Oh man... That means the tether isn't even pegged any more! If I can't buy them from the issuer for one dollar each and I really need a billion of them for some reason, then they're worth more, no? Conversely, if I can't sell them, they're worthless.
"There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."
Apparently they changed this text earlier this month to make it sound less like a total scam but the original text is still available on archive.org:
A lot of exchanges only change between USDT and other crypto currencies. If tether is insolvent, the 1:1 backing ratio of USDT to USD doesn't exist, which means that USDT is worthless. Promised USD just evaporates.
The few exchanges that offer USD to crypto and back are probably pretty safe, but if the entire ecosystem crashes, it stands to reason that's not going to stand up for long.
Fake 450 million USD being used to buy up Bitcoin, artificially inflating the value. Then when people want to sell, there isn't actually the underlying USD available, so you can't actually turn your BTC back into USD, leading to a mass sell panic rush and the price craters.
Imagine the New York Stock exchange decided to print counterfeit dollars (electronically) and use them to buy up shares of all the stocks on the exchange. There would be a huge rally, all the stock prices would go through the roof. But if enough shareholders started selling their shares and asking for real dollars back, the exchange would eventually collapse because they wouldn't have enough money to settle all the trades.
With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD.
Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based.
The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent.
There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges.
To complement what you said, this has already happened with MtGOX in 2013. The price rise in Bitcoin up to $1000 was largely due to trading bots in MtGOX who purchased bitcoin with fake money. When MtGOX finally broke we say prices exploding inside it, as people desperately tried to cash out, and plummeting everywhere else.
You could go even further. Let's say you are a very large bitcoin fish running an exchange and you want to cash out.
Tether is the ideal instrument to let you absorb part of the market demand using bitcoin rather than dollars, protecting the price while you're continuing your cashout.
Couldn't agree more with the endgame you described. It will be same as MtGox's last month when prices were $2,000 higher there while everyone was trying to sell off at more liquid exchanges.
Do you think there really is $194B hard cash in the entire ecosystem? Or are you deriving that number from simply # of coins issued multiplied by last trade price?
> How would it take down the entire ecosystem? Bitcoin alone has a $194B market cap. $450M is a drop in the bucket.
I'm not sure you can compare those numbers like that. If somebody used $450M to buy bitcoin, the market cap would likely rise much much more than $450M.
For example, if I look at the GDAX order book right now, I see that the bitcoin price could be pushed up $200 by buying less than $3M worth of bitcoin. That corresponds to increasing the market cap by $3.2 billion.
Tether is 1/400 of the cryptocurrency market cap. Meaning "only" 1/400 of the money would be lost if Tether does an "exit scam" like Bitconnect did. Oh, and by the way, Bitconnect was larger than Tether.
To put things in context, the MtGox heist was worth about 1/20 of the market. However, back then Bitcoin was pretty much the only cryptocurrency and it was still just a technological curiosity. If Bitcoin could be "hacked" at this level, then people didn't really have a choice than think that maybe this technology isn't all that great, and may actually disappear.
I don't think the market would crash for 2 years straight again if $40 billion in cryptocurrency were stolen tomorrow. It would take a LOT to take down the whole market for good.
Even if you had events such as world's governments uniting to ban all cryptocurrency exchanges, which is highly unlikely (see Belarus announcing to make crypto tax-free today), it would still make crash the market for 2-3 years, until people figure out how to get around those regulations with decentralized exchanges.
You are equating dollar inflows/outflows with market cap. They are not the same.
Look at the order book on GDAX. How much bitcoin do you need to buy/sell to increase/decrease the market cap by 1 billion dollars? MUCH less than 1 billion dollars worth...
Sure, but you're assuming they're going to stop printing Tethers.
Also, Belarus? It ranks as one of the most corrupt countries in the world. Not exactly the first shining example that comes to mind of a leader in financial regulation.
You should look at daily volume:
BTC daily trade volume = $14B
Tethers sloshing around in market today = $1.6B
Thus Tethers represent 14% of the market. If MtGox crash was due to a 5% heist, this 14% scam will wipe out Bitcoin and establish Ethereum as the new king.
Tether will end up being the pretext US authorities use to raid various exchangers. It's coming folks. Do not leave your coins at an exchange wallet, ever.
Tether is a foreign company, so the raid has to be from international authorities... but boy that raid story will rival Silk Road or Megaupload stories.
This is not going to matter one single bit. US authorities will claim they have evidence or reasonable suspicion that Tether funds were converted to coins that were later sent to addresses believed to be under the control of US-based exchangers. Money laundering raids 101.
Can somebody explain, in detail, the conspiracy theory here? Preferably in a way that doesn't emotionally assume some nefarious action?
$450M is a lot of money. Why do you assume that tether is lying about this?
If tether aren't actually backed by anything, isn't that just about the worst ponzi scheme imaginable? Like some sort of reverse ponzi scheme, actually? They give you "fake" tethers, and you get to buy "real" bitcoins with them.
> Can somebody explain, in detail, the conspiracy theory here?
For tether to maintain a 1:1 ratio of 1 USDT to 1 USD, they have to have a backing of $450M from some company or bank that has USD to give them. As of now, they have no US based banks even doing transfers with them, let alone working with them on being solvent.
Tether promised to be open to auditing, and none of the latest issuings have been audited as having actual backing currency.
I'm far from knowledgeable on this, but, as I understand it, for tether to maintain that ratio, the issuer of tether must both be willing to buy and sell one tether for one dollar, to and from anyone, at any time. The moment that stops, you're operating on faith, and you're no longer pegged to anything.
Well, it's a good thing they don't have anything like this in their Terms:
> "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."
Oh, wait, that's exactly what is in their Terms...
I don't think anything says that it isn't plausible. The issue is that $450M appearing with no third party audit in a relatively short time period with no fanfare (e.g., Tether: "We just secured a new deal with a bank and have issued more tethers as a result!") is a bit odd to look at from a normal perspective. If Tether were 10 years old and had established chains of successful audits, this would be less of a big deal (but still a deal).
Let's not forget that they explicitly disclaim that they have any obligation or responsibility to turn the Tethers (that you can't buy, unless of course you're one of the institutional investors supposedly giving them $100MM/day) back into USD at any point in the future.
> and buy USDT thinking they are buying USD not realizing they are buying tethers
There are people buying $450M of USDT thinking that it's actually dollars? And just in the last round?
Let's think about how many people, and what average transaction $$:
1M people @ $450
100K people @ $4500
10K people @ $450K
Which of those is most plausible? That's a lot of suckers, no matter which choice. And remember that's just the last round, there's nx$1B out there already.
The only "proof" they have is an "audit" that is explicitly disclaimed as "not an audit" by the very party they asked to do it in their summary letter.
They've been booted from Wells Fargo, and other banks have refused to do business with them.
They say they have a new bank, but refuse to name it. When a reporter asked, they said they'd require an NDA to even name where they are storing their funds.
Sounds like an organization that isn't exactly trying to build trust.
It works based on it being redeemable for USD. It says it has frequent audits, but only recent one made public was not considered an audit by their own words. US residents on their legal page and updates is stated to not be legal customers of USDT.
The theory is that Bitfinex creates these out of thin air and buys other cryptos with them, thus raising the prices across the board (the prices quickly bleeds into all the other exchanges because arb). Crypto holders buy tethers when they want to short crypto against "USD" since tethers are supposedly equal to usd. Often times the entire market swings at once and lots of it dumps into usdt during downturns ("tether up!"), and back again into crypto on an upswing. Anyway, if you look at Bitfinex, you'll notice they have pairs like BTC/USD... except that USD is really USDT. It's basically counterfeit usd and it seems like all exchanges that can't trade actual usd use it
Right now its almost like tether is like the central bank of crypto, constantly bailing out the market during downturns and pumping the price up. They've really upped their printing the past few days due to the massive downturn.
Alternatively, You could make the argument that what Bitfinex has done here is really smart. It's really expensive, engineering & risk wise, to setup payout links at consumer scale. There really is no difference between me holding Tether's and holding a USD balance on Coinbase. But in actuality Coinbase is in more danger here than Bitfinex. If all the Coinbase users cashed out, they'd be unable to payout, but Bitfinex is secure from this.
This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.
Those are extremely bold assertions with no evidence provided to back them up. How is Bitfinex secured from an inability to pay out? To my knowledge, they have never published an independent 3rd party audit showing that they actually have the reserves that would be required.
Sometimes I wish I could forget all about integrity and honesty and just use my knowledge to make a quick buck by scamming people like all these cryptoscammers do..
Or do not do that but use your tech knowledge to make money from the market in a non scammy way. Past 1.5 month including the 'crash' of the past days were a party without scamming people. That is a quick buck.
> What if the crypto community is simply too stupid to ever let the bubble burst?
> Like. Literally nobody has ever been able to trade their tethers back into dollars, and they've been around for over a year at this point. How the fuck do people have imaginary money and simply not want to get real money from it, not even once, in over a year?
> Maybe the buttcoiners were right, and we are witnessing the birth of something completely new here: The market that was too dumb to even realise that it should crash.
I've felt for a while that the main thing to ask yourself wrt crypto speculation is when does a pessimistic narrative dominate an optimistic narrative. I've argued that crypto, being software based, is inherently optimistic since any present day deficiencies can arguably fixed with "more code." This doesn't have to be true it just needs to be convincing enough to generate enough demand for the next wave of speculators.
In the limit, either the concept is fundamentally flawed or it will inductively work after many iterations and rollovers to new models/coins/etc. But if it's flawed that could be a long time before the market collectively throws its hands up and says "there is no hope for this ever working" and drives the price to literally zero -- I mean, what would the catalyst be? In short term periods, market momentum can drive sentiment, but in longer periods there needs to be some kind of pure capitulation event that causes the market to resolve that crypto is doomed. Your guess is as good as mine as to what that is -- the long term trend seems to be that the last generation of holders cash out, causing a price drop, and new optimists pile in, driving the price higher than previous highs, sometimes in the form of new systems like ether or ICOs. It's hard to imagine what will break this cycle. Maybe the crypto engineering community tries a bunch of stuff and "these X problems cannot be solved in less than Y" years enters the crypto engineering zeiguist?
That would cause high prices on Bitfinex due to Bitcoin buying, while deflating prices on Coinbase and Gemini due to cash outs.
During the last month of MtGox it was common to see $2,000 price gap between Gox and US exchanges. I have a feeling history is going to repeat itself very soon.
we are witnessing the birth of something completely new here: The market that was too dumb to even realise that it should crash.
It's not so completely new. There was this old Warner Bros. cartoon trope about characters floating in defiance of the law of gravity, because they, "never studied law." (Though, perhaps Wile E. Coyote running halfway across the rift before he realizes he should fall might be more apt.)
As far as I can tell it has mostly issued Tethers to itself [1](as Bitfinex). Bitfinex/Tether are hoping that they can entice customers to use their platforms for arbitrage with other exchanges such that they can cream off a healthy margin without actually holding much currency themselves.
A US public company can do the same thing in terms of their authorized stock vs their shares outstanding. You can print money without it being backed. This means increasing your 'authorized' as you see fit. Just get approval from the SEC/Finra and your buddies and you're good to go. Now lets talk about other organizations printing money that's not backed by anything e.g. the Fed, QE 1-4, countries with inflationary problems. Cryptocurrency offers far more transparency (as we can see here) and has true global reach. This FUD needs to stop and more effort needs to put into understanding financial engineering and it's importance and relation to software engineering.
I think you should look up how stock dilution works, how that typically destroys share prices, etc. I would like to suggest learning how finance works, starting from Investopedia /s
The later authorized and issued shares are NOT considered equal to the initial class A shares. Here's a tutorial on the difference between class A shares, class B shares, and so on...
Thank you. Those links were informative. However, with extra shares authorization and in the Yandex golden ticket case, shareholders/the board, voted to go ahead with those dilutions. This is quite different from a centrally controlled coin where the users are really just hoping for "good will" more than anything. No matter what, you would expect those who have a stake, to want to increase the worth of that stake. Problem with crypto is...they dump and no one finds out until later. And once they dump, they could care less about upholding the value through good management. For example, Charlie Lee, pumped then dumped LiteCoin just last week. Literally sold all of his coins. The price crashed hard. Now he can care less.
1. Their terms state that they owe you nothing in exchange for Tethers you hold
2. This effectively means Tether is backed by nothing. The 1:1 peg with USD is a total farce
Tether must and does at all times reserve the right to refuse to issue or redeem Tether Tokens...
No Representations & Warranties by Tether: Tether makes no representations, warranties, or guarantees to you of any kind. The Site and the Services are offered strictly on an as-is, where-is basis and, without limiting the generality of the foregoing, are offered without any representation as to merchantability or fitness for any particular purpose.
What this means:
Tether can print 1 billion Tethers, buy up 1 billion Bitcoin, and then cash out into dollars. In other words, they have engineered a way to more or less counterfeit U.S. dollars by counterfeiting cryptocurrency.
Why would anyone buy a Tether? Are people getting into cryptocurrencies really that clueless? I can see the idea behind bitcoin, that somehow it can hold value due to its inherent scarcity and high demand. But if the Tether supply is unlimited and controlled by a single company, how could anyone possibly believe it would hold its value?
> Are people getting into cryptocurrencies really that clueless?
short answer is YES, people getting into cryptocurrencies really are that clueless. take for example that the vast majority who opened new accounts at coinbase didn't realize that you could buy fractional shares of bitcoin and therefore assumed since they couldn't afford bitcoin at 1BTC at around $15k they opted for altcoins
Why? Their terms of service crystal clear tell you they do not guarantee a thing. If you pay money for something where the seller explicitly tells you its worthless why would they go to prison?
As long as the demand for USDT soars, it works! They can keep the price pegged by creating more USDT. If the demand shrinks they can buy some back. If the demand shinks enough, they go belly up and all is worthless.
Actually not too different than fiat currency. Only they have the demand for it locked by laws/ treaties/ wars/ etc. Tether is not that big.
So these USDT are being issued to non-U.S. Persons. How does that work? A non-U.S. Person wires funds in their local currency to tether who applies the current exchange rate for that currency to USD then issues an equivalent number of USDT? Why would anyone do that instead of just purchasing the tether for their own currency?
It's so they're not caught out by laws pertaining to "USD-backed securities" enforced by the nice people at the SEC.
This doesn't excuse them from previous transactions they've already made.. Which means likely they didn't start printing Tether until after 1st of Jan. It's likely they have loans out for the amount stuck in escrow since Taiwan froze their wire's in April.
This is the heist of the century. They're 5% of the way to ENRON level shenanigans.
Disclaimer: I think Tether is shady, likely illegal, and would never use it myself. However, I think there is a perfectly reasonable explanation for where this Tether is coming from and why no existing Tether has ever been redeemed for USD.
First, understand that Tether and Bitfinex are the same people. Bitfinex has hundreds of millions of dollars in their accounts. It is likely that most or all of the Tether is bought directly by Bitfinex in order to satisfy Tether withdrawal requests. The money comes from USD deposits to Bitfinex.
When people want to convert Tether to USD, rather than redeeming from Tether.to directly, they send Tether back to Bitfinex, which credits it to their USD balance at a 1:1 rate. The USD can then be withdrawn as a wire transfer. Crucially, this process does not require that Tether be redeemed, because Bitfinex maintains a large balance of both USD and Tether. As long as Tether demand keeps increasing, Bitfinex can simply sit on the Tether they receive until it's time to hand it out to someone else doing a Tether withdrawal.
The only situation in which Tether would ever be redeemed is if there was a bank run on Bitfinex. As Bitfinex's USD reserves fell they would need to redeem the Tether that they hold for USD. So far, Bitfinex has not faced this situation and so no Tether has ever been redeemed.
So, I've described a way in which Tether could be relatively legitimate. Is that actually what's going on? Nobody knows except the management of Bitfinex. Personally, I don't trust them. The incentives for fraud are astronomical, and even if it's been entirely legit up to this point it's unlikely to remain so forever.
> First, understand that Tether and Bitfinex are the same people.
> Nobody knows except the management of Bitfinex.
The management of Bitfinex, who as you say, are the management of Tether still claim, hand on heart, that there is no relation or interaction between the two.
Same people doesn't mean it's same company. If we talk about a normal real world company, these kind of transactions are illegal. Subsidiaries, even if we can call Tether and Bitfinex that, have strict rules regarding these transfers also known as ICPs or intercompany transfers. Many times these transactions end up being used for hiding losses in both companies.
As for Bitfinex USD withdrawal it was banned for a long time and restored in November. Given that all withdrawals/wires take time we need to wait and see if there are issues reported for Bitfinex withdrawals before reaching a conclusion about smoothness of the process.
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[ 3.6 ms ] story [ 128 ms ] threadMeanwhile this bank is supposedly receiving upwards of $100MM/day in deposits for this account and blissfully unaware...
One born every minute.
* Tether purchases are "temporarily disabled" for regular customers. https://wallet.tether.to/app/#!/signup
* Tether claims that these large purchases are being made by nameless "institutional investors" but didn't name who those investors would be.
* Why would large institutional investors be stupid enough to purchase billions of dollars of useless cryptotokens from a shady company anyway?
"There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."
Apparently they changed this text earlier this month to make it sound less like a total scam but the original text is still available on archive.org:
https://web.archive.org/web/20171224172135/https://tether.to...
The few exchanges that offer USD to crypto and back are probably pretty safe, but if the entire ecosystem crashes, it stands to reason that's not going to stand up for long.
With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD. Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based.
The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent.
There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges.
If you're reading this, you have been warned.
Tether is the ideal instrument to let you absorb part of the market demand using bitcoin rather than dollars, protecting the price while you're continuing your cashout.
I'm not sure you can compare those numbers like that. If somebody used $450M to buy bitcoin, the market cap would likely rise much much more than $450M.
For example, if I look at the GDAX order book right now, I see that the bitcoin price could be pushed up $200 by buying less than $3M worth of bitcoin. That corresponds to increasing the market cap by $3.2 billion.
To put things in context, the MtGox heist was worth about 1/20 of the market. However, back then Bitcoin was pretty much the only cryptocurrency and it was still just a technological curiosity. If Bitcoin could be "hacked" at this level, then people didn't really have a choice than think that maybe this technology isn't all that great, and may actually disappear.
I don't think the market would crash for 2 years straight again if $40 billion in cryptocurrency were stolen tomorrow. It would take a LOT to take down the whole market for good.
Even if you had events such as world's governments uniting to ban all cryptocurrency exchanges, which is highly unlikely (see Belarus announcing to make crypto tax-free today), it would still make crash the market for 2-3 years, until people figure out how to get around those regulations with decentralized exchanges.
Look at the order book on GDAX. How much bitcoin do you need to buy/sell to increase/decrease the market cap by 1 billion dollars? MUCH less than 1 billion dollars worth...
Also, Belarus? It ranks as one of the most corrupt countries in the world. Not exactly the first shining example that comes to mind of a leader in financial regulation.
Thus Tethers represent 14% of the market. If MtGox crash was due to a 5% heist, this 14% scam will wipe out Bitcoin and establish Ethereum as the new king.
PS: What's the story behind your username?
$450M is a lot of money. Why do you assume that tether is lying about this?
If tether aren't actually backed by anything, isn't that just about the worst ponzi scheme imaginable? Like some sort of reverse ponzi scheme, actually? They give you "fake" tethers, and you get to buy "real" bitcoins with them.
For tether to maintain a 1:1 ratio of 1 USDT to 1 USD, they have to have a backing of $450M from some company or bank that has USD to give them. As of now, they have no US based banks even doing transfers with them, let alone working with them on being solvent.
Tether promised to be open to auditing, and none of the latest issuings have been audited as having actual backing currency.
> "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers."
Oh, wait, that's exactly what is in their Terms...
I've been following https://twitter.com/bitfinexed
Who is on the other side of that transaction? ie, who is accepting $450M in tether for their BTC?
clients on exchanges sell BTC and buy USDT thinking they are buying USD not realizing they are buying tethers
think of it this way, you can easily put money into the system but you can't get it out, instead you get funny money
don't believe me? find me one person who has sold tether and has documentation to prove it
when money comes in but can't leave... there's a name for that...
There are people buying $450M of USDT thinking that it's actually dollars? And just in the last round?
Let's think about how many people, and what average transaction $$:
Which of those is most plausible? That's a lot of suckers, no matter which choice. And remember that's just the last round, there's nx$1B out there already.It sounds implausible really.
They've been booted from Wells Fargo, and other banks have refused to do business with them.
They say they have a new bank, but refuse to name it. When a reporter asked, they said they'd require an NDA to even name where they are storing their funds.
Sounds like an organization that isn't exactly trying to build trust.
Answered this in another thread that includes citation from their own site: https://news.ycombinator.com/item?id=16141938
Right now its almost like tether is like the central bank of crypto, constantly bailing out the market during downturns and pumping the price up. They've really upped their printing the past few days due to the massive downturn.
This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.
> What if the crypto community is simply too stupid to ever let the bubble burst?
> Like. Literally nobody has ever been able to trade their tethers back into dollars, and they've been around for over a year at this point. How the fuck do people have imaginary money and simply not want to get real money from it, not even once, in over a year?
> Maybe the buttcoiners were right, and we are witnessing the birth of something completely new here: The market that was too dumb to even realise that it should crash.
"Can I redeem my Tether for them?"
"No."
"Can I get some proof?"
"No."
"Uhm..yeah..hmm..ehhhhh"
In the limit, either the concept is fundamentally flawed or it will inductively work after many iterations and rollovers to new models/coins/etc. But if it's flawed that could be a long time before the market collectively throws its hands up and says "there is no hope for this ever working" and drives the price to literally zero -- I mean, what would the catalyst be? In short term periods, market momentum can drive sentiment, but in longer periods there needs to be some kind of pure capitulation event that causes the market to resolve that crypto is doomed. Your guess is as good as mine as to what that is -- the long term trend seems to be that the last generation of holders cash out, causing a price drop, and new optimists pile in, driving the price higher than previous highs, sometimes in the form of new systems like ether or ICOs. It's hard to imagine what will break this cycle. Maybe the crypto engineering community tries a bunch of stuff and "these X problems cannot be solved in less than Y" years enters the crypto engineering zeiguist?
Fun times...
During the last month of MtGox it was common to see $2,000 price gap between Gox and US exchanges. I have a feeling history is going to repeat itself very soon.
It's not so completely new. There was this old Warner Bros. cartoon trope about characters floating in defiance of the law of gravity, because they, "never studied law." (Though, perhaps Wile E. Coyote running halfway across the rift before he realizes he should fall might be more apt.)
That would explain why Tether is so desperate to prop up the price and avoid withdrawals.
[1] https://medium.com/@bitfinexed/spoiler-alert-the-institution...
https://www.delawareinc.com/blog/change-your-companys-number...
Summary of Tether for the uninformed:
1. Their terms state that they owe you nothing in exchange for Tethers you hold
2. This effectively means Tether is backed by nothing. The 1:1 peg with USD is a total farce
Tether must and does at all times reserve the right to refuse to issue or redeem Tether Tokens...
No Representations & Warranties by Tether: Tether makes no representations, warranties, or guarantees to you of any kind. The Site and the Services are offered strictly on an as-is, where-is basis and, without limiting the generality of the foregoing, are offered without any representation as to merchantability or fitness for any particular purpose.
What this means:
Tether can print 1 billion Tethers, buy up 1 billion Bitcoin, and then cash out into dollars. In other words, they have engineered a way to more or less counterfeit U.S. dollars by counterfeiting cryptocurrency.
I hope they go down hard.
short answer is YES, people getting into cryptocurrencies really are that clueless. take for example that the vast majority who opened new accounts at coinbase didn't realize that you could buy fractional shares of bitcoin and therefore assumed since they couldn't afford bitcoin at 1BTC at around $15k they opted for altcoins
https://www.reddit.com/r/Bitcoin/comments/7femm2/many_people...
I have bad news for you... YES. Check http://supercoolawesomemoney.com/
https://etherscan.io/address/0xdf4B1A742D3B4F87099C835d5423B...
As long as the demand for USDT soars, it works! They can keep the price pegged by creating more USDT. If the demand shrinks they can buy some back. If the demand shinks enough, they go belly up and all is worthless.
Actually not too different than fiat currency. Only they have the demand for it locked by laws/ treaties/ wars/ etc. Tether is not that big.
Beginning on January 1, 2018, Tether Tokens will no longer be issued to U.S. Persons.
https://tether.to/legal/
So these USDT are being issued to non-U.S. Persons. How does that work? A non-U.S. Person wires funds in their local currency to tether who applies the current exchange rate for that currency to USD then issues an equivalent number of USDT? Why would anyone do that instead of just purchasing the tether for their own currency?
This doesn't excuse them from previous transactions they've already made.. Which means likely they didn't start printing Tether until after 1st of Jan. It's likely they have loans out for the amount stuck in escrow since Taiwan froze their wire's in April.
This is the heist of the century. They're 5% of the way to ENRON level shenanigans.
First, understand that Tether and Bitfinex are the same people. Bitfinex has hundreds of millions of dollars in their accounts. It is likely that most or all of the Tether is bought directly by Bitfinex in order to satisfy Tether withdrawal requests. The money comes from USD deposits to Bitfinex.
When people want to convert Tether to USD, rather than redeeming from Tether.to directly, they send Tether back to Bitfinex, which credits it to their USD balance at a 1:1 rate. The USD can then be withdrawn as a wire transfer. Crucially, this process does not require that Tether be redeemed, because Bitfinex maintains a large balance of both USD and Tether. As long as Tether demand keeps increasing, Bitfinex can simply sit on the Tether they receive until it's time to hand it out to someone else doing a Tether withdrawal.
The only situation in which Tether would ever be redeemed is if there was a bank run on Bitfinex. As Bitfinex's USD reserves fell they would need to redeem the Tether that they hold for USD. So far, Bitfinex has not faced this situation and so no Tether has ever been redeemed.
So, I've described a way in which Tether could be relatively legitimate. Is that actually what's going on? Nobody knows except the management of Bitfinex. Personally, I don't trust them. The incentives for fraud are astronomical, and even if it's been entirely legit up to this point it's unlikely to remain so forever.
> Nobody knows except the management of Bitfinex.
The management of Bitfinex, who as you say, are the management of Tether still claim, hand on heart, that there is no relation or interaction between the two.
And do you really believe 450m was transferred to Bitfinex in the last 3-4 days?
As for Bitfinex USD withdrawal it was banned for a long time and restored in November. Given that all withdrawals/wires take time we need to wait and see if there are issues reported for Bitfinex withdrawals before reaching a conclusion about smoothness of the process.