[lugged]

Cryptocurrencies aren't "inflated by fake money". Tether is inflated by fake money. And even then, probably only as fake as the corporate bond market. (Which is pretty fake lol)

Tether going to zero would mean almost nothing, usdc or the even more safe busd is waiting in the wings to fill the liquidity gap.

That's the problem with these hot takes about the crypto market being dependent on tether, it's just fud.

[bavell]

Exactly. I can't wait for the scam that is Tether to become unraveled. I always thought it was hot garbage since it first came out and I read up on it. Iirc it's totally centralized and there have always been questions over whether they had the $$$ to back up their coin.

If tether disappeared overnight I'm not sure if it'd even affect the rest of the market given that it's inevitable failure is probably baked in or at least wouldn't be a huge surprise.

[phyalow]

In traditional finance their is a concept of HQLA (High Quality Liquid Asset) collateral, this is mainly things like treasuries, JGB's, Gilts etc. Tether is for all intents and purposes HQLA in crypto, layers of rehypothecation and leverage are built off the back of Tether deposits, this is between exchanges, leverage/margin exchanges extend etc.

Tether suddenly becoming impaired IMO would certainly have massive effects on the rest of the market, you cannot remove ~$70b of HQLA from a system worth ~$1-2T and not have negative effects.

Following some sort of credit event, I expect a period of massive volatility (hours to days), I would expect USDC to trade at a premium for several days, ETH and BTC would whipsaw, but likely end up at higher relative levels as tether holders flee/get liquidated and in turn bid up (relative) "safe haven" assets.

10's of DEFI protocols would go bust due to the peg breaking and AMM /Yield farms would likely also see massive loss of AUM and substantial impermanent loss applied to LP positions.

It will be messy, but necessary for the long run health of the system. Anyone holding tether or who has long exposure to tether at this point is taking hefty credit risk (a risk they are not being compensated for - which is a total amateur move) with total disregard for the many blatant red flags. Their is very little opportunity cost for using something like USDC over tether, it should be a simple decision for most users...

[lugged]

Usdc has the same problems as tether irrc. BUSD is almost completely dollar backed, usdc still hold a lot of paper.

https://blog.seedly.sg/best-stablecoins/

Fwiw, I still use tether daily, the markets are far more liquid. If I'm holding it overnight I convert to busd or hard currency.

[smabie]

If tether majorly depegs, let's not kid ourselves, it would absolutely devestate the crypto ecosystem.

[lugged]

I honestly disagree. Tether is easily replace by busd. The markets are already ready for it.

[smabie]

What would happen to all the future and swap denominated USDT contracts? What would happen to all of the AMM pools? What would happen to all the firms who keep tether reserves to trade with?

It would be a blood bath. Almost everyone who works professionally in crypto agrees with this statement.

Moreover, BUSD is kind of a joke and the only thing I ever use it for is trading a couple BUSD denominated binance swap products.

[bavell]

I for one can't wait to see the blood bath from crypto "professionals" who foolishly got tangled up in tether!

[unmole]

> Cryptocurrencies aren't "inflated by fake money". Tether is inflated by fake money.

What if loads of people buy a lot of Bitcoin using Tether, thereby increasing the price of Bitcoin?

From what I understand, this isn't a hypothetical.

[wsatb]

If you don't think Tether, which has been the source of free giveaways by exchanges for years, has inflated cryptocurrency prices, I don't know what to tell you.

There may have been many people that agreed to pay the inflated price but that was without the knowledge that it was inflated in the first place by fake money. Not to mention the pumping and dumping that was done to turn their fake money into real money. That should damage confidence, in Bitcoin especially, but it won't because people are blinded by thinking they will get filthy rich off of it.