Tether Cuts Commercial Paper, Boosts Treasuries Behind USDT (bloomberg.com) 35
Tether, the operator of the world's most used cryptocurrency, said it had reduced the amount of commercial paper in the reserve backing its $74 billion stablecoin, revealing information about its holdings while dollar-pegged assets face tougher scrutiny from regulators. From a report: Tether Holdings had assets totaling at least $82.4 billion as of March 31, along with $82.2 billion in liabilities relating to the digital tokens it issues, according to an assurance from Cayman Islands-based MHA Cayman. Tether is the issuer of USDT, a stablecoin which relies on a reserve of US dollar and dollar-equivalent assets to maintain a one-to-one peg with the currency. The quality of those reserves have previously been called into question for an over-reliance on assets with limited liquidity, with criticism levied at Tether over its lack of transparency on the matter.
The crypto company was brought under an intense spotlight over the last week following the collapse of algorithmic stablecoin Terra, which briefly knocked USDT off its peg with the dollar during a period of mass market instability. In a statement on Thursday, Tether noted a 17% decrease in its commercial paper holdings to $20.1 billion compared to the previous quarter, and added that it had completed a further 20% reduction on that amount since April 1, which will be included in its upcoming report for the second quarter. Conversely, Tether said it had increased its investments in money market funds and US Treasury bills, rising more than 13% to a total of $39.2 billion. The average rating of its commercial paper and certificates of deposit has increased from A-2 to A-1, it added, while secured loans have decreased by $1 billion.
The crypto company was brought under an intense spotlight over the last week following the collapse of algorithmic stablecoin Terra, which briefly knocked USDT off its peg with the dollar during a period of mass market instability. In a statement on Thursday, Tether noted a 17% decrease in its commercial paper holdings to $20.1 billion compared to the previous quarter, and added that it had completed a further 20% reduction on that amount since April 1, which will be included in its upcoming report for the second quarter. Conversely, Tether said it had increased its investments in money market funds and US Treasury bills, rising more than 13% to a total of $39.2 billion. The average rating of its commercial paper and certificates of deposit has increased from A-2 to A-1, it added, while secured loans have decreased by $1 billion.
UNstablecoin (Score:1)
which briefly knocked USDT off its peg with the dollar
If Tether's centralized shitcoin can't be exchanged 1:1 back to dollars at the mothership, it's only backed by make-believe. I'm honestly surprised this charade has been allowed to continue.
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People trade with it because you can easily move it from exchange to exchange, which is not quite the case with fiat currency. It's basically idiocy to try and simply day-trade it--the only time it's moved more than a small fraction of a percent has been when Luna crashed and loads of people flushed their Tether just in case, overloading exchange markets like Coinbase where it dropped to almost 94 cents.
What people should worry about is that the company has never had a proper audit, which is so incredibly
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That is exactly how stablecoins make their money. Even though they are pegged on the dollar, or yuan, or some other currency, the owners assume that not everyone will want to sell their stake of currency, so if they have $100 backing up, they can have $1000 floating around, and nobody will really care. Well, until people get panicked and trade out.
Same exact stuff happened in the 1920s with banks.
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I like how you slip in that "OR how decentralized."
Because decentralized definitely makes for stability. Yup yup yup.
It is redeemable. Here's the sign up page (Score:3)
I've written here many times why Bitcoin and similar are useless as currency, and suck as a payment provider - PayPal, Venmo, etc are faster and cheaper. I'm not into crypto.
That said, Tether IS redeemable from "the mother ship".
It's easier to use an exchange, but if you are running an exchange or a merchant you might choose to deal with Tether.to directly.
https://app.tether.to/app/sign... [tether.to]
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You can redeem $100,000 of Tether for $99,900 after fees.
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You can redeem $100,000 of Tether for $99,900 after fees.
Their site says the fee is actually $1,000. Also, there is a broken link here (in bold): [tether.to]
Note: Please exercise extreme care when depositing tokens. In cases where token recovery is needed due to a deposit mistake, Tether may, in certain limited cases and in its sole discretion, attempt to assist you to recover your token(s) and will charge you fees as determined [here](/tether-token-recoveries).
Yeah, that just screams "trustworthy". It really seems like they're making it as difficult as possible (and for
Nobody reads the TOS (Score:2)
This is in the TOS for the sign-up you just linked:
Market Risk: The market for Digital Tokens is still new and uncertain. No-one should have funds invested in Digital Tokens or speculate in Digital Tokens that she is not prepared to lose entirely. Whether the market for one or more Digital Tokens will move up or down, or whether a particular Digital Token will lose all or substantially all of its value, is unknown. This applies both to traders that are going long and to traders that are shorting the market.
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Tether is NOT redeemable (Score:2)
The entire system is designed to let the exchanges and big guys bail when the time comes while leaving the rank and file holding the bag when it inevitably implodes.
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The exchange would simply redeem however much they needed to fulfill orders if there were "run". If a thousand people each want to sell $500 worth of Tether (and nobody is buying), the exchange redeems $500K.
Same as the stock exchange works in blocks of 10,000 shares or $200,000 minimum. When you want to sell 1 share or 10 or 100, you sell those 100 to your broker, who then batches them up and sell batches on the NYSE. That doesn't mean you can't sell 10 shares. Heck, it's EASIER to sell 10 shares if there
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I think this entire crypt-currency / NFT / web3 business is all pretty much nonsense. I think its all going to zero eventually and that some years from now we all find ourselves talking about the 2011-2202X era the way we do about the .COMedy. Some technology will come out of it; eventually the FED will roll out a digital dollar or something with a public settlements ledger similar in concept to the bitcoin blockchain. Maybe States/Counties will use some of the technology to track and control the transfer
Maybe Tether is actually for real (Score:3)
I had always been dubious that Tether was really fully backed, or at least what it was backed with was of poor quality.
But so far Tether has held up again a lot of withdrawals, maybe they are actually more stable than I thought...
Still too much risk for me they are not though, so I remain out of crypto until the stability of the market as a whole is resolved.
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That's very sensible as far as it goes but even if they were backed and therefore stable, what would be the point? I already have currency units worth one dollar each in my dollar bank account, I can make payments through online banking free of charge (and if I didn't have a means to do that then I would have to pay a fee to get the stable coins in the first place so using them wouldn't put me ahead). In what way would these coins actually improve on that? If they were stable then they wouldn't be any use a
They haven't had that many withdraws (Score:5, Interesting)
The issue here is that even reducing their "commercial paper" assets by 17% those are still IOUs. It's another company that promised to give tether fiat currency (e.g. real, live USD) in exchange for Tether. But there's nothing to prove those companies really have the cash. Worse, there's indications that those "companies" are either shell companies that are just tether in disguise or are closely related to them.
e.g. if a crypto exchange promises to back tether with real $USD, allowing tether to mint coins, then sells those coins onto investors for a profit that sounds fine... until it's not. Specifically what happens when those investors want to bail? Their holdings are under $100k, so they can't get their money from tether. But the exhange, who's holdings are well over $100k, can. They get paid first, and the exchange would get all the cash tether is holding in this scenario... and then have those IOUs called in against it. Fine if the exchange pays up, but if they can't or won't, that leaves those small investors holding the bag.
That means they'll sell their tether off for whatever they can get, and the price collapses. This is similar to what happened with "Wild Cat" banks in the 1900s (look up a video on YouTube by CurrentAffairs, I'd never heard of these things). They were doing exactly what tether seems to be doing, e.g. creating fake currencies and shuffling money around to attract investors. And it blew up spectacularly.
This is why so many crypto critics say they're "speedrunning 500 years of financial regulation history". Which wouldn't be a problem, except these companies are buying real assets with fake money, and when they crash they're likely to take down the whole economy when they're forced to sell off whatever they have, or when they try to run with it.
Re:They haven't had that many withdraws (Score:4, Interesting)
But there's nothing to prove those companies really have the cash.
Yeah whenever you find yourself thinking "maybe it's different this time" it's usually not different. :-)
So I agree, me earlier optimism is probably misplaced... thankfully I have involved no actual money to go with that optimism, and again I don't think anyone else should either.
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As others have mentioned, Tether's claim to fame was that they were backed 1-1 with 'commercial paper'. Which are short term, corporate loans. The insinuation of using the term 'commercial paper' is that these are also loans from firms with very high credit ratings. So even a JP Morgan with plenty of money in the bank (ha!) will still issue these loans (commercial paper) all the time. Buy and sell, etc.
But what if the 'commercial paper' isn't from a high credit rated firm? What if it's commercial paper
Who cares who it's issued by (Score:2)
Get out of Crypto. Now. Sell whatever you have for real money to some greater fool while you still can. Hopefully we can stick it to the crypto bros and only the crypto bros and not everybody else.
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Funny thing is, it sounds like a great business just setting yourself up a server and exchanging $1 of play money for $1 of real money, then immediately putting that real dollar in into something secure.
Hell, if you give me $80 billion dollars AND pay me a fee for withdrawing your money, I will absolutely buy government bonds with it and you can audit me all you want.
I suppose pretty much anyone who's willing to sit and get stupid rich for doing nothing can't resist the urge to get *more* stupid rich by tak
The problem is they'll crash the bond market (Score:2)
Those are IOUs (Score:4, Insightful)
There's a YouTube channel called Current Affairs with a good interview with an economist who does the better job explaining how the scam works. Also a lot of their holdings are treasury bonds and if tether is allowed to continue expanding they might start having an effect on the bond market. This part I don't fully understand but I gather there's a market for trading in US Treasury bonds sometimes at levels above what the bond is actually worth. It's not clear to me why you would do that but from a practical standpoint it means that if tether how to run against it and was holding a few hundred billion in bonds they could cause a market crash. The problem being that they're being given a ton of real cash that they can use to buy those bonds while also creating imaginary commercial paper to pump up the perceived value of their coins.
The end result is that tether is effectively integrated into the broader financial markets that you and me depend on. And they're set up so that they can potentially as they grow take down those markets when the whole scam implodes.
Tether is clearly aware of this and if you want to get real cash for your tether then you only have two options. The first is to use an exchange and sell it to somebody who wants to buy it. If you want to actually make tether give you your cash you have to have a minimum of $100,000 in tether before they'll do it. This means only large investors get made whole. Small investors have to hope they can find a greater fool to sell it to if or more likely when the whole thing collapses.
I don't think I'd care so much if they want also intermingling with the main economy through those treasury bonds. But here we are. Never mind the fact that if a large number of small investors Gamble and lose even that can have effects on my life. Yours too if you're reading this
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Small investors have to hope they can find a greater fool to sell it to if or more likely when the whole thing collapses.
Something tells me if/when the whole thing collapses, there will be a nice 404 error where the redemption page used to be. Wouldn't be the first time.
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"This part I don't fully understand but I gather there's a market for trading in US Treasury bonds sometimes at levels above what the bond is actually worth. It's not clear to me why you would do that "
Usually the interest rate on the bond is higher than the current market rate. A bond is worth its face value and the number of interest payments left to go.
https://www.investopedia.com/t... [investopedia.com]
Cryptodrama! (Score:2)
Doesn't everyone love this cryptodrama on /. every. single. fucking. day.?! Seriously, I can't even read the articles if I wanted to because they presume everyone knows what cryptocurrency XYZ is, how it works, and the entirety of the ever-expanding list of the acronyms to go with it.
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It's actually pretty interesting. It's like watching a documentary about Madoff or Ponzi in real time.
Re-inventing finance poorly (Score:2)
Breaking the buck [investopedia.com] is a rare event in establishment finance, generally signaling severe widespread financial panic of epic proportions, or egregious mismanagement. We're nowhere near the kind of panic that would cause traditional MMFs to break the buck, yet USDT did that recently [pymnts.com]. Maybe the crypto bros should write their own UNIX too.
"an assurance" (Score:2, Informative)