Why one should short Tether

[obadia]

I know I ll get shit for that..

A. As any trader of any sort can easily explain, taking a position is estimating a potential profit vs the risk of a potential loss.
B. Tether is in turmoil (I won't make any guess on the economical health of Tether nor have an opinion about it, it may be perfectly running or it may be crap, not my concern).
C. The markets are quoting Tether circa 1usd, in other words you can take positions at 1USDT=1USD (1.015 this morning, 0.987 as i am writing the post).

D. In case all goes, the reserves are here and tangible, the legal process stops etc: The loss will be close to 0, since market is max-reversing at 1 usd.
E. In case anything doesn't go well, the market will drop at least to the tangible reserves maximum and/or to the valuation counting the legal risk and availability risk due to a SEC tutelary provision.

Therefor:
if you go short, you may: lose nothing nearly nothing or make a lot.
If you go long, you may: Lose a lot or make nearly nothing.


If one imagines a Nash game out of it, it is obvious the price will go down, at which price you should still go short is another question that I am not able to answer, anyway, go short now.

[obadia]

For the ones not so familiar in finance:
Further than what I wrote, please remember a simple principle of finance:
i. If somebody has a dollar of yours, you valuate it at the chances it has to give it back to you! That's one of the reasons you can have different interest rates in Governement bonds with the same currency (ex interest spread between Germany and Italy).

ii. Quoting USDT at 0.99USD is like saying you trust more Tether than: US Government ability to repay in three months, any US bank, any telcom company, Amazon, Google or the Governement of Canada on short run.

iii. Obviously, government may well default, but since it is a pegged currency, you would also lose the value in depreciation the US governement would apply in its savage fiat printing in case they were clause to default.

iv. In other words, while bitcoin would take a lot of value, there is no way you would make money with Tether in case of a collapse of the USD, nor anyway a Tether should be valued better than USD short term bonds..

[Xintenson]

Noob question, but what exactly is shorting?

[obadia]

Shorting means betting against or selling something you do not currently own.

When unwinding your short you will have a financial impact exactly inverse of the one you would have if you had made a purchase.


fyi: https://en.wikipedia.org/wiki/Short_(finance)