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Comment by eightysixfour | Hacker News Reader

They have guaranteed returns on $185b of other people's money, and they only owe the other people the principal. That's like... the best business in the world? If it was all in 6m 2.8% treasuries they'd still be making $5.2b year for holding people's cash and running a token on the blockchain.

How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?"

I'm pretty sure Tether was holding less cash than they said multiple times, and at multiple points it was just a house of cards where they were inflating the price of BTC on their own, but I'm also guessing by now they've had made enough to cover.

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Said another way, returns ALWAYS have to be risk adjusted. Sure they could _probably_ make more in Equities, but their approach is returns with zero risk, which is impossible to beat.

Depends if the purchasing power of the currency holds up. Real returns are what matter, and earning 3% “risk free” is not so “risk free” if the price of things you want to buy increase by more than 3%, etc.

Skimming 3% on OPM is still a pretty, pretty good business.

Well, fortunately for them we are talking about amounts of money where inflation is irrelevant.

The problem is liquidity. If in some fantasy situation there was a run on tether, tether would go to 0 because their investments can't be converted into USD without tanking the price of those investments

Luckily for the crypto people, Tether makes it near impossible to turn their fantasy money into real money

Tether could gate redemptions at a pace that would preserve value of the underlying sovereign debt requiring liquidation, due to no immediate redemption regulatory requirements. Take a number and wait your turn while the treasuries are sold into the market, essentially.

The US treasury market is one of the most liquid markets in the world.

But a lot (like 40% last I looked) of their wealth is in bitcoin, gold and loans

Uh, internet dude, you must be new to finance. Banks have been doing this for centuries. Best business in the world? Sure. But it's even better when you invest in things that earn more, right? Like equities. That's what banks do. It's about the rate of return. Is it more risky? Sure. That's why they hold a diverse basket of goods, to diffuse the risk. But it's worth the risk when weighed against the opportunity cost of not investing and losing that rate of return.

> How greedy do you have to be to look at that and say "yeah, well they could be getting bigger returns with an actively managed portfolio?"

This is banking and finance. Greed only stops when you run into legislative limits, and sometimes, not even there.

> It's about the rate of return. Is it more risky? Sure.

Isnt the whole idea this is a stable coin?

Yeah, and we used to separate the investing activities of banks from the depository activities, to reduce overall risk to the financial system. You don't want people investing in higher risk securities with money that is supposed to be available on demand.

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