[brandoncarl]

Tether's underlying assets are almost certainly worth less than $1. You can see this by taking each asset class and marking it to market.

I've provided details here: https://twitter.com/brandonjcarl/status/1536310742261047296?...

By itself that's not enough for Tether to "fail". It does mean that the asset is in a position of very high risk and subject to a run.

[dd36]

It’s bizarre that this is legal. It’s all based on “trust us” without qualified audits or verifications.

[lxgr]

In the absence of an explicit regulatory framework, legality can probably only be determined after negative outcomes, unfortunately.

It also seems like without catastrophic retail investment losses, politically there isn‘t much to gain with implementing such a regulation, and potentially much to lose. Reacting too late to prevent harm seems to be the logical outcome.

[potatototoo99]

Like every currency ever in the history of mankind, gold-backed or not.

[elchupanebre]

Not true. Fiat currencies are backed by the consumer of last resort: governments. Everyone has to pay taxes using the official currency of the country. For instance, US$ is backed by approximately 25% of the GDP which the government collects every year in taxes.

[brandoncarl]

Important to note that a currency peg is different than a currency. The latter free floats, the former does not.

[chii]

well, if people decided to trust them even without the audit, then what's to say that it should be illegal? Investments have always been caveat emptor.

[brandoncarl]

Investments were this way in the 1800s and early 1900s.

A lot of protections have been put into place since then. There's a reason we prosecute Ponzi schemes, offer FDIC and SIPC insurance, stress test banks, etc.

[Majromax]

> I've provided details here

I agree with you that Tether is very risky, but I think your revaluation of the "digital coins" class. In its attestations, Tether claims to value digital coins as "cost less impairment," so effectively at the minimum value the coin has reached since its purchase.

With that methodology, it is erroneous to apply "down 60% from market highs" to estimate the current value.

That said, we can speculate endlessly about Tether's ultimate solvency because we don't have a detailed enough balance sheet. I think it's clear, however, that despite acting like a bank Tether's capital could not possibly meet Basel 2-like risk weighting standards. Even with completely above-board operation, Tether would be reasonably likely to collapse if we experienced a repeat of the 2008 financial crisis.

[brandoncarl]

You're absolutely right regarding from market highs.

To do this correct you'd need purchases and sales versus assets.

All that said, it's why I put a rough estimate of 30% (instead of 60%) and hadn't included any losses in broader commercial paper (which has dropped). So the overall estimate is defensible.

Also agree on Basel 2-like risk. The primary issue with Tether is the marketing around stability and the transparency. If it was treated like any other "money market" with better NAV reporting, position reporting and rules around withdrawals then we'd mitigate some of the risks.

[LatteLazy]

That's not necessarily true based on your link. Given Tether is invested in interest bearing instruments, the pool of capital should be move than the total outstanding Tether value. So even losing some by MTM at lower prices, they have a safety buffer...

[brandoncarl]

I follow your theory, but as of the last audit that wasn't close to true.

[LatteLazy]

Has there been a public independent audit? I thought the lack of one was part of the issue...

[brandoncarl]

This is the closest. https://assets.ctfassets.net/vyse88cgwfbl/1np5dpcwuHrWJ4AgUg...

As you can see, the rates don't map to any significant overcollateralization.