Crypto will survive this Tether fiasco. However, Id imagine anyone holding crypto will get badly burnt whenever it is dealt with. It remains to be seen how or when that will happen. However, it's another reason why regulation (in the right way) can be positive for bitcoin and crypto generally.
Major fall in BTC price (16th Jan)
- Thread starter jhegarty
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I decided in the interests of my crypto education to Google "Tether". What an eye opener. My read, but correct me where wrong, is as follows.
Tether is s crypto backed by real US $ reserves, or so say Tether; so that 1 Tether coin is worth 1 US $. (B/S are you watching? Note that Tether does not have a limited supply and is based on double trust - trust in Tether corp and trust in US $.) So what is it for? It is to enable crypto transfers of US $ so as to make the crypto exchanges fast but mostly because crypto exchanges find it difficult to have relationships with conventional banks. Tether is in effect the US $ banker for the crypto exchanges. As I understand it Tether has become more than that - it is now a significant part of the crypto exchange market - being responsible for as much as 50% of any price rises. So when you see the bitcoin latest price in $ you are probably really seeing its price in Tether coins.
Now by a remarkable coincidence the amount of Tether coins in existence more than doubled to over $2bn during the recent bitcoin downturn. Where on earth did the Tether company get that amount of US $ to maintain their claim that Tether is 100% backed by US $? The obvious suspicion arises. Was Tether in fact "printing" these coins (could happen even for non central bankers don't you agree B/S?) so as to support the bitcoin price? Does that explain the mini dead cat bounce? In the last 24 hours 1.7bn Tether coins were transacted. Is that what is supporting the market? To fuel this conspiracy theory Tether is unable to provide audit proof that it has the US $ backing for these coins and in fact its accountants ditched them very recently and it is under investigation by the US authorities.
The Daily Telegraph predicts that if Tether is exposed as not having these reserves then there would be an immediate 80% fall in the bitcoin price. Does anybody really believe that Tether has those US $ reserves backing its coins? I think Boss the timing of the burst is becoming clearer - weeks rather than months. tecate you are right, Tether is the key to all this, and I respect your judgement for getting out until (if) it gets sorted. People like jman will of course continue to see bull signs, no hope there I'm afraid.
Indeed and the relationship between Tether and Bitfinex exchange...........
TheBigShort
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I'd say the question is, have you been watching?
You are about six weeks behind the curve.
Nevermind, what else have you got for us?
Yes, sounds dodgy, don't like it.
So Tether has a conventional relationship with the US banking system? Wouldnt surprise me. As has/is being pointed out to you, that system is corrupted to the core. It is disease ridden. Full of fraud and manipulation. For sure, the system is so vast that certain levels of fraud and manipulation can be absorbed, but this is just another indicator of how bad it really is.
Imagine being able to set up a company claiming that there is $2bn in reserves, and for it to take this long before someone questions that claim?
Perhaps there is a cure, but I wouldn't too confident that there is.
Exactly! Dodgy or what?
A conspiracy theory, no, not you...surely not you, Duke?
So essentially it "printed" a bunch of coins, which by themselves had nothing going for them - then claimed they were backed by US$ reserves....and the banks fell for this?
When did it predict this? Six weeks ago? The price has fallen 50-60% since then.
I don't.
Brendan Burgess
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What banks fell for this?
It's getting very complicated.
Is this correct?
Tether issued these coins.
Bitcoin owners bought them with BTC.
Presumably some eejits actually paid cash for them as well.
Now the promoters of Tether own a lot of Bitcoin and have a lot of cash, although presumably not $2 billion in cash.
Brendan
TheBigShort
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True, it is. I'm not sure, I'm just relying on what the Duke said;
Perhaps I misinterpreted. But I don't see how you could transfer US$ without using the conventional banking methods. But I'm happy to accept that I have misunderstood and got this bit wrong.
The idea behind Tether is that it tracks the USD and they are to hold equivalent USD. It was/is used by people holding other crypto's when they want to opt out of whatever crypto they're holding. Cashing out to FIAT can be expensive and difficult.
The fatal flaw is that it is centralised. I looked at it a long time ago but for this reason I opted out. Furthermore, burried in their t&c's it states that they are not obliged to meet dollar value.
I knew it was dodgy a long time ago. What I didn't see until late January was the effect it could have on btc through their actions. Most likely BTC liquidity is completely false right now as a direct result of Tether.
Negotiator
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It's impossible to know how many people actually hold Tethers on average at any given time (the amount of the float that is in use per se) but this is the key figure to understanding the risks. The exchanges can have any amount of Tether but if the punters don't actually use them then it doesn't matter.
I don't trust Tether at all and feel very uncomfortable holding them but I have only held them for relatively short periods of time. They are a great way of exiting the Crypto market for a short period of time but obviously creates a new risk. Could it all go t1ts up? Definitely but it's a necessary evil until a better solution is found. In fact the concept of Tether is absolutely fine but it needs to be properly audited on a regular basis and given a lot more transparency.
I think Tether is most vulnerable when the markets falls considerably so if it didn't collapse at around the $6k mark then I think it will need to fall a good bit below this price for it to be an issue again. Just my 2 cents on it, obviously anything is possible!
I don't trust Tether at all and feel very uncomfortable holding them but I have only held them for relatively short periods of time. They are a great way of exiting the Crypto market for a short period of time but obviously creates a new risk. Could it all go t1ts up? Definitely but it's a necessary evil until a better solution is found. In fact the concept of Tether is absolutely fine but it needs to be properly audited on a regular basis and given a lot more transparency.
I think Tether is most vulnerable when the markets falls considerably so if it didn't collapse at around the $6k mark then I think it will need to fall a good bit below this price for it to be an issue again. Just my 2 cents on it, obviously anything is possible!
Of course it matters. The price of Bitcoin is being manipulated with false liquidity and if rumours are to be believed, Bitfinex (just happens to have the same CEO as Tether) is trading Bitcoin using made up Tether for it's own benefit.
TheBigShort
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I would have thought it was people buying bitcoin with tether, inflating the bitcoin price with unverified amounts of $US via Tether coin.
From what im reading above Tether was bought with bitcoin instead? Wouldnt that reduce the bitcoin price against the dollar?
From what im reading above Tether was bought with bitcoin instead? Wouldnt that reduce the bitcoin price against the dollar?
TheBigShort
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Does it matter that such false liquidity is so easily introduced and not verified before it is accepted?
From my reading it appears that all you need is some slick marketing and shiny teeth and hey presto! - you can trust that I have $2bn in reserve!
It's Bitfinex/Tether buying BTC with Tether they've magic'ed up.
They're acting like their own private central bank! It's everything BTC aims not to be.
I agree with Negotiator that it would be useful if properly regulated...but that won't be via Bitfinex/Tether.
Those guys are not bothered. At this point they can issue it at will. No slick marketing required.
They're in the BVA. The yanks supoena'd them but they don't have to comply. Hopefully they find a way to get at them and reign them in.
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They are concerned that it could be subject to government shutdown.
https://cointelegraph.com/news/bitm...enough-cash-reserves-could-still-be-shut-down
Negotiator
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They basically dumped all their US customers last year so they wouldn't have to deal with the Yanks. Their excuse was that US customers only accounted for a very small amount of their business so it wasn't worth all the red tape etc etc. A perfectly viable reason but we don't know whether it was more to do with the whole Tether situation or not.
Oh yes you can! Go to the market and offer it for sale. If you have no bidders, the bag is worth nothing.
Now do the same with a bitcoin.
Dear God. From the report:
The Bitmex report attempts to refute those rumors by showing a possible correlation between the rising cash reserves of the International Financial Entities (IFE) banking category in Puerto Rico, under a section entitled “The lack of transparency may not indicate fraud.”
Cointelegraph recently reported that Puerto Rico may be emerging as a “crypto tax paradise.”
The Bitmex reports puts forward Puerto-Rican-based Noble Bank as a possible candidate for holding Tether’s cash reserves, mainly because it is the one of the two full-reserve banks in Puerto Rico that publicly operates with crypto.
All good with Tether then. Nothing to worry about as the money was in Puerto Rico all this time.....Well there was some money belonging to someone being held in some bank in Puerto Rico. What other assurances do people want??
TheBigShort
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Not much of a sales pitch for either Tether or fiat there. Looks like no-one can assure anyone of anything.
Duke of Marmalade
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No I don't think that is it. I think it is cruder than that. They allegedly issued the coins to themselves allegedly pretending they could do so because they had sufficient US $ to back these newly printed coins. They then allegedly used the freshly printed coins to buy bitcoin thus allegedly supporting the price. A very significant amount of supposedly US $/bitcoin trades are in fact Tether/bitcoin trades and create the illusion that real US $ are being used to but bitcoin.
Brendan Burgess
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Hi Duke
I think we are saying roughly speaking the same thing.
I say: BTC owners bought Tethers.
You say: Tether bought BTC
So the Tether demand pushed up the price of BTC.
Why did they not sell some of the BTC for real cash?
None of this makes any sense, but maybe in the mad, mad, mad, mad, mad, mad World of BTC, it does.
Brendan
I think we are saying roughly speaking the same thing.
I say: BTC owners bought Tethers.
You say: Tether bought BTC
So the Tether demand pushed up the price of BTC.
Why did they not sell some of the BTC for real cash?
None of this makes any sense, but maybe in the mad, mad, mad, mad, mad, mad World of BTC, it does.
Brendan