I could be wrong, but isn’t the trade volume of Tether on exchanges far and away above that of actual dollars? Such that the price of nearly anything crypto-related is tied to its dollar backing?...
I could be wrong, but isn’t the trade volume of Tether on exchanges far and away above that of actual dollars? Such that the price of nearly anything crypto-related is tied to its dollar backing? It’s insane to me that Tether is the lynchpin of a financial industry with a 2T market cap and no one is even sure if it’s a scam or not.
I don’t think there are any “actual dollars” on most crypto exchanges? Even given that dollars in bank accounts are electronic records, these exchanges don’t have the agreements with banks to do...
I don’t think there are any “actual dollars” on most crypto exchanges? Even given that dollars in bank accounts are electronic records, these exchanges don’t have the agreements with banks to do that. The stablecoins filled a need. Though, it’s weird that Tether is preferred to USDC.
Coinbase is something of a exception in that it will let you transfer to and from your bank account.
100%. It's baffling that anyone with a need for a stablecoin and a choice between Tether and USDC would ever pick Tether. Maybe it's purely just the persistence of its initial success: everyone...
Though, it’s weird that Tether is preferred to USDC.
100%. It's baffling that anyone with a need for a stablecoin and a choice between Tether and USDC would ever pick Tether. Maybe it's purely just the persistence of its initial success: everyone knows its name and knows it's supported everywhere so they pick it.
But I stumbled into an interesting twitter thread forever ago that offered some insight: it alleged there are many smaller exchanges that run promotions that are paid out with Tether specifically (ie. open an account, keep a minimum balance of crypto, get free Tether). So it's possible that a ton of people are exposed to Tether through these promotions, and then they keep using Tether because it's something familiar to them and because they keep seeing it referenced and used by others.
Now why there would be so many promotions paid out in Tether specifically is an interesting question. Do they do it purely because Tether is a well-known option that they think users will be comfortable with, and so it's purely just a case of Tether's pre-existing popularity reinforcing itself? Does USDC just have a bit more oversight and a higher risk of its issuers revoking the exchange's use of it, so exchanges prioritize Tether? Or are the exchanges specifically doing some kind of money-laundering scheme with the issuers of Tether? I think the other explanations are simpler and more likely, but if the Tether issuers are being shady already, there must be a lot of lucrative opportunities along these lines.
I'm not totally sure what you mean by this. Binance and Coinbase, two of the largest exchanges, both allow users to exchange cryptocurrency for US dollars without passing through Tether.
I don’t think there are any “actual dollars” on most crypto exchanges?
I'm not totally sure what you mean by this. Binance and Coinbase, two of the largest exchanges, both allow users to exchange cryptocurrency for US dollars without passing through Tether.
Yes, I know Coinbase works. I’ve used it myself. I’m not too familiar with other exchanges, but I think some don’t support having a cash balance (in USD) at all? They just have stablecoins. Also,...
Yes, I know Coinbase works. I’ve used it myself. I’m not too familiar with other exchanges, but I think some don’t support having a cash balance (in USD) at all? They just have stablecoins. Also, I don’t know about Binance. I see complaints on Reddit about transfers not showing up.
But then the question is, if they support having a cash balance, can you trust them? When you trust an exchange to be good for the money, is that “actual dollars” or not?
This gets into how money is defined, and there are multiple definitions to pick from. Bank deposits are included by most definitions and money market funds are sometimes included. I don’t think any cryptocurrency exchanges are included. Hopefully they have bank accounts.
For me, Coinbase is the only cryptocurrency exchange I trust, though that’s relative. I think they’re legit but I don’t trust them as much as a traditional brokerage (where I keep higher balances), let alone a bank.
If people have collectively agreed that 1 tether equals 1 dollar then I don’t see why it matters if tether is backed by real cash. It’s essentially a second-degree fiat currency.
If people have collectively agreed that 1 tether equals 1 dollar then I don’t see why it matters if tether is backed by real cash. It’s essentially a second-degree fiat currency.
It's not that people have just agreed upon it. Tether is guaranteeing their tokens are redeemable (if you're not an American) for 1 USD and that each token is backed by cash or equivalents. If it...
It's not that people have just agreed upon it. Tether is guaranteeing their tokens are redeemable (if you're not an American) for 1 USD and that each token is backed by cash or equivalents. If it ever became public knowledge that this wasn't the case you'd be heavily incentivized to redeem ahead of the crowd and a bank run would likely ensue.
I think it's similar to a currency peg. It will work as long as whenever people decide to exchange Tethers for dollars, someone is there with enough dollars to take the other side of the trade. So...
I think it's similar to a currency peg. It will work as long as whenever people decide to exchange Tethers for dollars, someone is there with enough dollars to take the other side of the trade. So far that's been true.
As far as I know Tether hasn't seriously been challenged, but maybe someday it will happen. When the challenge comes, there needs to be someone with lots of money who is willing to spend it on all the Tether that other people don't want anymore. And the question is whether Tether (or anyone else) will be willing and able to do it. At that point, it will matter if the cash is really there.
Here is a good overview what is known of Tether's story, including interviews with a few of the people involved. Summary: still sketchy.
I could be wrong, but isn’t the trade volume of Tether on exchanges far and away above that of actual dollars? Such that the price of nearly anything crypto-related is tied to its dollar backing? It’s insane to me that Tether is the lynchpin of a financial industry with a 2T market cap and no one is even sure if it’s a scam or not.
I don’t think there are any “actual dollars” on most crypto exchanges? Even given that dollars in bank accounts are electronic records, these exchanges don’t have the agreements with banks to do that. The stablecoins filled a need. Though, it’s weird that Tether is preferred to USDC.
Coinbase is something of a exception in that it will let you transfer to and from your bank account.
100%. It's baffling that anyone with a need for a stablecoin and a choice between Tether and USDC would ever pick Tether. Maybe it's purely just the persistence of its initial success: everyone knows its name and knows it's supported everywhere so they pick it.
But I stumbled into an interesting twitter thread forever ago that offered some insight: it alleged there are many smaller exchanges that run promotions that are paid out with Tether specifically (ie. open an account, keep a minimum balance of crypto, get free Tether). So it's possible that a ton of people are exposed to Tether through these promotions, and then they keep using Tether because it's something familiar to them and because they keep seeing it referenced and used by others.
Now why there would be so many promotions paid out in Tether specifically is an interesting question. Do they do it purely because Tether is a well-known option that they think users will be comfortable with, and so it's purely just a case of Tether's pre-existing popularity reinforcing itself? Does USDC just have a bit more oversight and a higher risk of its issuers revoking the exchange's use of it, so exchanges prioritize Tether? Or are the exchanges specifically doing some kind of money-laundering scheme with the issuers of Tether? I think the other explanations are simpler and more likely, but if the Tether issuers are being shady already, there must be a lot of lucrative opportunities along these lines.
I'm not totally sure what you mean by this. Binance and Coinbase, two of the largest exchanges, both allow users to exchange cryptocurrency for US dollars without passing through Tether.
Yes, I know Coinbase works. I’ve used it myself. I’m not too familiar with other exchanges, but I think some don’t support having a cash balance (in USD) at all? They just have stablecoins. Also, I don’t know about Binance. I see complaints on Reddit about transfers not showing up.
But then the question is, if they support having a cash balance, can you trust them? When you trust an exchange to be good for the money, is that “actual dollars” or not?
This gets into how money is defined, and there are multiple definitions to pick from. Bank deposits are included by most definitions and money market funds are sometimes included. I don’t think any cryptocurrency exchanges are included. Hopefully they have bank accounts.
For me, Coinbase is the only cryptocurrency exchange I trust, though that’s relative. I think they’re legit but I don’t trust them as much as a traditional brokerage (where I keep higher balances), let alone a bank.
If people have collectively agreed that 1 tether equals 1 dollar then I don’t see why it matters if tether is backed by real cash. It’s essentially a second-degree fiat currency.
It's not that people have just agreed upon it. Tether is guaranteeing their tokens are redeemable (if you're not an American) for 1 USD and that each token is backed by cash or equivalents. If it ever became public knowledge that this wasn't the case you'd be heavily incentivized to redeem ahead of the crowd and a bank run would likely ensue.
I think it's similar to a currency peg. It will work as long as whenever people decide to exchange Tethers for dollars, someone is there with enough dollars to take the other side of the trade. So far that's been true.
But even central banks can have trouble enforcing currency pegs. You might compare with the time George Soros (and others) broke the bank of England.
As far as I know Tether hasn't seriously been challenged, but maybe someday it will happen. When the challenge comes, there needs to be someone with lots of money who is willing to spend it on all the Tether that other people don't want anymore. And the question is whether Tether (or anyone else) will be willing and able to do it. At that point, it will matter if the cash is really there.