Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.
most liquidity tends to aggregate on dexes like Curve, which is also where you could have seen the whole LUNA/UST debacle play out in real time as large actors swapped out of UST into USDC/USDT/DAI
Completely. For context, "the Reserve Primary Fund broke the buck when its net asset value (NAV) fell to $0.97 cents per share" [1].
[1] https://www.investopedia.com/articles/economics/09/money-mar...
The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.
Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)
I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".
Longer comment: https://news.ycombinator.com/item?id=31449400
Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke.
> holds its price above a $0.98 average
When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg.
[1] https://www.investopedia.com/articles/economics/09/money-mar...
All it takes is a few days of near zero in the next year to win the wager. Isn't that what patio11 has said would happen for what 4 years now?
I'm offering a chance to capitalise on such deep knowledge, surely that's a no-brainer choice for someone so convinced that Tether is done for?
It shouldn't be. Not for a dollar-pegged asset. Fractions of a cent on billions of dollars, dollars easily lent and borrowed every day, every minute, is millions of dollars a year for an arbitrageur [1].
Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.
> what patio11 has said would happen for what 4 years now?
Four years isn't long. At the first sign of tight markets, the damn thing fell apart to the tune of 5%.
> that's a no-brainer choice for someone so convinced that Tether is done for?
People are shorting Tether [2].
The problem is counterparty risk. When Tether busts, you want someone on the other side who isn't all in on crypto. That's not easy.
[1] Coinmarketcap shows $0.9989 for 1 Tether, an 11 bp spread. Call money is 2.75% [1], or around 75 bps per day; too expensive. But the repo rate is 80 bps [2]; less than a basis point a day. Borrow a billion against collateral, buy one billion Tether, redeem it for one dollar each and pay back the loan. You'll make, round trip, a $1mm profit [c]. In one day. Unless we're arguing there would be $1mm transaction costs for this trade, one must ask why nobody is doing it.
[a] https://www.bankrate.com/rates/interest-rates/call-money/
[b] https://www.newyorkfed.org/markets/reference-rates/tgcr
[c] [$1bn - $1bn * 0.9989] - [$1bn * (0.8% / 365)]
[2] https://www.wsj.com/articles/short-sellers-bet-tether-crypto...
Or indeed shitty Chinese commercial paper. Whatever Tether calls its treasury desk must be approximately the most stressful seat in the universe.
Legally, IRDs and futures trade/settle on a few centralized exchanges with maybe one CCP (at least going by clarusft numbers on monthly dv01 volumes [some products way trade more on different venues compared to others], esp compared to all the places USDT trades) with many times rehypothicated US treasuries or other gov bonds behind it all, scheme blows up occasionally (was fun watching 30 year UST's trade ~30 bps under 75% of SOFR txs for a month before sept 2019 'surprise' fireworks happened).
> … buy one billion Tether
With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream. Maybe you can market make over the course [unknown amount] of time and pick it up on cex/dex's at/under $0.9989, but good luck trying that everyday (esp on chain where you will need to split that over many address all the time or addr tracking algos will front run if the MEV bots dont get you on every tx).
Shit show all around, ones just more concealed from the public and "regulators" than the other…
Slippage for an arbitrageur is price correction to the market. I made a math error in my comment: call money at 2.75% is less than a basis point a day. The trade makes money with no collateral.
I--me!--could call my broker and borrow $10mm at 5.75% (call money + 300 bps, because I'm not a billionaire) by lying and saying it wasn't for trading, buy 10 million Tethers for 0.9987, redeem them and pay back the loan the next day to turn an $11,425 profit.
I'm not going to do this. Because in that interval between buying and redeeming, an interval I'm sure would be marred by unnecessary delays--with my borrowing cost the trade breaks even between days 8 and 9--there is more than a 1 in 875 chance that Tether blows up [a]. (In other words, I'm betting, by not doing this trade, that Tether has no more than a few years to its name.)
[1] 1 / (11,425 / $10mm), the 11,425 being about $10mm - [$10mm * 0.9987] - [$10mm * {(2.75% + 3%) / 365} * 1 day]
Edit: solvent at crisis time. LBI wasn't linked to onshore information systems.
The problem wasn't solvency. It was liquidity. The point of bank regulation is to ensure that banks can survive small bouts of illiquidity and remain solvent through major ones.
So you don't think you're just losing money, I'll issue you $5,000 worth of my personal stablecoin that you can redeem 1:1.
If you win, I'll give you another $5,000 of my personal stablecoin to pay the bet.
You can redeem them whenever you want, I'll be good for it. /s
If you are so sure of this then let us make a Real bet. 50 million sounds good yes? And if you don't have 50 million we can simply bet your entire net worth.
I am happy enough with what was proposed and am not being facetious, was wagered directly to the person who wrote the article a few others after that.
Don't see anyone daring to take up the challenge, just low effort and frankly low-tier commentary that doesn't belong on this website in response. I will offer it to you as well since you seem keen. Any amount up to $5000 USD.
It's not much in the scheme of things to prove oneself right yes? I'm happy to have it all donated to charity which you can claim as tax deductible if that so pleases. Or are we not even talking about Tether anymore and just something else, something deeper that lurks within the unsettled anger of all these comments?
Let's put a $1k minimum caveat.
Sure, buddy...
Course in a good market you'd lay that risk on the order book not come fishing for suckers here...
I offer you the same deal, $5000 USD 1:1 that Tether maintains the peg above $0.98 for the next year averaged at the UTC 00:00 USDT/USD price on Kraken everyday.
We both keep it with an intermediary who invests in something that attempts to maintain a semblance of keeping up with inflation.
One year from now we tally up the score and the correct person wins. You only need a few days of tether collapsing to win this bet.
It's a simple wager that surely makes sense for those with all these strong words and bravado in here.
Or maybe not, who knows:
"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. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all."
Oh, and don't forget the fees:
"Fee per fiat withdrawal: The greater of $1,000 or 0.1%"
This has been debunked for a while already, nobody believes that anymore.
The fact that you don't want to engage in 1:1 odds means you are less sure of your own position than he is. Just sayin' :)
Now one could take that as a salesmans tactic to try and extract better odds from Grimburger but at that point the monetary aspect would become the focus and not the wager itself. A wager between two people who are in it for the sport and both sure of their positions should carry 1:1 odds. One could ask for a lower amount or refuse completely on monetary grounds but not request odds in ones favor.
If there are two people offering you a bet:
Person A offers you 5:1 odds in your favor saying that a random dice throw will yield a number small than 3.
Person B offers you 1:1 odds in your favor saying that a random number chosen between 1 and 10 will yield a number bigger than 6.
Thinking about the wager with Person B is independent of the wager with Person A. When deciding which bet to engage in the answer is both because in both cases you should be convinced that your chances of winning are >50%. Refusing the second bet would lower your overall expected winnings.
The emperor is clearly not wearing any clothes.
There's lame horses that get better odds in races than what is being offered to me if Tether collapses (and even recovers in a few days after that) right now.
The peg just needs to collapse for a tiny fraction of the next year for them to win this wager. Why wouldn't anyone take such a guaranteed profit? :)
And to be fair I doubt it's the loss of money that scares Patrick, it's the USDT/USD price on May 21st 2023.
You're American, I'm Australian, there really shouldn't be any problem here with finding a 3rd party intermediary, though I'm not sure about US laws on these sorts of p2p wagers.
You truly want to get $125,000 in return for my $5000 bet on tether maintaining the peg? Surely that says something about your faith in them asking 25:1 that they go under in the next year? I'm sort of tempted at the offer of 1/5th of that, as unfair as it seems.
Happy to do it if we each donate to the charity of the other's choice? 1:1? You can keep the tax benefit.
Keeping the peg is the least of the problems. If they somehow showed up tomorrow and said "Listen, we finally ran an audit and we found out that we really have only $0.90 for every minted USDT. But given that the small print says that we are allowed to return whatever we want, whenever you want, we decided that everyone will get a 10% haircut, ok?", you would bet that the market would shake for a week or two, but most of them would just scream Finally! and continue gambling what was left on the next project.
The real problem is that all that comes with that lack of transparency: the market manipulation, the cop-out to become a unregulated central bank, the inability for others to make a true assessment of the health of the market.
Tether basically took all the work from the cypherpunks and turned into a Casino that can't even be properly audited. They can manage to keep the peg for 20 more years for all I care, but each day they are still around is another day wasted that could be used for more meaningful things.
A peg is a peg, it's supposed to be more or less certain.
USDT maintains its peg by allowing certain entities to redeem USDT 1 to 1. How much USDT's price fluctuates depends on how well that mechanism works, and market conditions.
Are you just making stuff up? There were $10B worth of redemptions only last week.
Documenting a redemption would involve using the official redemption mechanism where you redeem $100,000+ at a time, pay a $100-$1000 fee, get a wire transfer from Tether etc. If you can find anyone ever documenting having done that, let me know
But, what I said was it’s never been documented.
* Does he buy Tether at par or at a discount?
* Can he redeem when he wants, in any quantity, or do they have arrangements?
* Is he redeeming for dollars or in kind? Terms allow for latter
* Does he buy with dollars or with commercial paper?
I do not believe he has shown material which would let us answer any of these questions
the 'fee per fiat withdrawal' is 'The greater of $1,000 or 0.1%'
so it would theoretically make sense for the peg to be 0.1% off as there is no more profit from redemptions at that level.
This non-linear relationship is literally programmatically hard coded in the case of money markets such as curve.fi
Currently the largest money market pool (https://curve.fi/3pool) it has a 5:1 USDT:USDC imbalance. In dollar amounts, the pool contains $1b USDT and $0.2b USDC.
This 5:1 imbalance only gives way to a 0.1% de-pegg.
In the past the balance used to be perfectly 1:1 USDT:USDC. The fact that a multi-million dollar arbitrage opportunity still exist is worrisome.
Sidestepping the definitional issue, I certainly worry when a pegged asset trades at a persistent discount, even a small one, when it didn't before. A stablecoin should generally trade at a premium just as often as it trades at a discount. When one goes long periods without ever being above, that is a strong signal. And when everyone panics, that's exactly when it's too late to get out. You have to beat the rush.
Remember, even up until the morning of May 9th, the day of the real TerraUSD depeg, people made that exact objection. "Oh come, on being 0.1% off is normal for stablecoin." Indeed it is -- but not in a persistent fashion!
Disclaimer: I closed out my Tether longs last week.
I had also held a small amount for online purchases.
More generally, the reason to hold a stablecoin rather than a "real" dollar is because you need the former in order to interface with smartcontracts on blockchains. Also, to buy from merchants who sell goods for stablecoins because they're in a grey market that banks don't want to touch.
Side note: I don't know why people keep asking that question -- it gets asked and answered each time this topic comes up e.g.
There is Gemini USD - similar story.
There is DAI if you are long on ETH/BTC and still want/need liquidity.
Curve has a pool without USDT (cDAI/cUSDC).
Uniswap lets you make any type of pair. On its heyday (before v3), I was providing to DAI/USDC and I was getting 2% returns per month.
So my question is: why USDT, when there is a handful of better stabletokens that can be used for the exact same purpose? If it is common knowledge that Tether is not to be trusted, why would any honest person still use it?
https://news.ycombinator.com/item?id=31422545
https://news.ycombinator.com/item?id=31417134
https://news.ycombinator.com/item?id=31412835
My comment was answering a question about “why stablecoins at all”.
To answer your question, because some uniswap v3 pools with USDT offered competitive returns, like the 0.05% WETH/USDT one. That was one of many I used, which included those that paired DAI or USDC with ETH.
I considered the concerns overblown at the time and so was okay with making some the USDT pools a part of my LP portfolio.
I’m honest.
Honesty is not just about "I wasn't the one profiting from the bad thing". It's also "I'm willing to call evil/immoral for what it is".
And I wasn't comparing in terms of returns. I just pointed out that there is no real use-case for USDT that can't be served by the other tokens, including yield-farming in liquidity pools.
That makes the peg loss seem significant
It’s seeing the redemptions that show it is significant
The $0.99 Only Store could do stable coin. You could even redeem your coins for items in the store!
This is misleading. Tether has consistently traded between $0.998 and $0.999 between May 13th and May 20th. See https://coinmarketcap.com/currencies/tether/
Is it trading at 0.1% lower than it was before the Terra USD collapse? Yes. Has it "lost its peg"? No.