Anyone Seen Tether's Billions? (bloomberg.com) 79
A wild search for the U.S. dollars supposedly backing the stablecoin at the center of the global cryptocurrency trade --- and in the crosshairs of U.S. regulators and prosecutors. From a report: In July, Treasury Secretary Janet Yellen summoned the chair of the Federal Reserve, the head of the Securities and Exchange Commission, and six other top officials for a meeting to discuss Tether. The absurdity of the situation couldn't have been lost on them: Inflation was spiking, a Covid surge threatened the economic recovery, and Yellen wanted to talk about a digital currency dreamed up by the former child actor who'd missed a penalty shot in The Mighty Ducks. But Tether had gotten so large that it threatened to put the U.S. financial system at risk. It was as if a playground snowball fight had escalated so wildly that the Joint Chiefs of Staff were being called in to avert a nuclear war.
Tether is what's come to be known in financial circles as a stablecoin -- stable because one Tether is supposed to be backed by one dollar. But it's actually more like a bank. The company that issues the currency, Tether Holdings Ltd., takes in dollars from people who want to trade crypto and credits their digital wallets with an equal amount of Tethers in return. Once they have Tethers, people can send them to cryptocurrency exchanges and use them to bet on the price of Bitcoin, Ether, or any of the thousands of other coins. And at least in theory, Tether Holdings holds on to the dollars so it can return them to anyone who wants to send in their tokens and get their money back. The convoluted mechanism became popular because real banks didn't want to do business with crypto companies, especially foreign ones.
Exactly how Tether is backed, or if it's truly backed at all, has always been a mystery. For years a persistent group of critics has argued that, despite the company's assurances, Tether Holdings doesn't have enough assets to maintain the 1-to-1 exchange rate, meaning its coin is essentially a fraud. But in the crypto world, where joke coins with pictures of dogs can be worth billions of dollars and scammers periodically make fortunes with preposterous-sounding schemes, Tether seemed like just another curiosity. Then, this year, Tether Holdings started putting out a huge amount of digital coins. There are now 69 billion Tethers in circulation, 48 billion of them issued this year. That means the company supposedly holds a corresponding $69 billion in real money to back the coins --- an amount that would make it one of the 50 largest banks in the U.S., if it were a U.S. bank and not an unregulated offshore company.
Tether is what's come to be known in financial circles as a stablecoin -- stable because one Tether is supposed to be backed by one dollar. But it's actually more like a bank. The company that issues the currency, Tether Holdings Ltd., takes in dollars from people who want to trade crypto and credits their digital wallets with an equal amount of Tethers in return. Once they have Tethers, people can send them to cryptocurrency exchanges and use them to bet on the price of Bitcoin, Ether, or any of the thousands of other coins. And at least in theory, Tether Holdings holds on to the dollars so it can return them to anyone who wants to send in their tokens and get their money back. The convoluted mechanism became popular because real banks didn't want to do business with crypto companies, especially foreign ones.
Exactly how Tether is backed, or if it's truly backed at all, has always been a mystery. For years a persistent group of critics has argued that, despite the company's assurances, Tether Holdings doesn't have enough assets to maintain the 1-to-1 exchange rate, meaning its coin is essentially a fraud. But in the crypto world, where joke coins with pictures of dogs can be worth billions of dollars and scammers periodically make fortunes with preposterous-sounding schemes, Tether seemed like just another curiosity. Then, this year, Tether Holdings started putting out a huge amount of digital coins. There are now 69 billion Tethers in circulation, 48 billion of them issued this year. That means the company supposedly holds a corresponding $69 billion in real money to back the coins --- an amount that would make it one of the 50 largest banks in the U.S., if it were a U.S. bank and not an unregulated offshore company.
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And the thing is, there are actual, well-established hedges against inflation: fixed goods and equipment of established stable-or-growing value. Anything remotely fungible, purchased in dollars, can be sold for a greater number of dollars if the value of the dollar declines.
One usually prefers growing investments, however. One example of this is forestry companies, especially leveraged ones. Forestry companies own timber lands, whose value has nothing to do with the dollar, but rather the usability of its
Re:Ironic (Score:4, Informative)
Also, "It's very telling that Cryptocurrencies always come under fire during democrat presidencies..." - Really? Bitcoin wasn't created until 2009. Cryptocurrencies have been continually exposed as scams and connected to criminal enterprises since then, with no difference between the 2 democratic and 1 republican presidencies since 2009. Sounds like a quote designed to trick gullible conservatives...
No he's right (Score:2)
Re:Ironic (Score:4, Insightful)
The only people today demanding to be paid in Bitcoin are scam artists, ransomware crooks, and other criminals. You may think the dollar is volatile, but it's amazingly stable compared to Bitcoin, and amazingly stable even when looking at presidential administrations across any party. Bitcoin came under fire under the only republican administration during its life as well, duh. If there is new and rapid rising inflation in the dollar, then bitcoin is not going to help you in any way, better to hedge your bets with real assets.
But your views are repeated a lot, which is why so many crypto scammers are targeting right wing mailing lists with gullible seniors. Just put the word "Patriot" in the name of some bogus investment scheme while claiming that the economy will collapse any day now once we go full commie and they'll gobble it up.
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Every few months someone with a smattering of interweb profile shouts "Bitcoin is a Ponzi scheme."
It is. But, in a saying attributed to John Maynard Keynes, "the markets can remain irrational longer than you can remain solvent."
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Fun quotation, though admittedly a few problems:
#1 - a better quote for intent against economic policies that look solely at "the long term" and claim to project success, "in the long run, we are all dead" [equitablegrowth.org] from Keynes's writings which require that economic policies take both long AND short term concerns into account.
#2 - The quote isn't likely to be Keynes (see point 3): Currently, Shilling is the leading candidate for coiner of this adage. John Maynard Keynes died 1946. He received credit for the adage
Attributed to [Re:Ironic] (Score:3)
That's why I specified "attributed to".
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It is.
It isn't. Bitcoin (itself, as opposed to whatever some collection of chuckleheads you're going to cite say about what bitcoin is) commits no deception about being backed by legitimate equities or property. Ponzi schemes require deception and are thus a fraud. So no, Bitcoin isn't a Ponzi scheme.
Ponzi [Re:Ironic] (Score:2, Troll)
Every few months someone with a smattering of interweb profile shouts "Bitcoin is a Ponzi scheme."
It is.
It isn't. Bitcoin (itself, as opposed to whatever some collection of chuckleheads you're going to cite say about what bitcoin is) commits no deception about being backed by legitimate equities or property. Ponzi schemes require deception and are thus a fraud. So no, Bitcoin isn't a Ponzi scheme.
The characteristic of a Ponzi scheme is that earlier investors are paid off by the money put in by later investors.
That describes investments in bitcoin.
https://www.investor.gov/intro... [investor.gov] https://www.investopedia.com/t... [investopedia.com] https://www.merriam-webster.co... [merriam-webster.com]
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The characteristic of a Ponzi scheme is that earlier investors are paid off by the money put in by later investors.
That is A characteristic.
And the characteristic that people are referring to when they say "this is a Ponzi scheme."
Another characteristic is that investors are deceived. Bitcoin does not have this characteristic. Bitcoin speculators know they are chasing a speculative bubble backed by no actual equities or other value.
If somebody knows that they're investing in a Ponzi scheme, but expects to cash out before the "speculative bubble backed by no actual equities or other value" crashes... it's still a Ponzi scheme.
Re: Ponzi [Re:Ironic] (Score:1)
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You are correct in your definition of ponzi scheme, but you are incorrect in its application to cryptocurrencies. Cryptocurrency is not a ponzi scheme in the classic since since today's money is not really paying off yesterday's investors...if that definition were to be accepted, then ANY asset that rises in value would be a ponzi scheme (Google stock?)
What sets crypto apart from Google is that crypto has no intrinsic value other than the belief that someone else will want it at some point. The only reason
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OK, "the greater fool theory" would serve as an alternate capsule description.
Bitcoin as a Victim (Score:2)
If we go back to first principles and look at Bitcoin, it is [can be] used as a translation mechanism to move accumulated value from one fiat currency to another without going through traditional exchange mechanisms like banks. I can buy Bitc
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I am certainly not an expert in cryptocurrency, but my understanding is that it was conceived not as a mechanism to exchange between two fiat currencies, but as a
more secure, semi anonymous way to buy stuff without physical presence of the two parties and without involving banks and their 'fees'/'tracking', and maybe more important as a way to avoid inflationary aspects of fiat currencies where governments skew the supply/demand curve simply by printing money. Buying stuff anonymously can be done t
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Exactly right.
Cryptocurrency is a hybrid between a typical Ponzi scheme and a greater fool economic bubble. It's perfectly attuned to current manias like internet!!, incomprehensible software!!, libertarian magical thinking!!, get rich quick scams!!, sovereign citizen/anti-government cults!!, tax cheating!!, and normalized criminal behavior!!
It just pushes all the buttons.
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Yup, Bitcoin is backed by the full faith and trust in nothing. If your marks aren't buying your story, then point out how the dollar isn't backed by gold anymore, or say how we print out trillions every year so that their retirement will vanish in a few months, and a few might be scared by all the lying and fearmongering to buy into the scheme before they remember that all those flaws apply to Bitcoin as well.
So it's not a Ponzi scheme, but Bitcoin is still a scheme. There are many ways to dupe a mark of
Once again, here's a link to a video (Score:5, Insightful)
There's around $2.8 Trillion (with a T) dollars tied up in crypto. There are so many reasons that's a bad idea it's hard to know where to begin. TFS is right, there's a real chance this nonsense is going to crash the economy at large. I would prefer the various governments regulate before that happens.
The only trouble is that Crypto probably can't survive regulation since money laundering is it's competitive advantage...
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There's around $2.8 Trillion (with a T) dollars tied up in crypto. There are so many reasons that's a bad idea it's hard to know where to begin.
That can't possibly be true. There's $2.8 trillion dollars in perceived value in crypto, but that doesn't mean there are dollars tied to it. The fed looks at crypto as an asset but not as part of the money supply; if that 2.8T were wiped out it wouldn't have a big effect. People have put actual dollars in crypto, but nowhere near that much. It's not like people are trading insurance policies on crypto like CDOs on mortgage backed securities, and i sincerely doubt you have sovereign wealth funds holding
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So the person who bought the car for 50k is also in fact out 50K if it crashes.
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Not really. What matters is, is anyone colateralizing anything with crypto. crypto can go zero and it won't matter much even if a whole bunch of people are all out $50k at the same time. What will matter is if a whole bunch of people or more realistically financial entities took dollar or euro denominated loans against it. Than what happens is the lender gets jittery because the asset they can repo is no longer worth anything; often the loan terms allow them request early payment in that event. Of course
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All those sad people who spent millions buying up obsolete power plants so that they build crypt mining warehouses will be crying that no one wants their assets anymore (truckloads of video cards for sale, going cheap, please handle carefully due to excess of coal dust and/or radiation).
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There's $2.8 trillion dollars in perceived value in crypto, but that doesn't mean there are dollars tied to it. The fed looks at crypto as an asset but not as part of the money supply; if that 2.8T were wiped out it wouldn't have a big effect.
Perceived value underpins real value. That's the problem. Those 2.8T dollars aren't just Scrooge McDuck's swimming pool, they however imaginary may be are used as leverage for real world investments not at all unlike investments banks made in sub prime loans which had a perceived value far higher than real value.
Just because something is imaginary doesn't mean it can't cause a disaster for the economy.
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All value is subjective/perceived. There is no "real value" or "intrinsic value".
See the subjective theory of value.
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All value is subjective/perceived. There is no "real value" or "intrinsic value".
A common idea in many sci-fi stories is the notion of a currency that has real, specific value in the form of energy. Each unit of currency is denominated in joules (or equivalent) and is ultimately associate with a specific energy storage or production facility (though production facility value must be discounted).
I always thought that a very powerful, though impractical, idea. And then one day I realized that this is actually exactly what we have, except that instead of dollars being backed by promises
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I agree that money represents human energy. In this sense, it is a type of battery or even an energy distribution system.
But it also means that inflation, caused by an increase in the money supply, is analagous to a parasite. It is literally sucking the life energy from the host. And the host is everyone in the country that uses the currency. Direct taxation is also parasitic. But money supply inflation is less obvious.... it can be thought of as something like a tapeworm, which is hidden away dee
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A different way to look at inflation is to say that old favors are worth less than new favors. In that sense, it isn’t so bad, because it encourages people to keep working and participating in the economy, especially talented people who might otherwise decide to retire early on their stockpile of favors.
High inflation is bad of course, but I think a little inflation is a necessary piece of the economic puzzle.
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well, let's agree to disagree on that one. In my book, all increases in the money supply are a theft of human labor and life energy. It is parasitic in nature.
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All value is subjective/perceived. There is no "real value" or "intrinsic value".
See the subjective theory of value.
That is false. There is perceived value and intrinsic value. The underlying intrinsic value forms a bass peg of the what a particular thing can offer society as a minimum. Take Gold for instance. It has a perceived value because it's shiny and people collect it. It also has intrinsic value as a noble metal used as a necessary component of production in goods. Whatever people perceive the value of gold as it won't ever drop below the value dictated by supply and demand related to its critical use.
See the sub
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gold is only valuable because other people think it is.
Give gold to a man dying of dehydration in the desert. See how much he values it vs water.
Subjectively, water is much much more valuable to him.
Also, tomorrow we turn out how to generated gold from lead. Or discover a huge new gold deposit in a mountain that would 10x the current amount of gold in the world.
What happens to gold's "intrinsic" value then? It's subjective value is going to drop, that's for certain.
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Also, what is gold's "intrinsic" value to a seal? do dolphins see the "intrinsic" value of gold?
How about beavers? Beavers value sticks and branches for building a damn. What can they do with gold? It has no value to them. Though I suppose I should not speak for all beavers.... maybe there is a gold-hoarding beaver out there somewhere.
Value is created in the mind of the organism. Organisms are individuals. Thus, value is subjective. This is clearly and obviously true.
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Yup, A crypto currency's value is like the value of Pets.com. It may look big on paper but until it's cash on the barrel it's not really worth a whole lot.
If I had the bitcoin, I'd sell it. I can spend dollars, I can't spend bitoin. Want to head out and party it up at the nightclub and throw some wealth around so that the ladies pay attention? You don't do that with bitcoin, but you can do it with dollars. The criminals using bitcoin are most definitely cashing it in on a regular basis to make some use
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Well put, especially the last paragraph. Nice to see it's already modded up.
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Unified solution to the Facebook problem? (Score:2)
Also well put, though you didn't explicitly mention motivation. From that angle, I would say that the "good moderators" have relatively weak motivations compared to the "corrupt moderators" who are trying to make a buck.
But I'm probably projecting. While I think I'd probably be an honest moderator, these years I never get a moderation point to give. And I obviously don't care or that should discourage me from posting on Slashdot. My theory is that there is some "no moderation points for you" flag, and I hav
I have Tether's Billions (Score:4, Funny)
safely stored in my mattress, and some jars in the backyard. /s
3am Eternal (Score:2)
Uh, part of the problem here is that Tether processes transaction instantly, while banks are a little slow in making payment. Banks only move at 3am, so buys and sells for the day put a little ripple in the bar graph. Still, it rarely his $0.99 or $1.01... it's all in less-than-a-penny land.
So, check to see how many assets BoA has compared to its total balances...
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Uh, your 80% to 80% math doesn't check.
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Depends on the country. I don't know how it is exactly in Germany/EU.
How ever in Thailand it is instantly. The bangking app and also the SMS App ping before the web page with ghe confirmation is finished reloading.
They should be backed but... (Score:1)
You're kinda backing it by buying USDT.
You gave a dollar you get a dollar.
I have had know issues converting to cash.
Nor have anyone else.
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Typo unclear... did you mean...
"I have had known issues converting to cash."
or
"I have had no issues converting to cash."
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Crypto threads must always remain cryptic.
Re: They should be backed but... (Score:2)
Nothing to see here, move along. (Score:1)
Yellen should focus on cleaning up her own backyard if the concept bothers her so much.
Re:Nothing to see here, move along. (Score:4, Insightful)
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I put a lot of the gold standard people into the same neighborhood as the flat earthers, maybe the other side of the tracks though. The gold standard was completely unworkable, especially with the rapdily growing population and economies. When Nixon got the US off the gold reserve it was because there was not enough gold to cover all the dollars out there and he and all his advisors knew it would be a disaster if there was ever a run on the bank. So a quick change over and get it done quick. And yet peo
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Agree with them or not, the position should not be difficult to understand. People resent inflation, and the effect that it has on value that they wish to store. And I can't blame them for not really wanting to hear about "The Greater Good" while they watch their retirement fund evaporate. You may cal
No (Score:2)
But Tether had gotten so large that it threatened to put the U.S. financial system at risk
No lol. Cryptocurrency combined is still nowhere near large enough to put the US financial system at risk. It's not used as collateral for anything so even if it disappeared at this moment, the contagion would be contained. The people who lost it would be sad, but other than that it's nothing.
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It will cause some stock market irrationality though and quite a few bubbles might pop. Probably won't be nearly as bad as the slice-and-dice real-estate collapse though.
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Wow, the horror if the stock market behaved irrationally. That never happens. The financial system truly is at risk!
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That was my reaction as well: If a completely imaginary currency can put the US financial system at risk then the US financial system is in pretty damn poor shape.
Either that or Zeke Faux (is that a real person?) needs a severe hypectomy before he writes more articles.
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Well, Faux is french for fake or wrong.
Hope that helps.
Sorry, sorry (Score:2)
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Not to worry, I think all those billions are tied up in a highly stable NFT portfolio collection!
There are now 12000 plus coins (Score:2)
I'm shocked it took this long for anyone to ask (Score:2)
USDT currently has a marketcap of ~$69bn.
I wish someone would explain what exactly is backing those, since net worth of Tether/Bitfinex is but a fraction of that figure. Or why people is willing to buy/sell digital IOUs at face value to begin with.
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People were asking these questions in 2018 during that year's long and agonizing market downtrend.
From what most of the then-involved reports indicated, it looks like Bitfinex/Tether Ltd. were printing USDT with no backing whatsoever. None. Zip. Zero. Nada. All they would do is push USDT out onto their own exchange, buy BTC with it (mostly during the 2017 bull market), and then HODL. When the value of BTC would jump, they would sell at a profit for USD on other exchanges, and then slide a portion of t
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All they would do is push USDT out onto their own exchange, buy BTC with it (mostly during the 2017 bull market), and then HODL.
That's is the most incredible part of this story. A lot of exchanges create their own coins, but for so-called "stablecoins" the minter actually tells you the market value beforehand, and everyone just blindly accepts it, which is insane to me.
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Most people outside of the few users on Bitfinex knew nothing of what USDT was like when it first hit the scene. If you were a trader on an unbanked exchange like Poloniex (which, in 2018, was still available to Americans), USDT seemed like it was a US Dollar, was worth 1 US Dollar, and could be used to liquidate a position temporarily to facilitate future trades. If you had BTC and wanted to dump quickly and easily, you could do it on an exchange like Poloniex by trading in your BTC for USDT, only to buy