related: Tether, biggest stablecoin, cuts its commercial paper holdings to zero(https://www.cnbc.com/2022/10/13/tether-worlds-biggest-stable...)
Tether now only holds US treasury assets.
Tether now only holds US treasury assets.
The commercial paper market is small, and everyone in the market pretty much knows everyone else.
No one ever noticed a new player - and in the time Tether expanded its balance sheet by $30Bn - there wasn't even enough commercial paper printed if Tether bought it all: https://www.bloomberg.com/news/features/2021-10-07/crypto-my...
The easiest way to preserve value in a bear market is to have no value to preserve in the first place [=
The US commercial paper market is the largest in the world: https://www.bloombergprep.com/practice/cfa/10b/lesson/5cf41e....
Look, Tether said they don't own any Chinese commercial paper: https://www.bloomberg.com/news/articles/2022-07-27/tether-sa...
I don't know why you'd believe they have commercial paper - but think they lied about what kind of commercial paper they had.
You can't go out and find $30B worth of commercial paper that no one else knows about and buy it in 3 months.
When governments around the world were stuffing everyone and every company to the brim with money - and banks couldn't find anyone to borrow money beside people to buy third homes in Ibiza - how did Tether find a bunch of companies that wanted to print $30B of commercial paper in 3 months that no one in the market was competing for?
Oh - and also - this heretofore undiscovered market was bigger than the previously known commercial paper market?
Yeah, right... It didn't happen.
> How do we know this? Because we can see Celsius borrowing from Tether. And we now know those loans were collateralized.
> We do not know the precise collateral arrangements except that Alex Mashinsky told the FT:
> If you give them enough collateral, liquid collateral, bitcoin, ethereum and so on . . . they will mint tether against it
It isn't USD, it isn't treasuries, it isn't commercial paper (Chinese or otherwise). At the end of the day it is going to be 90% crypto collaterialized loans that makes up Tether.
It is so weird to clearly read an article about the funding mechanism behind Tether and people literally refuse to read it correctly and start yapping about commercial paper.
1. Celsius calls up Tether and asks for $30Bn to buy Bitcoins.
2. Tether says, sure, prints 30 Bn USDT out of thin air, gives it to Celsius, and Celsius uses that to buy Bitcoins.
3. Celsius collects a bunch of money from retail investors.
4. Celsius steals all the Bitcoins and files for bankruptcy - and, oopsie, the retail investors lose everything.
The Celsius insiders obviously get something out of this. They got Bitcoins for nothing. They can and did sell those Bitcoins for the miniscule fiat liquidity that exists for Bitcoin.
What does Tether get? They're printing funny money out of thin air. Sure, it doesn't cost them anything. But they have to know that none of that funny money is going to get paid back with real money.
So why lend Tethers to someone else, so they can sell Bitcoins for real money - instead of just printing Tethers for themselves to capture all fiat inflows?
Celsius has Bitcoins. They borrow $30bn against those Bitcoins from Tether. Tether charges interest.
2. They call up Tether who loans them $500M worth of USDT which they can use as a more liquid security to loan out or trade crypto with.
3. They pay interest to Tether on the loan in crypto.
4. Eventually they have to pay back the USDT loan with USDT, although if their BTC value hasn't declined they probably extend the loan period instead -- although sending the USDT back is probably how Tether gets burned.
5. If the loans are denominated in $USD and Tether accepts USDT at the market rate for paying back the loans that would be a mechanism that would naturally pin Tether to the $USD via arbitrage by people who want to buy a cheaper USDT token to pay back their loans with whenever Tether falls, and don't want to be actively paying back Tether with their USDT when the price has fallen.
> But they have to know that none of that funny money is going to get paid back with real money.
To first order, none of it is about $USD so literally nobody cares, and its all just funny money collateralized by other funny money.
It is very much like someone sitting on a vault full of Gold (the BTC cold wallet) that wants to borrow money (the USDT in the crypto space) in order to have liquidity (buy crypto shit with it).
Chinese commercial paper had a large wave of delinquencies earlier this year (https://www.reuters.com/markets/rates-bonds/china-commercial...). The chances of Tether's holdings having zero defaults amongst all of that is... low.
Tether has an easy fix here: release the "frequent professional audits" they claimed on their website as far back as 2015 (https://archive.ph/mVPmL). They've provided various excuses and called attestations audits for nearly a decade now; their credibility is shot.
Read the tweet again. What they wrote is perfectly true if they rolled off 30B and are sitting on 10B of trash that needs a huge loss provision. They never say they liquidated all their CP holdings. I suspect that tweet is truthful but completely misleading.
They do separately say that; https://tether.to/en/tether-slashes-commercial-paper-to-zero....
(They have, of course, repeatedly lied elsewhere on that website.)
Similarily, their website lied for years about 1:1 USD backing in their accounts, and they faked it by moving money that wasn't theirs (likely Bitfinex customer holdings) in and out of their accounts. https://ag.ny.gov/press-release/2021/attorney-general-james-...
> The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations. In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’
> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
https://www.cftc.gov/media/6646/enftetherholdingsorder101521...
(both PDF)
the incompetence (as well as the lies) is just amazing
"because it is in Mandarin."
Like what the actual fuck.
Office Space: What if - and believe me this is a hypothetical - but what if you were able to translate the audit. Would that do anything for you?
Source: https://cointelegraph.com/news/tether-really-isnt-a-scam-com...
And straight from the horse's mouth: https://tether.to/en/tether-update/ (search 'Auditors')
They have repeatedly been forced to admit in court that they lied in the past. They have also had reserves invested with a fake bank whose CEO stole money from them and is now convicted in bank fraud. They claimed to be one of the largest holders of specific asset classes, but nobody trading those has any memory of trading them. And so on and so forth.
The refusing to allow a real audit is just icing on a cake consisting of a mountain of evidence of fraud.
As Matt Levine memorably said, they are "practically quilted out of red flags."
https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-a...
So they must be "backed" by something, we just don't know whom or how, that allows them to keep their scheme running.
https://twitter.com/patio11/status/1580269516331720706
Still his reason to make that bet was the comedy of being proven right about how broken crypto is when he lost his money. And not for the opportunity to be proven right and make money.