I doubt a run on tether would even cause a 50% drop in BTC price. Hope your account doesn't blow up when Bitcoin inevitably reaches 1 million per coin ;)

Sure, in the short term, unregulated markets can be manipulated.

But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them.

You can sell Tether on Coinbase for U.S. Dollar deposits to your bank account.

The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.

> The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.

Bernie Madoff claimed that his scam started in 1991, though in reality it was probably much earlier. It didn't collapse until 2008.

Even in the cryptocurrency space, Mt. Gox took five years to collapse.

There wasn't a well publicized US federal indictment and investigation of Madoff and Gox, settled with a fine and no injunction.

I'm not saying Tether is clean or 100% funded, I don't know. But unlike Madoff and Gox, accusations have been very loud and very public for a very long time, and the market still accepts USDT at parity with USD.

If Tether's treasury is empty, and if people can freely trade USDT for USD, it wouldn't hold 1:1.

Check this guy: https://en.m.wikipedia.org/wiki/Harry_Markopolos

The question of a collapse is when not if.

How would the smart money profit from obliterating them? If you’re referring to a Soros/GBP style trade, how would one borrow enough USDT to pull it off?

Presumably, people who hold hundreds of millions of the stuff are well aware of every accusation made against Tether.

If they wanted to, they could trade their USDT for actual US fiat on a 1:1 basis if they thought USD was worth more than USDT.

The really smart money with large crypto stashes could borrow USDT with crypto as collateral, and trade the USDT for greenbacks.

Have you looked into the mechanics of this trade? The crypto loans I'm aware of are all significantly overcollateralized. You would have to pledge say 1m BTC to get 0.8m BTC worth of USDT which you could then sell for dollars. If you succeeded USDT tanks, everyone who holds USDT would be rushing for the exit, wiping out the crypto you pledged as collateral also. So you succeed in losing 20% of your money on the initial USDT trade and almost all of the value of the crypto assets you pledged for the loan as well.

These markets are nowhere near as flexible and liquid as regular fx - I would be amazed if you ended up making money overall on this kind of strategy and the execution risk is significant.

Presumably the value of Tether would drop much farther than the value of other crypto.

If USDT drops 90% and BTC drops 50% in USD terms, the BTC would gain value in USDT terms and your loan would be even more overcollateralized.

Then you could pay back your loan with USDT at ten cents on the dollar and make an absolute killing.

Love to hear this.

1)In normal FX markets the amount transacted goes to trillions of USD per day, and liquidity at the touch is very high. So if you need to unwind a position there will be people who will take the other side and the market won't move much even if you're trying to unload a lot of a single cross.

2)In equity markets (which I'm a little more familiar with from a microstructure point of view) a single large market participant like a big broker/dealer will do more than a billion client orders on a busy day (when you add up the orders they do internally and all the child orders from executing trades in pieces). If you wanted to do a billion transactions on the ethereum blockchain at the current throughput it would take you almost 2 years, and no-one else would be able to do anything. So making a lot of trades fast isn't really possible.

Obviously chains like solana would help this a lot, but the point remains that in the current defi ecosystem markets aren't very resilient because they can't react as fast and they don't have the kind of depth of liquidity that conventional markets have.

So I suspect there’s not much overlap between people who believe they could break tether and people sitting on a large crypto stash to use as collateral.

- borrow a ton of USDT

- trade it for USD on exchanges, eating away at organic demand as well as the reserves used to keep the peg

- eventually (presumably) the peg will break and the price will collapse, and you can buy back the USDT for cheap to repay the loan

The trouble is getting that USDT-denominated loan, though.

Personally I'm really really confused about who holds all that Tether. Just who is it? I can't come up with any good idea. Is it the exchanges? But if so then why would they?

I did create a synthetic tracking portfolio to keep myself accountable to the bet over time, though: https://twitter.com/paulgb/status/1453111218374389763

If the Fed prints another trillion dollars tomorrow, their stock price could double, wiping out your short...

That, of course, would not happen. Even if there were such an event you'd still see people trying to beat the clock and mass liquidate the old BTC while there's still demand, or people immediately liquidating their positions in "new BTC" because they think it's not going to eclipse "old BTC".

We have a good real world example of these very things happening with things like BCH and Ethereum Classic still trading quite regularly. Both were the result of some users deciding to move to a fork and some deciding to stay. In traditional markets you could make some parallels with a stock split or demerger.

The big risk in your play is that the crowd in a panic will select another stable coin for going on the sideline IF AND ONLY IF such a coin is available. If not they will buy the most stable non-stablecoin which is ... drumroll ... bitcoin.

Of course, long-term effects might be different.

To this point specifically: is there any proof this is malicious? Amazon, Facebook, Google have all had outages before; shouldn't we apply Hanlon's Razor when a cryptocurrency exchange fails to serve requests during a massive traffic spike?

Further, an honest exchange makes money on people’s trades. Going down when volume is high means giving up peak profits. Equivalent of amazon reliably going down on black friday.

First and most importantly, the crypto market can drop 15-20%+ in a 24 hour period; similar rises take multiple days on high-volume, large-cap coins. This is actually not specific to cryptocurrencies, there's a well known phrase in the equity markets "bulls take the stairs, bears take the elevator (or 'the window')".

Similarly, with such volatile assets, when the price falls dramatically, many people are running for the exits. On the other hand, when the price is skyrocketing, many people have a "hodl" mentality, think the price will rise up further, etc. If the price falls off a cliff everyone is trying to sell, but when the price spikes many feel "I missed my chance, better wait for a dip" and aren't rushing to buy.

Making a robust exchange is hard and requires an amazon level of development. Huge movements in price correlate with massive increases in volume. The simplest explanation remains firmly in the realm of poor platform, in my mind, rather than nefarious and illegal manipulation.

Just look at Robinhood. They offer a sleek looking product, but their crypto offering falls down under load (positive and negative) regularly.

[1] http://rekt.news