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by mastermojo 1937 days ago
This is the confusing part to me. Everything I read online talks about Tether being fraudulent. Shouldn't the price of Tether reflect a discount based on that? If it doesn't, does that mean the market is okay with a Tether being 1 USD even if it is not backed by anything?
2 comments
firekvz 1937 days ago
At some point yesterday, BTC/USD pair was trading up to 400$ lower than the BTC/USDT, that should be enough to tell you that a lot of people don't really want the USDT anymore and were willing to pay a 400$ premium to get real USD, it will start getting ugly at some point
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tim333 1937 days ago
Not necessarily because Tether the company will use the USD or similar that they have to buy tethers on the market if the price falls below $0.995 or so. The worry is if there are say 30bn tethers out there and they only have $20bn cash and enough people redeem the the price will stay about $1 until the $20bn runs out and then suddenly drop to not much.

It's actually possible that rather than just holding US$ against USDT they have put some into bitcoin instead which would mean they may have plenty of funds unless bitcoin crashes in an unfortunate way.

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mastermojo 1937 days ago
So the consensus here seems to be that Tether the company is doing some sort of fractional reserve banking? I'm assuming no one on hacker news is holding Tether ...

To the point of actions speaking louder than words, why are there people who trust Tether enough to hold it? If there is no trust there wouldn't everyone redeem and create a bank run?

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tim333 1937 days ago
I've held tethers before now. The 'fractional reserve' thing is unknown. If I were a crook and running the thing I probably would have printed lots of tethers to buy bitcoin in the slump then sell them at a profit to fix the reserves and buy and island. But who knows unless they do an audit which they seem very reluctant to do. The above scenario would be illegal but would not lead to the collapse of tether unless the law got them which is tricky as they are based in various offshore locations.

I've been through this whole tether is a scam which will collapse thing before around late 2017 or Jan 18 and inspite of the crypto downturn they didn't.

A HN story from Nov 2017 https://news.ycombinator.com/item?id=15745441 for example.

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