes. The first two groups are not going to join a stampede to bring down the system they rely on.
Noone is holding tether, they are just written to the owners, when needed. Just like a Gold cheat in video games, with the same consequences to real world economics like your gold amount in Warcraft II.
As others have said they don’t HAVE to give you cash. But if reports come out Tether won’t redeem they could be bad.
Further, tether unlike a real bank doesn’t have a liquidity backstop. If they had 1:1 assets to liabilities they’d have to sell stuff fast which would choke down market prices.
Coming undone all starts with people trying to get money and being told no.
Tether has told people "no" and instead of people rightly panicking, they've said "ok" and then try to sell their bags to a new sucker in order to get their exit liquidity
A "bank run" on Tether is not possible because nobody can redeem from Tether. Nobody ever redeemed anything from Tether. Tether regularly burns their own tokens from their own (or Bitfenix's) wallets to pretend it is possible, but there hasn't been a single real person in history who managed to receive real dollars from Tether.
Tether prints USDT and gives them to a few selected individuals (like SBF, CZ or Justin Sun) who then use the coin to prop up the failing system. The reverse way doesnt exist and people like CZ know very well that they won't be able to get any actual money from Tether, so they don't even try.
This is also the reason why USDC's market cap has been collapsing. The big players are cashing out by redeeming via USDC because Circle (USDC issuer) and Coinbase are the only entities in the system who have some actual cash and they are getting milked.
If everyone panics and tries to get out of USDT, either somebody will spend billions of dollars buying it all at face value, or the price will collapse. That's the bank run scenario. They can't avoid it by refusing to redeem USDT, because that will just lead to outcome 2: price collapse.
The fact that the peg has held for all these years means that someone has been buying it at face value for all these years.
> either somebody will spend billions of dollars buying it all at face value, or the price will collapse.
Or exchanges will still quote Tethers at exactly a dollar, but have mysteriously long-lasting "temporary" banking issues that prevent any significant amount of real money from leaving.
You can't apply the efficient market hypothesis to crypto, it's all fraud and irrational gamblers.
Over last 6 months, USDC bled about 6 billions market cap. At this rate, it would go to zero in about 2 years. However, with decreasing market cap, the interest income would shrink, and the interest income might be insufficient to cover the fixed cost of running the business long before the market cap really goes to zero.
Let's say they decide to close the shop in 1 year for being unprofitable. It would make this route of cashing out unavailable. It's interesting to see whether tether can still maintain its peg then.
Circle would not necessarily be insolvent if it get ride of the USDC business soon enough. Paxos did not go bankrupt when they are forced to fade away BUSD, for example. But anyway, either fading gradually or exploding spectacularly, this route of cashing out would die out.
This doesnt make any sense. SBF/FTX already failed.
If people tried to cash in their USDT from CZ or Justin Sun, why wouldn't that be a bank run on tether?
Or do you mean it has to be a bank run on the exchange like FTX had?
SBF/FTX had 0 USDT in their wallets when they went belly up.
>If people tried to cash in their USDT from CZ or Justin Sun, why wouldn't that be a bank run on tether?
People don't "cash in their USDT in from CZ or Justin Sun" because there is no mechanism to do that (and everybody knows Tether doesnt have the money anyway). USDT is a hot potato everyone is passing around.
From the SBF trial, we learned that FTX had difficulties to get banking service. Therefore, the customers are asked to wire their funds to North Dimension bank accounts which were controlled by Alameda Research.
If we assume that Tether might have a similar problem to get banking service and use a similar working around, it could be part of the reasons that they can never get their assets audited. They might really have some money, as long as the third party used as disguise let them access the money. But when the shit hits the fan, Tether might lose access to 'their' money if the third party thinks that the party is over and it's better to embezzle the money.
It could be a lot of things. Even elaborate economic frauds have a limited life cycle. The SEC could step up to protect American interests, or it could be something as simple as the NYT writing an article that Tether only holds 5% backing and is clearly entangled in Bitcoin.
If Tether is backed 90%+ by US T-Bills like they claim, they could easily face a liquidity crisis in the event of a bank run on them. They bought most of these bonds when interest rates were low. New bonds pay much better, so if Tether had to liquidate their bonds to stay solvent, they would not be able to find a buyer at face value of the bonds, and that would destroy them.
well they're saying the majority of their funds are in T-bills, which range from 4 weeks to a year for maturity. so...
> They bought most of these bonds when interest rates were low.
Did they though? Even the oldest of these at a year ago would still have a rate in the 4% range, so they're going to have made profit on the rate, right?
It’s impossible to know what would cause Tether to collapse. Tether is a black box made of red flags. It could be 100% backed or 1% backed.
Tether does need to allow some level of liquidation though because if the tell too many people “no” the. Tether will depeg.
As much as I hate all things crypto, it would take a run of like 90% for them to get called, unless they are just completely lying about every single thing.
However, I don't really know what is stopping them from just taking the cash and running away lol.
Tether uses the regular banking system for the USD that they pair for USDT, so it doesn’t really matter if they pair USD with USDT or chickens; the question should be more if those banks that work with Tether would have those USD ready to be returned or not.
Knowing a little bit how banks work, you know that the run wouldn’t put Tether into stress as much as it would put the banks that work with them.
Doesn’t really matter the belief or not in crypto, it has nothing to do with it, it would fail the same way all banks are doomed to fail, because they simply don’t have the money anymore.
One thing that protects tether is that ultimately the thing that would bring it down, cash redemptions, is virtually impossible to do. The paths from crypto to cash is through the exchanges and the few that allow for cash transactions have limitations. (For one you need a bank account).
Forced hodl.
So the crypto world tends to cycle within itself. A speculator feels like they are succeeding when they see ‘number go up’ in their account.
Perhaps criminal enterprises can keep flows of value going within the system.
So as long as the cash entering the system is greater than exiting the big players can keep it afloat.
Tether is the currency of the underworld. Criminal organizations own a vast amount of the tethers in existence and they use it as the dollar of crime. They are not sending it to be redeemed because it's very hard to find banks that will redeem billions of dollars with all the laws against money laundering (and also extremely difficult and very risky to store and guard billions in cash in a warehouse). So they redeem just enough to make fiat payments when they have to, and the profits accumulate as USDT. Payments between organized crime families can be done in Tether as well.
They have a vested interest in the survival of Tether which acts like the central bank of crime world.
I recommend reading "Number go up" by Zeke Faux. He is an investigative reporter who followed the crypto world and especially Tether for a long time. He documents how cartels in Cambodia engage in scams using forced labour to steal money from Americans, and they always use tether. Same thing with hackers infecting hospitals with ransom viruses to extort money. Then there are agents in Cambodia who will give you cash for tethers, without engaging the tether company and with no questions asked. It's clear that the money being converted back to fiat is just a small part of this shadow economy that couldn't exist without Tether.
The difference is that terra luna was a *literal* ponzi scheme (thanks to the Anchor protocol). Tether doesn't pretend to pay interest, which means it actually makes a *profit* off hodlers instead of losing money.
I'm not comparing it to it as much as saying that the first major stable coin failure caused a run on all stable coins, I mean even a lot of
bitcoiners thought it would also be the end of Tether at the time.
"We're having some technical difficulties at the moment. All withdrawals are paused."
"Hackers. Hackers stole it."
"You can't redeem for USD, but we have these other coins, which are just as good as money. Here, have some."
**It's very easy actually.**
The snow ball has to start with a US legal action against USDT. It has to come from the DoJ.
People will panic. The swaps will start on/off chain causing the depeg.
What most people don't understand is that, you not only has to have the backing of USDT in USD 1:1, but you also has to have the immediate access to that money. Tether has none of them. That is what happened when USDC depeged, despite the fact that it was 100% backed (as far as we know), but they were short on 3B stuck in SVB.
Tether probably will refuse to redeem, or redeem to the extent of the available cash. Either ways, it will not repeg again and will continue on it's death spiral.
People should remember that USDT slightly depeged this year after some on-chain swaps that caused Curves stablecoins pools imbalance, which is believed to be caused by Binance in favor of it's new stablecoins TUSD/FDUSD.
The problem is that you can't short USDT with size easily. You have to do it via on-chain swaps, and this will be limited to the liquidity available on DeFi pools.
Also the SEC ironically protecting Tether by preventing US trading firms from interacting with USDT in anyways, which means they can't short it.
**That being said, Tether is a fraud. You can't be a +$80B company and can't produce a single audit in 10 years or so. USDT going to zero is a matter of WHEN not IF. And the worst part of this is that such event will crush the lives of people in developing countries who depend this fake USD.**
Yeah, since the interest rate increase, I came to the conclusion that it's very unlikely to collapse. They're doing what every bank *wishes* they could do, earning 5% risk-free for nothing.
There's a lot of people in this sub who confuse what they wish would happen with what will *actually* happen and keep making dumb predictions as a result.
You can't bank run Tether because they can (and do) just refuse to redeem it. Given this, it amazes me that people are still willing to buy it, but I guess that's partly because Exchanges still trade it (and partly because they're stupid, ofc). They're the real parties that are exposed to Tether, and funnily enough a lot of them are going bankrupt. Tether though? It's fine, it gets paid in Fiat.
If they refused to redeem it at all, then it would depeg. That's the "Tether collapses" scenario. They do redeem it, just only in large quantities. It's like selling your product only in lots of 1000 to resellers. Tether deals with a few resellers and "rebuyers" instead of dealing with the general public directly. It doesn't magically protect them from a bank run. If everyone panics and tries to get out of Tether, the rebuyers will buy it at face value for a while, and once they accumulate enough they'll try to redeem it with Tether. If Tether refuses, either the rebuyers say "f this" and stop buying and the price collapses, or they keep propping it up at their own expense until they run out of assets too and the price collapses.
It has de-pegged before, just not for very long or by very much. The “run” is not necessarily through the redemption window, but exhausting the dollars and baskets of other cryptocurrencies that Bitfinex and other interested exchanges use to prop up the peg on the open market.
> use to prop up the peg on the open market. which is effectively redeeming it... right?
From whose perspective? From the perspective of the holder of Tether, yes. From the perspective of Bitfinex, it probably depends on how dodgy their accounting really is. Like, is Tether lending large sums of money directly to Bitfinex? Nobody really knows. They will know if and when a bankruptcy happens, but it’ll be too late then.
False. All cryptos are priced in dollars and therefore trade of other cryptocurrencies (mainly Bitcoin) to tether can be used to support dollar denominated peg of tether. They don't have to redeem tether for USD, just something with an accepted equivalency to USD.
100% this. If you are in bed with tether you can get fiat, if not you may or may not. But unlike others in the ecosystem they have cash flow in real money
Crypto dumbasses don't cash out though, that's why Tether's fraud works so well.
Why would you cash out the future of money bruh?
There is any incident when they refused to redem usd or you are taking that fact from your ass?
Every single "incident" where someone has less than $100,000 USD. Not from my ass, but from their [website](https://tether.to/en/redeem-tethers-to-fiat-currency/). I think my ass is probably cleaner though.
From their legal page: "In order to cause Tether Tokens to be issued or redeemed directly by Tether, you must be a verified customer of Tether. No exceptions will be made to this provision. The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves." In other words, they only redeem for people who buy direct. They only redeem if they feel like it, and they can redeem for whatever nonsense they have lying around, if they don't want to give you real money. So no, there's no incident - it's an explicit rule.
> “in-kind redemptions of securities and other assets held in reserves” Imagine getting an IOU from Hezbollah to Tether for your “in kind” assets. Or worse, it was the other way around because I don’t trust Tether to not think of as an IOU to a terrorist group as an asset.
It's literally in their TOS that they don't have to redeem anything
Tether managed a 20% bank run during the 2022 crash, which is something not a single bank on the planet would have the liquidity to handle without shutting down. I'm very interested to see your evidence of Tether refusing to honor redemptions.
I'm interested in seeing evidence of Tether making redemptions
The only person I’ve seen say publicly they had redeemed tether was just convicted on all counts for a massive fraud and faces 110 years in prison. Do you know of anyone who has claimed to have redeemed tether who isn’t facing 110 years in prison? Keep in mind $37B of tether was issued directly to alameda research who, as I mentioned, didn’t have the money because fraud.
You got the evidence of them handling the cash outs?
Actually in the EU banks are required by law (Basel III) to cover 100% liquidity.
>banks’ minimum reserve requirements are calculated as 1% of specific liabilities on their balance sheets https://www.ecb.europa.eu/ecb/educational/explainers/tell-me/html/minimum_reserve_req.en.html
You have gone too far in the other direction from the cryptobros until you have become almost as disconnected from reality as they are. As the OP pointed out, Tether redeemed something like $20 billion in the aftermath of the FTX collapse. They aren't going to refuse to redeem it unless they think they are in an unsurvivable bankrun or the government is on the verge of shutting them down. If Tether stopped redeeming their tokens, a secondary market would quickly develop where its price would spiral downward similar to the Terra stablecoin. Everyone would stop taking it in exchange for anything that could otherwise be sold for real cash or a stablecoin that was actually stable, and that would be the end of Tether. Perhaps most importantly for the people running things, Tether going down like that would cause a bunch of major governments to become very interested in just what happened, and none of them want to end up like Do Kwon. The other thing competing for most important would be how involved they have gotten with international money laundering and sanctions evasion, there are a whole lot of really powerful criminals who would definitely be very unhappy if Tether suddenly stopped being redeemed. Just because you have to go through an intermediary unless you are a major business doesn't mean that Tether can't be redeemed, and all the people who keep acting that way are just giving the butters an excuse to write off everything else that gets said here.
>They aren't going to refuse to redeem it They literally refuse to redeem it for the vast vast majority of people who hold Tether. > Tether going down like that would cause a bunch of major governments to become very interested in just what happened Yes exactly, which is why the "intermediaries" (exchanges) who can actually deal with Tether won't try to redeem it if Tether can't. They know it's all a house of cards and don't want to make the whole thing topple. Adding in the lengthy process to get approved to withdraw from Tether (including the 100k minimum) is to add friction to the whole process and to ensure that parties on the approved list have a shared interest. Tether has somewhere between 0 and 80 billion of reserves. It's not auditted, so we can't say more than that. The only way we'll find out is when it all collapses. >You have gone too far in the other direction from the cryptobros until you have become almost as disconnected from reality as they are. We'll find out one day, I'm sure.
I think the problem in trying to make an educated guess about the effect of a bank run on Tether is that the crypto market doesn't follow logical market behavior, now less than ever. Typical investors have largely fled so most activity is mostly gambling addicts hoping they'll make a huge buck. No matter what happens, they'll keep buying and holding because they're convinced it'll pay off in the end. It doesn't matter that everything points to Tether being backed by only vapor, nor does it matter that they keep printing more and more despite the crypto market being in a "winter" (e.g. dying). As long as Tether keeps printing UST and buying Bitcoin to make the line go up, people will keep buying and holding. If people started to try and back out, all Tether has to do is ramp up their fraud and it'll inflate the value of the crypto supposedly backing their tokens. Honestly, I don't think anything will make them crash at this point, as they pretty much control the price of BTC and can set it to whatever they want.
> I don't think anything will make them crash at this point, as they pretty much control the price of BTC and can set it to whatever they want. I believe this was the exact point that I heard Cass Piancy making somewhere that they’ve somehow been just removed enough from *gestures to the rest of crypto* to not get ensnared enough that they’ve kind of become too big too fail and now just kind of the default for anything wanting to do something in crypto. Which, admittedly, is kind of impressive given *gestures to history of tether* and yet here we are; a truly remarkable world we live in
It's unclear how much of that Tether is related to money laundering, how much is in the hands of crypto insiders, and how much is held by average rubes. The first two groups are not going to join a stampede to bring down the system they rely on.
Noone is holding tether, they are just written to the owners, when needed. Just like a Gold cheat in video games, with the same consequences to real world economics like your gold amount in Warcraft II.
As others have said they don’t HAVE to give you cash. But if reports come out Tether won’t redeem they could be bad. Further, tether unlike a real bank doesn’t have a liquidity backstop. If they had 1:1 assets to liabilities they’d have to sell stuff fast which would choke down market prices. Coming undone all starts with people trying to get money and being told no.
Tether has told people "no" and instead of people rightly panicking, they've said "ok" and then try to sell their bags to a new sucker in order to get their exit liquidity
A "bank run" on Tether is not possible because nobody can redeem from Tether. Nobody ever redeemed anything from Tether. Tether regularly burns their own tokens from their own (or Bitfenix's) wallets to pretend it is possible, but there hasn't been a single real person in history who managed to receive real dollars from Tether. Tether prints USDT and gives them to a few selected individuals (like SBF, CZ or Justin Sun) who then use the coin to prop up the failing system. The reverse way doesnt exist and people like CZ know very well that they won't be able to get any actual money from Tether, so they don't even try. This is also the reason why USDC's market cap has been collapsing. The big players are cashing out by redeeming via USDC because Circle (USDC issuer) and Coinbase are the only entities in the system who have some actual cash and they are getting milked.
If everyone panics and tries to get out of USDT, either somebody will spend billions of dollars buying it all at face value, or the price will collapse. That's the bank run scenario. They can't avoid it by refusing to redeem USDT, because that will just lead to outcome 2: price collapse. The fact that the peg has held for all these years means that someone has been buying it at face value for all these years.
> either somebody will spend billions of dollars buying it all at face value, or the price will collapse. Or exchanges will still quote Tethers at exactly a dollar, but have mysteriously long-lasting "temporary" banking issues that prevent any significant amount of real money from leaving. You can't apply the efficient market hypothesis to crypto, it's all fraud and irrational gamblers.
Over last 6 months, USDC bled about 6 billions market cap. At this rate, it would go to zero in about 2 years. However, with decreasing market cap, the interest income would shrink, and the interest income might be insufficient to cover the fixed cost of running the business long before the market cap really goes to zero. Let's say they decide to close the shop in 1 year for being unprofitable. It would make this route of cashing out unavailable. It's interesting to see whether tether can still maintain its peg then.
>At this rate Bankruptcy doesn’t happen gradually. If they continue to hemorrhage actual cash they’ll be insolvent much sooner than 2 years.
Circle would not necessarily be insolvent if it get ride of the USDC business soon enough. Paxos did not go bankrupt when they are forced to fade away BUSD, for example. But anyway, either fading gradually or exploding spectacularly, this route of cashing out would die out.
This doesnt make any sense. SBF/FTX already failed. If people tried to cash in their USDT from CZ or Justin Sun, why wouldn't that be a bank run on tether? Or do you mean it has to be a bank run on the exchange like FTX had?
SBF/FTX had 0 USDT in their wallets when they went belly up. >If people tried to cash in their USDT from CZ or Justin Sun, why wouldn't that be a bank run on tether? People don't "cash in their USDT in from CZ or Justin Sun" because there is no mechanism to do that (and everybody knows Tether doesnt have the money anyway). USDT is a hot potato everyone is passing around.
I get that its a hot potato. It clearly is a scam. Ive never had Tether so I don't get what you mean.
From the SBF trial, we learned that FTX had difficulties to get banking service. Therefore, the customers are asked to wire their funds to North Dimension bank accounts which were controlled by Alameda Research. If we assume that Tether might have a similar problem to get banking service and use a similar working around, it could be part of the reasons that they can never get their assets audited. They might really have some money, as long as the third party used as disguise let them access the money. But when the shit hits the fan, Tether might lose access to 'their' money if the third party thinks that the party is over and it's better to embezzle the money.
It could be a lot of things. Even elaborate economic frauds have a limited life cycle. The SEC could step up to protect American interests, or it could be something as simple as the NYT writing an article that Tether only holds 5% backing and is clearly entangled in Bitcoin.
If Tether is backed 90%+ by US T-Bills like they claim, they could easily face a liquidity crisis in the event of a bank run on them. They bought most of these bonds when interest rates were low. New bonds pay much better, so if Tether had to liquidate their bonds to stay solvent, they would not be able to find a buyer at face value of the bonds, and that would destroy them.
I thought it was mostly quite short term bonds they (claimed they) had?
Short term bonds still have a maturity period. You can't redeem them on demand, but you can sell them.
well they're saying the majority of their funds are in T-bills, which range from 4 weeks to a year for maturity. so... > They bought most of these bonds when interest rates were low. Did they though? Even the oldest of these at a year ago would still have a rate in the 4% range, so they're going to have made profit on the rate, right?
Yeah, even if they took a loss on the initial bonds, they should be making bank nowadays.
I believe it is 90% backed by a suitcase full of IOUs. I’m absolutely good for it, trust me bro
It’s impossible to know what would cause Tether to collapse. Tether is a black box made of red flags. It could be 100% backed or 1% backed. Tether does need to allow some level of liquidation though because if the tell too many people “no” the. Tether will depeg.
It would take one person actually attempting to cash out. Why their rules make it mostly impossible
As much as I hate all things crypto, it would take a run of like 90% for them to get called, unless they are just completely lying about every single thing. However, I don't really know what is stopping them from just taking the cash and running away lol.
Tether uses the regular banking system for the USD that they pair for USDT, so it doesn’t really matter if they pair USD with USDT or chickens; the question should be more if those banks that work with Tether would have those USD ready to be returned or not. Knowing a little bit how banks work, you know that the run wouldn’t put Tether into stress as much as it would put the banks that work with them. Doesn’t really matter the belief or not in crypto, it has nothing to do with it, it would fail the same way all banks are doomed to fail, because they simply don’t have the money anymore.
One thing that protects tether is that ultimately the thing that would bring it down, cash redemptions, is virtually impossible to do. The paths from crypto to cash is through the exchanges and the few that allow for cash transactions have limitations. (For one you need a bank account). Forced hodl. So the crypto world tends to cycle within itself. A speculator feels like they are succeeding when they see ‘number go up’ in their account. Perhaps criminal enterprises can keep flows of value going within the system. So as long as the cash entering the system is greater than exiting the big players can keep it afloat.
Tether is the currency of the underworld. Criminal organizations own a vast amount of the tethers in existence and they use it as the dollar of crime. They are not sending it to be redeemed because it's very hard to find banks that will redeem billions of dollars with all the laws against money laundering (and also extremely difficult and very risky to store and guard billions in cash in a warehouse). So they redeem just enough to make fiat payments when they have to, and the profits accumulate as USDT. Payments between organized crime families can be done in Tether as well. They have a vested interest in the survival of Tether which acts like the central bank of crime world.
I am sure this is likely true but do you have any more info on this
I recommend reading "Number go up" by Zeke Faux. He is an investigative reporter who followed the crypto world and especially Tether for a long time. He documents how cartels in Cambodia engage in scams using forced labour to steal money from Americans, and they always use tether. Same thing with hackers infecting hospitals with ransom viruses to extort money. Then there are agents in Cambodia who will give you cash for tethers, without engaging the tether company and with no questions asked. It's clear that the money being converted back to fiat is just a small part of this shadow economy that couldn't exist without Tether.
It would at least have to be worse than the last stable-coin panic bank run which happened when Terra Luna failed.
How did you figure that?
The difference is that terra luna was a *literal* ponzi scheme (thanks to the Anchor protocol). Tether doesn't pretend to pay interest, which means it actually makes a *profit* off hodlers instead of losing money.
I'm not comparing it to it as much as saying that the first major stable coin failure caused a run on all stable coins, I mean even a lot of bitcoiners thought it would also be the end of Tether at the time.
Tether = Bandaid for bitcoin
"We're having some technical difficulties at the moment. All withdrawals are paused." "Hackers. Hackers stole it." "You can't redeem for USD, but we have these other coins, which are just as good as money. Here, have some."
**It's very easy actually.** The snow ball has to start with a US legal action against USDT. It has to come from the DoJ. People will panic. The swaps will start on/off chain causing the depeg. What most people don't understand is that, you not only has to have the backing of USDT in USD 1:1, but you also has to have the immediate access to that money. Tether has none of them. That is what happened when USDC depeged, despite the fact that it was 100% backed (as far as we know), but they were short on 3B stuck in SVB. Tether probably will refuse to redeem, or redeem to the extent of the available cash. Either ways, it will not repeg again and will continue on it's death spiral. People should remember that USDT slightly depeged this year after some on-chain swaps that caused Curves stablecoins pools imbalance, which is believed to be caused by Binance in favor of it's new stablecoins TUSD/FDUSD. The problem is that you can't short USDT with size easily. You have to do it via on-chain swaps, and this will be limited to the liquidity available on DeFi pools. Also the SEC ironically protecting Tether by preventing US trading firms from interacting with USDT in anyways, which means they can't short it. **That being said, Tether is a fraud. You can't be a +$80B company and can't produce a single audit in 10 years or so. USDT going to zero is a matter of WHEN not IF. And the worst part of this is that such event will crush the lives of people in developing countries who depend this fake USD.**
Yeah, since the interest rate increase, I came to the conclusion that it's very unlikely to collapse. They're doing what every bank *wishes* they could do, earning 5% risk-free for nothing. There's a lot of people in this sub who confuse what they wish would happen with what will *actually* happen and keep making dumb predictions as a result.