Topic: What Effects Did the Tether Reserves Breakdown Have on Bitcoin and The Market? - page 2. (Read 509 times)

Agree the focus has been too centred on reserves, but that's really an important measure that strangely, even banking systems are keen to do away with -- it follows that Tether should not be punished if banks have foregone that requirement.

I suppose at the end of the day, they should all just be allowed to run themselves into the ground to demonstrate just how rotten the whole system really is -- going to be a lot of pain for stablecoin holders, though I can easily foresee corporate bailouts (temporarily) saving the day.

We know that Tether has claimed that all of their USDT tokens are backed by actual cash deposits. Throughout the years, they have changed this claim to say different things, though. Looking at the pie charts they made public, we can see that their whole reserves aren’t backed up by cash and cash equivalents.

“Cash & Cash Equivalents & Other Short-Term Deposits & Commercial Paper” take up 75.85% of their reserves. But how much of that is actually backed up by cash? According to the chart, only 3.87%.

The biggest reserves of over 65% are commercial papers. This category should represent some type of securities. According to the source, a similar type of commercial papers was part of the problem that led to the bankruptcy of Lehmann Brothers, which signalled the beginning of the financial crisis of 2008.

Wall Street investor Caitlin Long, who has defended Tether many times in the past, was critical of Tether’s choice of assets to keep as reserves. If Tether wanted to keep the risk for users as low as possible, she believes that government bonds would have been a much better choice. The commercial papers introduce a credit risk that could result in USDT no longer being pegged to the USD. Instead, Tether went for “commercial papers” to profit on the interest rates. According to the same source, a 1% interest would net the company a profit of $582 million annually.

If that is true, Tether makes money with the funds users invest when they buy USDT but leaves all the risks on the users by keeping inadequate reserves.

The accountant's attestations reveal that Tether has very little capital. The gap between assets and liabilities is paper-thin: on 31st March 2021 (pdf), for example, it was 0.36% of total consolidated assets, on a balance sheet of more than $40bn in size. Stablecoin holders are thus seriously exposed to the risk that asset values will fall sufficiently for the par peg to USD to break – what money market funds call “breaking the buck”.

Hot damn I always thought Okex was S.Korean, a quick look up confirms I was wrong. Not that it would have mattered, their reputation precedes them.

I come from a non-profit background and I used to think some of the audits in the field cut a lot of corners (but I accepted it as a consideration of the complexities of record keeping and security in environments with extreme instability)... and then I saw audits for small corporates in Europe later on and got a bit of a shock.

So no surprise if Chinese hustlers can get away with more ridiculous ones.

Thanks for the link! I feel like I've read some of his writing before. Used to follow Tether-drama a bit in 2016/17 (?), back when the idea of Spoofy enthralled me.

I would like to see audits made in those commercial papers. I want to laugh together with everyone if those commercial papers were issued by Binance, Okex, Huobi and Poloniex. The Chinese hustling gang hehehe.

Also, for everyone. Read all the articles about iFinex, Bitfinex and Tether  from this website.

https://bennettftomlin.com/

It is one of the best source of information for tether skeptics.

First source I read related to this news put it at an even lower figure, but I actually thought that they already say they have audits (not transparent but apparently, shown to regulators) that already satisfy requirements?

Not that I care, or that regulators should. If FDIC banks in the US don't even need fractional reserve anymore (indefinitely at the moment), then why should Tether need it? They're all printing magic money now;)

Magic money might vanish all of a sudden and many of us who invested in crypto might be affected as well and hence it is better to avoid them.

Chinese miners will probably not move neither, they will probably make a deal with the party, tell them the half of all the money made from miners will go towards the party and they can keep mining there for sure. That is what the getting out jail card there as well, just give them money and you can do anything illegal, party only cares about the money they can make and that's it.

Not that I care, or that regulators should. If FDIC banks in the US don't even need fractional reserve anymore (indefinitely at the moment), then why should Tether need it? They're all printing magic money now;)

The closest countries with cheap electricity they can migrate to are Russia and Kazakhstan. I am not sure how popular the United States is for Chinese miners, but I have read reports in the past that some of them are moving their equipment to the US. The price for industrial electricity in the States is decreasing year by year. It is good for bitcoin mining in general to lower the impact Chinese miners have on the whole network.   

There are people close to the situation in social media who say that miners are in the process of migrating to other countries for the last 48 hours and others are selling their mining hardware.

On the news about the ban on mining in China, this is real. There are people close to the situation in social media who say that miners are in the process of migrating to other countries for the last 48 hours and others are selling their mining hardware.

Manipulators try to re-cook old things, of course, with some new spices for different times. Very generally

• The market can not rise if it does not have big falls previously.
• News are used adaptively with market trends.

With the bloodbath, the market has re-cooked news

• Energy
• Cryptocurrency ban in China
• Illegal use of Bitcoin for criminal activities
• Tether

The market will march onwards with a more prosperous price for Bitcoin, not instantly, of course it takes time.

Is Tether cancer we have to get rid of for bitcoin and the crypto market to have a prosperous future?
How big of an impact do you think this Tether disclosure had on the recent downtrend of bitcoin and the whole market?

The news that only about 70% of what they released is really backed up with fiat is old news, this was discussed back in 2017, and then something like that was confirmed in 2019 Tether Says Its USDT Stablecoin May Not Be Backed By Fiat Alone.

Wall Street investor Caitlin Long, who has defended Tether many times in the past, was critical of Tether’s choice of assets to keep as reserves. If Tether wanted to keep the risk for users as low as possible, she believes that government bonds would have been a much better choice. The commercial papers introduce a credit risk that could result in USDT no longer being pegged to the USD. Instead, Tether went for “commercial papers” to profit on the interest rates. According to the same source, a 1% interest would net the company a profit of $582 million annually.

If that is true, Tether makes money with the funds users invest when they buy USDT but leaves all the risks on the users by keeping inadequate reserves.

In short, USDT reserves can't be trusted and I would advice the stablecoin users to shift to more reliable coins such as USDC.