Tether's Stablecoin USDT 'Has a Peg Stability Problem', Claims Analyst

[larry_vw_1955]

More realistic to this story would be that you see things like trading btc/food, water, fire, cigarettes, electricity,... but no it's not happening like that and what people is using and the desire I see here is harmony from bitcoin, not isolation from theory. The terms decentralization, or centralization label many things. I see sometimes people just want to prove a stance on an issue they support, the general view here is that Tether is still very important anyway. In this market and in the future after all the FUD or negative opinions from someone, it is still the main choice of users.

I'm just saying, something a big as a fiat backing of bitcoin should be highly regulated by the government to make sure it's not some big ponzi scheme or something.

https://cryptoslate.com/global-stablecoins-need-governing-body-pose-risk-to-financial-stability-says-imf-fsb-in-g20-report/

Notice the title of the article: Global Stablecoins need governing body, pose risk to financial stability says IMF, FSB in new G20 report

I think alot more needs to be done to bring these type of things like Tether under a very strict compliance maybe even outlaw them. But I know the report didn't go that far.

[1714712096]

1714712096

[1714712096]

1714712096

[gurunanakji777]

I haven't come across any information about a $150 verification fee. Is this information accurate, or is it just a rumor? I have heard speculation about USDT potentially losing its peg, but nothing has materialized thus far. I have been using USDT for a while, and I haven't encountered any issues. Additionally, the transaction fees associated with USDT are considerably lower than those of other stable currencies, so I intend to keep using it.

[Xal0lex]

Another scary cautionary tale about Tether? Except history shows that USDT has the ability to recover quickly from all sorts of de-pegs, and it doesn't have much impact on its capitalization and level of dominance among other stablecoins. History shows us that no matter how bad things are said about USDT, it still shows much better reliability than USDC, BUSD, TUSD, etc.

why does a company need to be involved in tether though. people have to trust a company! isn't that like the antithesis of bitcoin? you would think with all the high tech blockchain stuff we wouldn't have to rely on a company. even relying on a government would be an improvement over that, i would think. but who wants to rely on a government. so it's really bad. bad all around.

tether could just stop redeeming tethers and the value of usdt would go to 0. because no one else redeems it except tether!

Where have you seen any major projects comply with the basic covenants of cryptocurrencies? It's impossible in the current regulatory environment. You either accept the rules of this game and use liquid products that are widely distributed on the network, or you stick to the crypto covenants and wander somewhere in the crypto underground, using products that almost no one knows about and few people use.

[larry_vw_1955]

I haven't come across any information about a $150 verification fee.

that's because you're a small potato and tether doesn't want anything to do with you. as long as you are a good little boy or girl and don't bother tether you won't have to pay that fee.

Is this information accurate, or is it just a rumor?

of course it is. why would someone make that up?

I have heard speculation about USDT potentially losing its peg, but nothing has materialized thus far. I have been using USDT for a while, and I haven't encountered any issues.

of course you haven't. if that happened then tether would be bankrupt. and it would be all over.

Additionally, the transaction fees associated with USDT are considerably lower than those of other stable currencies, so I intend to keep using it.

i dont get why people don't just keep their money in fiat. that's safer than something like usdt. because its backed by the government. then if you really want bitcoin you buy bitcoin with fiat. simple as that. but don't pretend like tether is decentralized or something. if the us dollar went to zero so would tether.

[nutildah]

i dont get why people don't just keep their money in fiat. that's safer than something like usdt. because its backed by the government. then if you really want bitcoin you buy bitcoin with fiat. simple as that. but don't pretend like tether is decentralized or something. if the us dollar went to zero so would tether.

Because unlike pure USD that trading pairs are based on at some exchanges, USDT can be withdrawn to a cryptocurrency wallet for safe-keeping, moved around to other exchanges, used in something like Uniswap or whatever. This gives it a distinct advantage over USD. To be fair I've never tried to move USD from one exchange to another, or even withdraw it to a bank account (not since 2016 or so anyway), but USDT comes with the distinct advantages of being a cryptocurrency.

[larry_vw_1955]

Because unlike pure USD that trading pairs are based on at some exchanges, USDT can be withdrawn to a cryptocurrency wallet for safe-keeping, moved around to other exchanges, used in something like Uniswap or whatever.

if you like burning money you can move it around and pay $10 everytime you withdraw from an exchange   average fee is about $11 usd right now it looks like https://withdrawalfees.com/coins/tether

This gives it a distinct advantage over USD.

well uniswap and things have even more fees. the only people making money is the exchanges. most people probably losing money. not a zero sum game unfortunately... but we all understand that i guess.

To be fair I've never tried to move USD from one exchange to another, or even withdraw it to a bank account (not since 2016 or so anyway), but USDT comes with the distinct advantages of being a cryptocurrency.

i don't even think its possible to move USD around from one crypto exchange to another they don't want to deal with fiat at all so yea, i understand usdt and things like it get around that issue.

[Tytanowy Janusz]

well the $150 for kyc is really not the big barrier as compared to the $100,000 minimum withdrawal/deposit is it? what if they upped the kyc fee to $100,000 and the minimum withdrawal/deposit to $1,500,000? at what point does it become a scam? and who makes that determination.

It can even go to 10 000 000$ or 50 000 000$ and it probably won't cause the USDT exchange rate to detach from the dollar anyway, because its a penny for binance, huobi, coinbase, kucoin, bybit and several unknown large market makers and arbitrageurs, that will create liquidity for every single smaller trader. Tether will simply cooperate with several large institutions that will create liquidity for smaller players.
Write an e-mail to a sheikh in Abu Dhabi and ask him to sell you 30 liters of fuel for your Opel Corsa. He sells oil by the tonne to companies that then sell it to retailers. Nothing strange here. Tether stays at $1 and will achieve this by being solvent. It doesn't matter whether they decide on wholesale or retail.

i don't even think its possible to move USD around from one crypto exchange to another they don't want to deal with fiat at all so yea, i understand usdt and things like it get around that issue.

Full KYC on exange also means connecting a specific bank account and proving that it belongs to you. All withdrawals can only go to this specific account. So is it possible to transfer usd from 1 exchange to another? yes but only when the bank account of the second exchange is yours (you are the second exchange), or you use will your bank account as an intermediary (making 2 transfers and probably losing 4 business days). Transfering value in USDT takes 5 min.

[zasad@]

Because unlike pure USD that trading pairs are based on at some exchanges, USDT can be withdrawn to a cryptocurrency wallet for safe-keeping, moved around to other exchanges, used in something like Uniswap or whatever.

if you like burning money you can move it around and pay $10 everytime you withdraw from an exchange   average fee is about $11 usd right now it looks like https://withdrawalfees.com/coins/tether

This gives it a distinct advantage over USD.

well uniswap and things have even more fees. the only people making money is the exchanges. most people probably losing money. not a zero sum game unfortunately... but we all understand that i guess.

To be fair I've never tried to move USD from one exchange to another, or even withdraw it to a bank account (not since 2016 or so anyway), but USDT comes with the distinct advantages of being a cryptocurrency.

i don't even think its possible to move USD around from one crypto exchange to another they don't want to deal with fiat at all so yea, i understand usdt and things like it get around that issue.

I don't think you can freely move your stablecoins between exchanges. If you transfer more than $10,000 to an exchange, then the exchange employees will most likely ask you for confirmation of the KYC procedure and many other documents about where you got these stablecoins. And then you won’t even be able to sue the exchange.

After such blocking, you will understand that it is better to pay more commission and not use centralized exchanges.

[larry_vw_1955]

Write an e-mail to a sheikh in Abu Dhabi and ask him to sell you 30 liters of fuel for your Opel Corsa. He sells oil by the tonne to companies that then sell it to retailers. Nothing strange here.

yeah but that's a different situation. people that buy oil in quantity turn around and sell it for a higher price per barrel because they're getting a volume discount. you can't do that with tether. because tether then might not have the money to redeem. unless their investments were paying back more than the discount they were giving to volume purchasers.

Tether stays at $1 and will achieve this by being solvent. It doesn't matter whether they decide on wholesale or retail.

it doesn't make sense then how or why a company would buy something in bulk from tether and sell it to their customers at the same price. there's no profit in that.

[Tytanowy Janusz]

it doesn't make sense then how or why a company would buy something in bulk from tether and sell it to their customers at the same price. there's no profit in that.

They create huge buy wall at 0.9988$ and sell wall at 1.001$. So the price stays in these ranges as long as arbitrageurs keep up with transfers and tether keeps up with transaction processing. And most often it stops in the middle (around $1), because usually in this scenario small investors trade among themselves and only when the sentiment prevails in one direction the price goes to the lower or upper ranges where arbitrageurs earn $0.0012 on every dollar ($12 on every $10,000) or $22 on every $10,000 if they have enough liquidity that they stop the price and it rebounds to the upper band after sentiment changes.

I'll tell you more. I personally had a trading bot that was buing USDT for BUSD as soon as the rate dropped to 0.9999 and selling it as soon as it went to 1.0001 (binance then had a 0 fee policy on currency pairs to BUSD). I didn't need tether, and USD to make money providing liquidity to tether (zero tether KYC fee, no 100k limit). It was possible to get around 30% APY this way.

"as long as ... tether keeps up with transaction processing" - so the larger the arbitrageurs and the fewer of them there are, the greater the chance that tether will work in critical situations. Then there is no situation in which the price of tether on the market temporary drops to $0.98 (flash crash) and tether receives spam from 10,000 small investors and each transfers $1000 that he managed to buy at $0.98 to sell for $1 and earn $20 and tether have to process 10 000 transactions.

[larry_vw_1955]

...arbitrageurs earn $0.0012 on every dollar ($12 on every $10,000) or $22 on every $10,000 if they have enough liquidity that they stop the price and it rebounds to the upper band after sentiment changes.

i guess theres people that would be happy even making $22 on every $1,000,000 always people willing to pickup any free money if you consider putting your money at risk on a centralized exchange risk free.  

I'll tell you more. I personally had a trading bot that was buing USDT for BUSD as soon as the rate dropped to 0.9999 and selling it as soon as it went to 1.0001 (binance then had a 0 fee policy on currency pairs to BUSD). I didn't need tether, and USD to make money providing liquidity to tether (zero tether KYC fee, no 100k limit). It was possible to get around 30% APY this way.

so you couldn't do it by hand? or that would be too tedious? i guess that opportunity is long gone now...

"as long as ... tether keeps up with transaction processing" - so the larger the arbitrageurs and the fewer of them there are, the greater the chance that tether will work in critical situations. Then there is no situation in which the price of tether on the market temporary drops to $0.98 (flash crash) and tether receives spam from 10,000 small investors and each transfers $1000 that he managed to buy at $0.98 to sell for $1 and earn $20 and tether have to process 10 000 transactions.

that would be a disaster if that happened!  

[Tytanowy Janusz]

...arbitrageurs earn $0.0012 on every dollar ($12 on every $10,000) or $22 on every $10,000 if they have enough liquidity that they stop the price and it rebounds to the upper band after sentiment changes.

i guess theres people that would be happy even making $22 on every $1,000,000 always people willing to pickup any free money if you consider putting your money at risk on a centralized exchange risk free.  

Its 2200$ on every $1,000,000 and its not so little if you consider you can use this $1,000,000 couple times a week/day. Its risk free if you are the owner of the exchange or if you hold your money on this exchange anyway (you are doing arbitrage trades on other coins, you are marketmaker, or you are an active whale daytrader that temporary does not have open possition).

I'll tell you more. I personally had a trading bot that was buing USDT for BUSD as soon as the rate dropped to 0.9999 and selling it as soon as it went to 1.0001 (binance then had a 0 fee policy on currency pairs to BUSD). I didn't need tether, and USD to make money providing liquidity to tether (zero tether KYC fee, no 100k limit). It was possible to get around 30% APY this way.

so you couldn't do it by hand? or that would be too tedious? i guess that opportunity is long gone now...

it was possible to do it manually, but the 30% APY result was achieved by placing orders 24/7 and placing new order fraction of the second after previous order was filled. If you wanted to do it manually for 8 hours a day, the APY drops to 10%. If you add human mistake and human reaction time, it turns out that the APY drops to around what 10-year bonds currently pay and you do all the work for free. In my case, it looked like this: I kept my capital on the exchange and actively traded it, and every time I did not have an open position or some of the capital was free, I launched a bot to get extra yeld.


But these are all details. The main message is that the fact that tether targets the largest users and does not retail to everyone is not proof that there is a "Peg Stability Problem". This article is written to create fud and nothing more.
There are many other risks associated with tether. This one is not worth discussion.

[larry_vw_1955]

But these are all details.

yeah i didn't know about those things. but thanks for sharing.

The main message is that the fact that tether targets the largest users and does not retail to everyone is not proof that there is a "Peg Stability Problem".

i guess that's right. on the other hand, tether is probably less stable than say buying T-bills from the US government. They are less likely to default on their obligations than tether. i think we could agree on that. historically, the us government has been the gold standard for paying their obligations. they're not looking so good these days but they're still issuing T-bills. and paying the interest.

This article is written to create fud and nothing more.

maybe part of it is? but certainly not all of it. this stuff here has nothing to do with the particular author of the story. he's just reporting what i would assume to be facts:

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) published a report commissioned by G20 under India’s leadership, outlining a comprehensive framework for regulating crypto-assets like Bitcoin and stablecoins today, Sept. 7.

The paper synthesizes the policy recommendations from both organizations to help countries address the financial stability and integrity risks posed by the rapid growth of crypto-assets.

so i guess what you're saying he used that as a branching off point to try and make tether look bad. 

There are many other risks associated with tether.

you mean like them running away with the money or their investments going sour or the us dollar becomes worthless?

This one is not worth discussion.

then lets talk about the real risks of it. i'm curious to know what they are.

[Tytanowy Janusz]

or the us dollar becomes worthless?

It's not a tether problem and it's hard to describe it as a risk from tether exposure because in this case they will do their job exemplarily - they will maintain a 1:1 ratio to the dollar - what they promise. But in the event that the dollar falls to zero, the question arises - who owns the tether reserves and the profits from their investment. The risk of losses is on our side, so at least part of the profits should be on our side too, but this is probably not the case. I am writing about this because Tether's balance sheet apparently contains around 2% of bitcoin and >5% of non debt assets that will not go to zero with dollar.
But here we are talking about unlikely cases in which tether "behaviour' will be the least of our problems.

About their investment portfolio (if its not faked). It is set relatively safely, as according to their report, 85% is cash or cash substitutes (which in my opinion is enough to never have problems with liquidity.) Why? it is said that 30% of bitcoins are lost. someone died and didn't hand over the keys, someone lost the keys, someone regularly leaves dust on various wallets. I think it's the same with tether. Great proof of this is the busd marketcap, which needed as much as 10 months to drop by 90% after it was announced that busd was going out of business. Tether is twice as old, so the number of lost tokens is probably twice as high. I know it sounds strange, but even if the rest of investments goes to zero, i think 80% in cash is enough to be 100% backed, because during the 8 years of tether's existence, people have been "burning tokens" on a daily basis.

But looking deeper, what "Cash Equivalents" is. They are mostly U.S. Treasury Bills that expire after 4 weeks, 8 weeks, 13 weeks, 17 weeks, 26 weeks, or 52 weeks. So because they have a short expiry period, they are not that susceptible to rate changes. Its not a 20 year bond that can dump 50% in price due to rising interest rates creating temporary paper losses

if they don't lie in their reports, their wallet seems to be safe enough that tether will never have problems maintaining the $1 exchange rate. And here's the big if and the biggest risk. If they don't lie...

Another big risk may be a massive attack by regulators and freezing of funds or them running with our money.

[Xal0lex]

Another scary cautionary tale about Tether? Except history shows that USDT has the ability to recover quickly from all sorts of de-pegs, and it doesn't have much impact on its capitalization and level of dominance among other stablecoins. History shows us that no matter how bad things are said about USDT, it still shows much better reliability than USDC, BUSD, TUSD, etc.

why does a company need to be involved in tether though. people have to trust a company! isn't that like the antithesis of bitcoin? you would think with all the high tech blockchain stuff we wouldn't have to rely on a company. even relying on a government would be an improvement over that, i would think. but who wants to rely on a government. so it's really bad. bad all around.

Because all the most common crypto products are regulated and centralized. No one will allow USD to be operated anonymously and decentralized, these are utopian fantasies that are not destined to come true.

tether could just stop redeeming tethers and the value of usdt would go to 0. because no one else redeems it except tether!

Bitcoin could also fall to 0 if all the governments of the world suddenly say they ban its use and paying with bitcoin is a criminal offense. Then we will go back to 2012, where bitcoin was used only in darknet transactions and was worth a few cents or bucks. A scenario like the fall of Tether is unlikely, just like the bitcoin scenario I described.

[nelson4lov]

why does a company need to be involved in tether though. people have to trust a company! isn't that like the antithesis of bitcoin? you would think with all the high tech blockchain stuff we wouldn't have to rely on a company. even relying on a government would be an improvement over that, i would think. but who wants to rely on a government. so it's really bad. bad all around.

tether could just stop redeeming tethers and the value of usdt would go to 0. because no one else redeems it except tether!

In addition to what, @Xal0lex has already said, the reason most of web3 or crypto startups chose to indulge in Tether or any other stablecoin project for that matter is because they need on/off fiat ramp in order to operate properly. There are laws and rules associated with the country that the company is located at. So these restrictions make Tether a viable option for use. There are operations cost to run a company including employee salaries, etc. All of these can't be done without KYC amongst a formal payment gateway for on/off ramp payments with support for crypto.

Bitcoin could also fall to 0 if all the governments of the world suddenly say they ban its use and paying with bitcoin is a criminal offense. Then we will go back to 2012, where bitcoin was used only in darknet transactions and was worth a few cents or bucks. A scenario like the fall of Tether is unlikely, just like the bitcoin scenario I described.

The possibility of Tether falling/going to zero is there but it won't be a likely scenerio. Tether is embedded too deep in crypto. Crazy how an independent, centralized entity has garnered so much influence in a decentralized economy.

[larry_vw_1955]

Because all the most common crypto products are regulated and centralized. No one will allow USD to be operated anonymously and decentralized, these are utopian fantasies that are not destined to come true.

If bitcoin can run anonymously and decentralized then a stablecoin can too. but if you're saying bitcoin can't even do that then i don't know why we're here.

Bitcoin could also fall to 0 if all the governments of the world suddenly say they ban its use and paying with bitcoin is a criminal offense.

i don't know if that's a fair scenario to make a conclusion about that. trying to outlaw something doesn't always make its value go to 0. so i don't think we can assume that about bitcoin.

Then we will go back to 2012, where bitcoin was used only in darknet transactions and was worth a few cents or bucks. A scenario like the fall of Tether is unlikely, just like the bitcoin scenario I described.

i dont know. its hard to imagine but i don't know if that means it is unlikely. but i dont expect to see bitcoin going back to that level not ever. unless something unexpected happens.

The possibility of Tether falling/going to zero is there but it won't be a likely scenerio. Tether is embedded too deep in crypto. Crazy how an independent, centralized entity has garnered so much influence in a decentralized economy.

from what i've seen tether is main use is just to serve as an opposite pair. you trade eth/usdt or btc/usdt so it's like a part of the liquidity pair. no one really has a tether wallet where they just store tether on a non-custodial wallet because it would be useless then i guess! because all you can use it for is on exchanges. so you just have to keep it on exchanges. or just pay a bunch of fees to go back and forth to your wallet. there's tether on ethereum maybe tether on other blockchains so the stuff is not even interoperable. kind of confusing.

[Xal0lex]

Because all the most common crypto products are regulated and centralized. No one will allow USD to be operated anonymously and decentralized, these are utopian fantasies that are not destined to come true.

If bitcoin can run anonymously and decentralized then a stablecoin can too. but if you're saying bitcoin can't even do that then i don't know why we're here.

Bitcoin is not linked to USD, it is a standalone coin on its own blockchain. If someone offers a crypto product that is backed by fiat currencies, it will never be decentralized and anonymous. Never.

Bitcoin could also fall to 0 if all the governments of the world suddenly say they ban its use and paying with bitcoin is a criminal offense.

i don't know if that's a fair scenario to make a conclusion about that. trying to outlaw something doesn't always make its value go to 0. so i don't think we can assume that about bitcoin.

Just because you can't envision such a scenario doesn't mean it can't happen in principle.

[nutildah]

If someone offers a crypto product that is backed by fiat currencies, it will never be decentralized and anonymous. Never.

Although its not "backed" by fiat currency (merely pegged to the US dollar), MakerDAO does exactly that for their stablecoin, DAI.

https://coinmarketcap.com/currencies/maker/

MKR’s unique proposition lies in the fact that it allows its holders to directly participate in the process of governing DAI. Every holder of Maker tokens has the right to vote on a number of changes to the Maker Protocol, with their voting power depending on the size of their MKR stake. Some of the aspects of the protocol the holders can vote on are:

Adding new collateral asset types to the protocol, allowing users to submit new cryptocurrencies to mint more DAI;
Amend the risk parameters of existing collateral asset types;

Change the DAI Savings Rate: holders of DAI tokens can earn savings by locking them in a special contract, and the Savings Rate impacts the profitability of that contract;

Choose the oracles — entities whose goal is to supply trustworthy off-blockchain data to the Maker ecosystem;
Upgrades to the platform.

This ability to participate in the management of one of the largest stablecoins on the market is what drives the demand for MKR tokens and correspondingly affects their value.

All that is required to participate in the DAO is to hold MKR. You can argue it is not as decentralized as Bitcoin, and possibly not as anonymous, and you'd be right -- its not. But its an example of a stablecoin that is somewhat decentralized and anonymous.

[tygeade]

good luck with using tether everyone. you're going to need it if this thing depegs. 

I do not know if the problem will rise from within USDT itself and Tether as a company, or if it will be just governments doing something about them, but I am sure that there will  be an issue for them in the future. Nobody should be able to just print a fake thing and say "this is pegged to 1 dollar" and convince enough people to get tens of billions of dollars. That is literally what this is all about, they give you some digital code, that says that it's pegged to 1 dollar, and you should trust them about it.

This isn't like any other cryptocurrency, you have to trust a company for this, no other is like that, when you buy bitcoin you know the risks, but when you buy USDT you have to trust Tether is legit. So it could result with some issues in the future.