The point is that tether is wlsupposed to be willing to buy back tethers at $1 each so that if the price drops below $1 they buy all the sub $1 tether until the price returns to $1.

You can sell it at a discount but why if you can get $1 for it. That makes no sense.

For tether to depeg something else must be going on

It can temporarily depeg if there are more people selling than there are people who are able to redeem who are incentivised to defend the peg

On Bitfinex the peg has held strong because Bitfinex have a close relationship with Tether and enabled customers to convert USD/USDt freely (for now)

Other exchanges are experiencing either a temporarily blip (will eventually get arbitraged away) or it's the beginning of Tether being insolvent. Time will tell

>people who are able to redeem who are incentivised to defend the peg

This doesn't make any sense. Either you can sell it for $1 or you can't. If you can then it's free money to buy tether from people selling below $1 and selling it back to tether for $1.

I would describe the relationship between tether and bf as more than "close" they have the same owner.

They are, they just aren't buying them back on coinbase. Tether don't manage the secondary market (cexes and dexes)

Though the minimum redeemable amount is $100k https://tether.to/en/fees

Why they are depegging is people are selling for under a dollar on coinbase (perhaps in panic); and Alameda Research (re: FTX exchange) who normally makes a ton of money doing the arbitrage between dollars and tether is having liquidity problems, so not doing it currrently.

so thinking about this.

assumption: bitfinex has "dollars" to backup every USDT.

If bitfinex will buy a USDT for a $1 if it drops below $1 to maintain the peg, they can do this because they have "dollars" backing each share.

however, they would also have to destroy that USDT on purchase (as they just spend the $1 backing it). They could print more USDT (/ sell that back) for $1 and they would be whole again, but if there is downwards pressure on USDT, one should expect to see the market cap for tether to drop while bitfinex is buying/destroying currently existing USDT.

If one doesn't see this drop, wouldn't that be indicative of a problem?

Does destroying currency (reducing the amount in circulation) put downward pressure on it? Not in my experience.

I (believe) what I said if there's downward pressure on the currency, therefore to maintain the peg they have to buy it (and in a sense destroy it). not that destroying it leads to downward pressure, but that we should see a reduction in market cap. I'm wondering if we can see this fluctuation in market cap.

Wonder if its a friction thing. Do you have to setup a special account to redeem on the primary channel?

The "official" channel has a MOQ of $100,000: https://tether.to/en/fees/

There is a huge amount of friction. It's not clear whether they run market-maker operations to pick up the spread between Tether and $1. As always, the question is what actual assets Tether has to meet its claims.

Alameda Research (re: FTX exchange) normally makes a ton of money doing the arbitrage between dollars and tether but its having liquidity problems, so not doing it currently.

> It's not clear whether they run market-maker operations to pick up the spread between Tether and $1.

Of course they do.