[deweller]

> As of this writing, on May 20th, it has yet to regain the peg

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.

[patio11]

It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.

[ntoskrnl]

Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tame in comparison and I'm sure it's just the cost of moving money to arbitrage.

[1]: https://coinmarketcap.com/currencies/tether/

[hiq]

On https://coinmarketcap.com/currencies/tether/historical-data/ you can see that all the highs for the past 7 days have been strictly under $1, has this ever happened before?

[ntoskrnl]

If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course.

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.

[77fourtyfive]

coinmarketcap/coingecko are generally not very reliable for evaluating the stability of stablecoin pegs

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

[JumpCrisscross]

> now needs to redefine what being pegged means

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...

[makomk]

That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, which gave lower returns in exchange for that supposed safety, wasn't.

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.

[JumpCrisscross]

> money market funds are meant to be safe interest bearing investments

Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)

[zionic]

On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable".

I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".

[rglullis]

DAI has been designed to be soft-pegged. It is meant to fluctuate around the $1 mark, but it never guarantees any kind of parity.

[retcon]

This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.

[SilasX]

That’s the point. Dai goes below and above $1. Tether has stuck below $1. That’s an important difference.

Longer comment: https://news.ycombinator.com/item?id=31449400

[retcon]

This might be fine in a open regulated market. See my above comment.

[TameAntelope]

I'm not an expert by any means on this topic, but for non-crypto assets that are pegged, going even 0.1% below the peg is a huge deal.

A peg is a peg, it's supposed to be more or less certain.

[drexlspivey]

No it's not, if you think pegs are supposed to stay forever at the same price you don't understand how markets and order books work.

[TameAntelope]

I very much don't understand how markets and order books work, but people who do understand those things tell me pretty consistently how big of a deal it is when a money market fund loses its peg, even by a tiny amount.

[vagab0nd]

Define "tiny". Is 0.1% tiny? 0.01%? 0.001%?

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.

[graeme]

By claiming certain entities can redeem 1:1. No one has ever documented a Tether redemption. They have a very tiny number of clients and the terms say they don’t have to redeem at all.

[drexlspivey]

> No one has ever documented a Tether redemption

Are you just making stuff up? There were $10B worth of redemptions only last week.

[77fourtyfive]

from https://tether.to/en/fees/

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.

[mnaei]

Keep in mind that the relationship here is non-linear. A small de-peg signals a large imbalance of funds.

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.

[SilasX]

Eh, that just comes down to the arbitrary definition of how much of a discount you consider "losing the peg".

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.

[shuckles]

Before you thought Tether was unable to hold a peg why would you be long Tether? Isn’t it better to just be long the USD?

[SilasX]

I had invested in liquidity pools (which collect fees for you for facilitating trades between tokens that you contribute), and some such pools had Tether. One downside of such pools is that, if any one of the assets in it goes to zero, all your invested capital goes to zero (though you keep the fees). It was therefore a Tether long.

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.

https://news.ycombinator.com/item?id=31352262

[rglullis]

USDC has the exact same properties as USDT, but has no legal issue and is backed by an entity that is a infinitely more trustworthy.

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?

[SilasX]

I’m familiar with the others and use them as well.

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.

[rglullis]

It's not about the "concerns" that we should be worried about. We should also be worried about not perpetuating a gigantic scam.

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".

[graeme]

It’s not just 0.1% off the peg. It’s 0.1% off and facing large redemptions.

That makes the peg loss seem significant

[grapehut]

The large redemptions are what is causing them to be 0.1% off the peg...

[thebean11]

Or is being 0.1% below peg causing large redemptions? People buying USDT at a discount and redeeming at face value.

[kasey_junk]

Thats why breaking the peg is so bad. Its a visious cycle so both are correct.

[thebean11]

No it's not..people buying in order to redeem brings the price closer to the peg, not further away.

[graeme]

Definitely. But a lot of people have looked at the small depeg and said “it’s not big, and they’ve depegged in the past. What’s the issue?”

It’s seeing the redemptions that show it is significant

[onlyrealcuzzo]

Why hasn't anyone pegged a stable coin to $0.99 before?

The $0.99 Only Store could do stable coin. You could even redeem your coins for items in the store!

[downrightmike]

Anything less than 1.00 might as well be 0.