TLDR: Tether is the most traded stablecoin. however, i found that Tether has a shady contact location, undisclosed commercial papers they invested that back almost half of Tether's capitalisation, and a possible crypto crash if it collapses. we need a pressure test towards it in order to verify its legitimacy and solvency before the crash if it happens.
i don't mean to make a FUD using this thread, but i see something critical regarding Tether. i can be an idiot talking about this, but i think there is something regarding Tether that should be into our vigilance.
1. preface
USDT or Tether, as everyone here knows, is currently the top stablecoin we are talking about. as of today, its trading volume is more than 100 billion. people use this coin to accelerate the process of transaction compared to normal bank wires. Tether claims that it's fully backed and safe. however, unfortunately, i think there are some doubts that needs should be checked as soon as possible.
let's begin with some questions:
how is Tether
actually backed?
do they have real offices? if yes, where?
what will happen if Tether can't deliver certain withdrawal requests?
assuming you have a verified account in Tether, eligible to redeem Tether, according to the official website, how much fee would you have to pay per redemption?
2. the funds assets that back USDT
if you have ever followed up on this, you will realise that Tether is
not fully backed by cash. i understand that is normal like other banks, they need to do something such as lending money out to generate profits. YTD Tether posted two proof of funds verified by Moore Cayman. the most recent one
here.why it matter? according to the report, as of 2021.6.30, Tether's market capitalisation was $62B, in which $30B was commercial papers and certificates of deposit.
that is almost half of its whole capitalisation! however, unlike the bonds they have invested in, there is
no way we can know what they exactly have invested in the "commercial papers" part. they aren't highly stable in fiat value. as of 2021.12.31, that is $24.16B out of a $78.6B; only about $4.2B is in real cash.
in comparison,
USDC (2021.10 reports) has reported with only cash in reserve.
3.
the most important: Tether lacks the most fundamental contact information about their company.
if you are never aware of what the "contact us" on its website looks like, there you are:
yup,
this. most of the average company would at least have a basic business location. commonly, not having a sufficient physical profile about a company could be a red flag. Tether, having controls over the billions worth of its stablecoin, shouldn't be exempted from this. it's understandable that more people are working at home, but once again,
Tether is liable to almost the whole crypto market. what if they run off from it (although very unlikely)? who is going to be liable for the loss?
4. if Tether goes insolvent, the whole crypto market is doomed.
this is not a joke. if Tether suddenly goes insolvent to any withdrawal requests, then Tether is completely worthless. Tether's crash itself won't directly cause the whole crypto market to crash, but the fact is that
there are too many major trading pairs involving this, which will cause the market to have maximum fear.
but how it crashes the market?
in a very fundamental way by losing one side's value. hypothetically, the price of btc in Tether right now is 55'000, where the exchange rate between Tether and USD is 1-to-1, which means the price of a btc in Tether always is the same as in USD (1 btc == 55'000 USDT == $55'000). if Tether suddenly runs out of ability to keep its value stable, resulting in the price going to $0.5 (probably even lower as it's no longer redeemable), but the price of btc in Tether has not changed (55'000), then btc's actual price in USD will go below $27'500. because there is a finite Tether supply, it's impossible to keep the price by pumping it. basically,
the loss of the stablecoin value is a direct cutoff towards cryptos' fiat value.it's not like a regular stock market, where we trade directly between fiats and stocks. commonly, we trade crypto (
) using stablecoin, therefore, the stablecoin here is the intermediary between fiat and crypto. the exception is if we trade crypto directly with fiat, but the law is more complicated than i can think of.
5. you have to pay a minimum of $1'000 per redeem request.
according to the
fee schedule, you will have to pay at least $1'000 for every single redemption request (0.1% per $1m+ redemption). that means 1% on a 100k Tether. if you are a whale, this sum won't be a big deal. however, to most of us who have less than $100k immediate liquidity are rather a gigantic vault. a typical international wire transfer would only take about $60, so why would it be that much?
in comparison, USDC offered in Coinbase would not charge any fee or at least won't be that much. BUSD offered by
Binance would most likely only ask for the necessary wire transfer fee.
6. what should/can we do?
i want to verify if Tether really is
that backed by fiat money rather than to ruin the stablecoin, a
bank run is necessary. if the price of Tether is not highly impacted under the bank run, it means Tether is a legit stablecoin.
besides, Tether should make public of what they have invested in commercial papers
rather than simply coming up to
deny the rumours. the denial feels like dodging to reveal the documents. similar to
Elon Musk asked WFP about the exact plan of how to solve the world hunger but later they failed to answer.
if it is possible, we should move to any stablecoins that prove their cash solvency over time, to minimise any possible disaster if/when Tether collapses.
thanks to my ted talk, sorry man.
edit: removed the tag "unpopular".
edit 1: added USDC report ref + suggestion to what we could do, fee for withdrawal to fiat.
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