How centralized stablecoins keeps their value?

[mirek92]

Hello, I would like to ask, how centralized stablecoins keeps their value?

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

I read lots of articles about Tether bot there is only theory that Tether hold same value as reserves, but I didn´t found next practical steps...

Thank you for reply

[keyscore44]

Hello, I would like to ask, how centralized stablecoins keeps their value?

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

I read lots of articles about Tether bot there is only theory that Tether hold same value as reserves, but I didn´t found next practical steps...

Thank you for reply

In theory, each Tether should be backed 1:1 with a real dollar. There are many doubts as to whether such an enormous sum is actually secured in dollars, but Tether has gone through all audits so far. There is no evidence that it is not properly secured. In other words we just have to believe that the audits were carried out correctly and everything is secured as it should be, so 1:1 in USD.

[mirek92]

Yes, But I am more interested about way, how to get back to value of 1.
I mean that for example all tether/usd, tether/usdc, tether/dai and so on drop visible under 1. And it happen on Binance, Kucoin, Crypto.com and for example 70% of total Tether/other_usd_coin volume. Which mechanism (personal or automated) should return value back..?

[vv181]

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

Ideally, those people who are still trusting Tether can redeem their USDT for the pegged 1:1 price directly to Tether. In that attempt, the market may resolve it on its own. Since there may still be enough people who trust the company, they can arbitrage it.

As a result, for those who still believe and assume Tether can handle a tremendous amount of $ redemption, the market price will reach stability, until there is no room for arbitrage opportunity.

In a nutshell, it solely relies on how Tether handles the redemption, meaning how liquid and/or accurate their reserve is.

[mirek92]

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

Ideally, those people who are still trusting Tether can redeem their USDT for the pegged 1:1 price directly to Tether.

Ok, so do you know the link where can I do it?

[vv181]

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

Ideally, those people who are still trusting Tether can redeem their USDT for the pegged 1:1 price directly to Tether.

Ok, so do you know the link where can I do it?

You can check it out on https://tether.to/en/

[mindrust]

Hello, I would like to ask, how centralized stablecoins keeps their value?

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

I read lots of articles about Tether bot there is only theory that Tether hold same value as reserves, but I didn´t found next practical steps...

Thank you for reply

Exchanges probably. They probably make a deal with the tether issuer to keep it at 1:1 with the USD so no matter how much you wanna sell they'll buy or try to buy your tokens from 1 usd each. Sometimes as you have seen few days ago, the sell pressure on USDT gets overwhelmingly powerful, it starts to de-peg from the USD. Tether indeed holds some "stuff" to back their tokens but they are not transparent about it. Pretty shady imo.

[JeffBrad12]

Hello, I would like to ask, how centralized stablecoins keeps their value?

It was keeping its value by getting backed by the stable asset.

If people start to don´t trust Tehter, they are able to sell a bit under 1 usd price. And price USDT / USD can drop for example to 0,97, how can Tether cummunity return value closer to 1,00 if drop to 0,97 happen for example in all bigger exchanges and all their pairs?

It's based only with the trust to the tether. We have that a last weeks tether's price dropped to to the below $1. This is making so many people were feeling scared with it. That can triggers massive distrust to the tether as stable token provider.

I read lots of articles about Tether bot there is only theory that Tether hold same value as reserves, but I didn´t found next practical steps...

It's still unknown. Tether knows everything but not with us. The data was not so transparent but it's not fully backed by fiat money.

[Jawhead999]

When USDT price dropped to under $1, they will burn their token, this will reduce the circulation supply and increase the price.

When USDT price increase exceed $1, they will mint new token and increase the circulation supply, this will make the USDT price decrease.

You're correct the CEO hold significant amount of USDT, but he still doesn't include it on circulation.

[bittick]

All of theories that already written by various writers are not relevant anymore. It's caused by tether was not so transparent with reserved funds. In my opinion if tether was getting its value from backed by the dollars and trust from the users. Do you know why? it's caused by the users are only trusting tether without knowing about how many reserved funds that owned by tether to backed USDT. I meant that's not transparent. So many people are only speculating about this.
You shall not easily trust any theories which was not true. Those are only speculators.

[el kaka22]

Reality is that Tether company says that they are willing to buy it back from you. Which makes some people know this, even test it at times, and since it has been proven to be true so far, if it ever goes under 1 dollar, so like becomes 97 cents, then these people pay bitcoin to get it, and make it higher, because they trust the system and think it will be 1 dollar and they can get 1 dollar from tether.

So, if there is a big drop, many will spend billions to get it back to 1 again so that they could return it to tether if they have to and get it. This chain would be broken in a second and USDT could worth zero the moment Tether doesn't pay up when asked.

[dwminer1]

I think that in the current market the exchanges also play a big role in keeping the price of stable coins. For example, on Binance, the trading volume of the BUSD/USDT pair is about 1 billion a day. Think how much the exchange, which has enormous liquidity, earns by buying coins from users at a price slightly lower than the dollar, and selling for a slightly higher. Having the right bots and not paying commission can give a profit counting in millions of dollars a day.

[masterrex]

IMO, I believe that not all centralized Stablecoins have proven pegged to 1-1 against USD, But so far *USDT tether has been challenged through an audit and I can say that it was consistent for now, that USDT was backed by a reserve maybe they have a lot of *BTC and USD as a reserve currency. But what if the USDT will experience a massive dump like what Terra Luna's UST Stablecoin has experienced, can USDT still survive and retain its stability?

Anyway, another centralized Stablecoin like BUSD was also boosted that they are very sure that it was pegged with a 1-1 against the USD and guaranteed by no other than CZ himself the CEO of Binance. So I think thats the reason why BUSD is also Stable. it was truly backed by a Bitcoin reserve base on what CZ is saying.   

[Crypt0Gore]

There is nothing to worry about, USDT is now audited, those who are asking for a proof are asking for too much to be honest, how many people are they going to show the proof? Is it even safe for the business? It's better not to talk about proof at all.