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Comment by gjsman-1000 | Hacker News Reader

Nobody knows where the USD supposedly backing it goes. Most of it is in “commercial paper” they said, but the investors who work in that industry say they’ve never heard of them.

This seems impossible because at their scale, that would make them, like, the 5th largest commercial paper investor on Wall Street. How could commercial paper investors not heard of them?

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'Cause it's commercial paper from the exchanges? We know they've made "loans" to Bitfinex, after all.

They have adamantly declared that these are not loans to exchanges. That's one of the few things we know.

With the track record these guys have, the more adamantly they declare something the more you may be justified in suspecting that it is false or at least only superficially true.

Cool, but again, we also know they've done it, contrary to their declarations.

>Nobody knows where the USD supposedly backing it goes.

Every single time that ifinex was upfront about where the money was going, their bank accounts would be closed with little notice.

I can understand why they would stay tight lipped about where they are stashing $60B+.

Well they're currently being accused of fraud for misleading banks, so...

I dont think it matters to people who really use tether. If you cant buy usd due to capital controls, usdt is your other accissible option. As such its seemed to retain its user's opinion that it continues to track the dollar, even when its not backed directly and or backed insufficiently by other assets. Its a tool that has value, beyond its intrinsic value.

The thing is, it does not matter only to those who use it. Basically all trading of Bitcoin is not actually in USD, it is in Tethers. The polite fiction is that this is the same thing, but there are a million red flags saying that this is not the case.

Once Tether implodes, it takes the entire bitcoin market with it.

I was looking at the usdc, vs tether, vs dai market caps over the last few weeks. Tether seemed to have stopped printing as usdc has continued to grow.

https://coinmarketcap.com/currencies/tether/

https://coinmarketcap.com/currencies/usd-coin/

https://coinmarketcap.com/currencies/multi-collateral-dai/

Tether is at 60billion market cap compared to Usdc 30 billion and dai around 5 billion. Should probably look at volumes aswell.

I think we would get a major crash if tether fails, but I also think it will recover with usdc and other stable coins that have more legitimacy.

For now, its a house of cards that no one can really afford to remove their stake from. Those who have to use tether, are in a very precarious position.

USDC doesn't have a leg to stand on either and as far as "other stable coins", it's pretty dumb to compete with someone who is able to undercut you on cost, so they're either doing the same or not competitive.

I think there is a possibility of things going the other way around of what grand parent is expecting. Once USDT implodes there will be a bank run to sell those tokens for fiat, bitcoin, Ethereum or even other stable coins. That until exchanges cease accepting those or doing trades at all. Some might become insolvent.

In the end people who leave their funds at exchanges will be the one with the short end of the stick.

> Some might become insolvent.

Why should an exchange go broke because something they trade falls in value?

Because the leverage extended to customers is greater than the value of collateral the exchange holds. It is certainly possible if Tether dropped to 0.8 or something this would cause even automated liquidation and margining engines to fail then causing a systemic shock across all posted liquidity on the venue.

It wouldn't, if they handled funds correctly.

(They don't.)

USDC is rapidly shedding legitimacy in order to grow this quickly. Do not expect it to be much different than Tether ultimately.

How are USDC losing legitimacy? I haven't heard of this. They have monthly attestations that they hold the backing funds by a legit accountancy firm

They have monthly attestations, but an attestation is not an audit. What those attestations say is also not the same from month to month. Lately, they have been changing the exact thing they attest.

For instance, the attestations no longer claim that they hold backing funds.

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