The Bit Short -- Crypto's Doomsday Machine (Tether)

Wow. I am super newbie on the whole crypto front, but this article scared the living :poop: out of me!

https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3

Anyone else with more Tether experience got thoughts on this?

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Holy shit.

Thanks for sharing, had no idea about this.

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So what big cryptos are actually safe from this? Don’t most coins now allow conversion from Tether? It isn’t just bitcoin that will be hit by the fallout from this, correct?

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Yeh tether is extremely sketchy. And you only need it for extremely sketchy exchanges. There are several USD stable coins out there that are actually audited. They are not nearly as popular though, because the exchanges use tether.

If the current bubble is being fuelled almost entirely by printed tethers it would not surprise me that much.

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Interesting, the article states:

USDC — Coinbase’s own issued stablecoin, which *is* backed by regularly audited reserves of real dollars

This website appears to allow Tether to USDC → https://coinswitch.co/coins/tether/tether-to-usd-coin ?

There is any amount of exchanges that allow stable coin trading to/from usdt

and that’s why usdc has grown so much in popularity

I have read a bit more into this, read a few ‘debunking’ articles also. It is really hard to tell how serious people are and how invested they are, opinions can be warped when you have money riding on something.

I do think however that many people miss the link between Tether and the currency that is paying for it. Say for example a user buys Tether with a stolen credit card, the Tether will still exist even though that credit never will, someone has to foot the bill and if they don’t then that Tether will at some point decrease in value.

If we take the stolen credit card idea and scale it up, maybe a very dodgy bank or government, then we could have a serious problem. If Tether is owed a lot of real currency and it doesn’t receive it, then surely the price of Tether must correct instead?

Yeah; this guy bought bitcoin in March 2020 when it was cheap, and then it 6x’ed. So he personally made a ton of money – and yet he’s still concerned. So that’s… interesting.

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The OP article also scared me when I first read it, but it is now a bit dated. In February Tether settled its lawsuit in New York. This absolutely does not give me confidence to hold tether, especially since USDC is actually audited. But maybe it’s not a total scam?

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It still scares me, it’s the leverage, I had no idea it was so rife in the community. People are leveraging up 100x, 200x??? That is insane.

The analogy he gave where bob already leveraged on his credit card to buy coins and then leveraged again using the crypto he bought…

One market correction, even a slight one could bring the whole thing crashing down.

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The real adit for T will come with the upcoming central bank’s stabelcoins. It’s gonna be a game changer for everyone and every transaction will be transparent and recorded. There is rumours about central banks using slowly quantum computing and that means no cryptocurrency will be really safe from breaking. I think only Cardano and Ergo are very advanced in protection against. I won’t be surprised if Tether slowly change into a basket of currencies.

Tether Holdings Limited released a ridiculous “transparency” report yesterday. It’s one chart without evidence the numbers are true.

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Interesting read. Not sure how to feel about the fact that coinbase started listing tether on the 4th May 2021…

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It is listed on the app but cant be purchased, but it can be received if you have a direct wallet exchange. Coin base usually charges a fee for crypto purchases, yet Tether is now a free trade if someone sends it to your coin base wallet. I don’t know about sending it out again.

Also for what its worth the article used only the 1 source of cash on hand as proof of liquidity. whereas Robert posted a sweet pie graph clearly showing the have 65% of assets on commercial paper? whatever that means. it doesn’t look like something a well managed company would produce to say the least.

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Since Tether gives no info on their “cash equivalents”, for all we know it’s a bunch of junk debt mixed with laundered money. I doubt an independent auditor approved their numbers, surely Tether would have said so.

Mt. Gox played these same “transparency” games before collapsing.

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Oh I can do a big ramble on this one, someone just say “go”…

Sure go for it… “go”!

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Thanks brother, and I haven’t said it yet Love You man!!!

Let’s Start - Greed!

The driving factor, in any Utopia, behind financial systems ought to be enabling of barter, distribution of equal opportunity for success, basic transaction, enabling of emergency or reasonably proportioned credit, etc.etc. resulting in survival, prosperity and growth. After all we don’t know if the saviour genius with answers to 90% of our issues is going to be born in which economically deprived geographic region… Instead, the driving force, behind most financial systems is greed. While accepting that “greed is bad” we are all willing participants of the system for the rewards it offers (with its hosts of associated risks), in order to compete for a future advantage. (The price we pay in the process is also something we fail to consider because it is divided into smaller more affordable pieces - running out the resources of the future). The whole crypto phenomenon wanted to provide a solution of decentralisation, better equality, and less of the supposed “evil” that it is battling. The problem of crypto starts at the beginning of it and at the end - the end I will discuss. In the end it is evaluated in Dollars $, those looking to exit the system eventually want dollars, but guess what, when the market cap of crypto goes up by $1 trillion in valuation, there just isn’t that kind of Dollars in existence. So there exists a fundamental flaw in the philosophy of crypto for having tied itself to a single currency. That allows for the corruption, the ponsyscheme, the fraud. They could have just as easily pegged itself to a combined basket of gold, silver and a host of stable currency disabling 100% encashment. But since crypto allows for encashment in a specific currency, it is very easy to corrupt. The US dollar is itself measured on an index where its value is compared to a basket of 6 of the most stable currencies in the world.

So how do we all get here - Greed! - it is the greed that allows for the masses to flock to hyper-aggressive trading of digital assets, for which if you were to request financial models of valuation on paper, would fail to provide. That’s why I call it fairydust - just because they say that something they hold in lock and key and daily trade is worth more than a potted plant, doesn’t really make it so for there has to be documented established verified proof which should be available as openly for verification by parties with vested interest as the opensource code. But that’s not there, heck 98-99% of holders of crypto will not be able to agree to which wallet account is most secured and safe. Yet, they do this, and why? Greed! And it is established that “greed is bad” and that we are willing participants.

So to cut it short, I personally have 0 faith in 99% of crypto, the only thing I had a little faith in was the IoT model whereby you earn units for being a service provider within the network and you spend the units within the network or trade it within other IoT network where every individual IoT coin is measured against an uncashable basket of anything, I say anything but CASH! I am checking out the Chia network even though I don’t agree with it on it’s marketing promises (since I am old enough to be used to the fact that you will never get to buy a perfect phone, and when they are selling something at times the product is far from it - the case of Chia). Don’t get me wrong I am not perfect, I am willing participant to the degree that I will stick around for a couple of phases of evolution to see the product develop having real life applications - let’s call it PoA - proof of application, a new validation, valuation system for all crypto and a shift away from cashable fiat! Apologies for stepping on any toes…

P. S. I don’t agree with Chia because it is fundamentally trying to leverage an already aggravated semiconductors market - how can they do it so easily? The deregulated internet space allows them to develop a protocol to do just that. You will see Chia break $5000 marker in no time. Can you buy Chia? No! Can you realistically dependably earn Chia? No! With being as involved as you are with Chia, will you get paid? I will let you guess the answer to that question… And neither will you get to meet the winners…I may not agree with it but, I am not against this at all - if someone can run the biggest heist of the century and get away with it, then guess what, they deserve every penny of it as justifiably earned white collar income!

If I am also correct in my hunch the crypto market has no more than 18 months of exit window before it comes crashing down again and we reset for new development cycle…this time perhaps with integrated regulations…

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Huh.

I have significant concerns about USDT, but I also think that tweet thread by Stephen Diehl lacks critical context in a way that borders on misleading. It should have acknowledged that commercial paper is a perfectly normal holding for stable-value “money market” funds; the critical outstanding question is who are the counterparties and how senior is the debt, instead of this FUD about whether commercial paper in general is “real dollars.” The counterparties could be bogus but they also could be AAA – that’s what we need transparency into.

This line of thought forms a particularly red herring, in my opinion:

A mere 2.9% of Tether treasury is actually in real dollars held by a bank.
So for every 1 USDT there is $0.03 real dollars.

A significant portion of bitcoin price formation is therefore quoted in dollars, but paid for in USDT dollars that are only actually backed by three cents.

You can say the same thing, correctly, if I hold $97 of T-bills next to my $3 checking account. The 3% bank reserves isn’t by itself an indicator of fraud and doesn’t mean that a USDT must be only 3% “real.” We have to dig into what is the other 97%, and the above characterization just dismisses it without a real explanation.

Again I personally avoid USDT for other-than-transient uses; I just don’t like seeing unsound arguments, which just add still more confusion, on either side.

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