That is the exact opposite of the reality (and misses the entire point of the article).
The point is that shorting tether is likely to be enormously profitable, but you won't be able to collect your profits
This is because no well capitalized and stable broker or exchange will touch Tether, and the only counterparties who might lend you the Tether to short are extremely likely to go bankrupt when Tether does collapse.
So, you'll put your millions of dollars at risk on deposit, pay your interest, and end up with a $100 million or whatever profit, owed to you by a now-bankrupt exchange, so your profit will never arrive at your bank account, and your best case is suing the husk of a bankrupt exchange whose shady owners absconded to a non-extradition country.
The trade is bad because only disreputable and insufficiently capitalized counter-parties will touch it, not because Tether is great in any way.
Absolutely not. I think tether is garbage that benefits almost noone except its creators.
I'm just amused by the fact that stability of a bad thing is increased because betting against it is worse than for it.
> The point is that shorting tether is likely to be enormously profitable, but you won't be able to collect your profits.
Hence not profitable at all. :-)
Betting for it is risky, betting against it is risky. Maybe that's a huge part of its stability? Like stability on the edge of the knife held over lava pit. Nobody benefits from going to either side despite equilibrium being uncomfortable?
Also the question is, do people really want to call them on their promises. That's another thing noone would benefit from.
The most likely theory at this point is that most of it is FTX-style IOUs from other crypto companies marked at absurd pre -crypto winter valuations, which will collapse like a house of cards the instant they are touched or even exposed to light.
what's your source for that? Tether itself admitted that isn't true: https://cointelegraph.com/news/tether-to-reduce-secured-loan...
They announced they are curbing this activity so maybe it brought them more loss than gain?
They still probably didn't leak mucj tether this way. But I now see that it's not that 66 bln of dollars changed hands, but most of it in crypto valued at bull market prices. So if people wanted to cash out into dollars they would probably collapse. But why would people want to cash out into dollars en masse and pay tax on that?
And if they want to cash out into crypto there's no problem becuse the crypto is cheap now so tether doesn't need to give away much for each USDT they redeem.
Because they think Tether will collapse. It will happen slowly, then all at once.
Because they see it as a likely loss, and would rather get some return than nothing. A taxable gain is always better than a loss.
Even if the gains were in other crypto and are now being cashed out via Tether to $USD, it's better to realize those gains in $USD and pay 0%, 15%, or 20% capital gains taxes (depending on your income bracket), rather than lose it all due to Tether becoming worthless. Manageable but certain cost vs unpredictable likely total loss.
Yes I agree that those forces are minimal for Tether (and crypto in general) vs other investments. But it seems at most like a minor second- or third-order effect; technically existing but not practically moving (or stabilizing) the markets.
I'll take the long side of the Tether bet for 30% a year (I'll buy one-year Tether forwards at 70c).
I'm not as creditworthy as Goldman, but for small amounts, it's pretty close. I could collateralize the trade with my house, and in any case I don't have the kind of correlated portfolio that means if Tether goes bust, I can't pay you. But enough about me - some trader at Goldman will absolutely do the same deal! Maybe they can even do it for 72c.
There is a market-clearing price for this trade if done between two creditworthy parties. I don't know what that price is because there isn't a big public market for it, but if you shop the trade around, you'll find a price.
The people bemoaning they can't short Tether mean they can't short it at what looks like it should be the right price, say, paying 5% a year to borrow it. But that's not the right price! That's the price that already includes you taking a lot of wrong-way counterparty risk. Against Goldman, the price is 20% or 30% or something, and you can do the trade, but you don't want to.
So the fair price of one-year Tether forwards is 75c or whatever, but the spot price is clearly $1.00. How do you reconcile this in financial markets terms, that the prices don't converge? Same reason other commodity futures might have backwardation - holding Tether provides some value to its owners. Like having steel today allows you to build a skyscraper and start collecting rent, so spot steel trades higher than future steel if the construction business is good. In Tether's case, that value is the freedom to participate in other crypto trades, or perhaps to escape even riskier assets in China, or something else.