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12 sats \ 3 replies \ @freetx 13h \ on: Tether's Golden Bitcoin, WTH is Backing All of This? (Money Stuff, Matt Levine) econ
I don't understand his argument, and can't bypass the paywall. Can you clarify:
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Is he claiming that Tether is not backed by US Treasuries?
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Side question: How is this criticism of Tether different than any 0% reserve retail bank?
In early 2019, Tether changed their terms from saying:
10.164 Tether's website on 12 February 2019 "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD."
To:
11.623 Tether's website on 19 March 2019 "Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD." (#1115791)
If you go to this website you can see what they claim as their reserves:
It seems to be quite a mix of assets. (Note that this only pertains to reserves for USDT)
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Great chart. So they are 77% backed with Cash (or equiv) and remainder Loans/Gold/Bitcoin. Honestly looks like a pretty safe allocation.
I would point out that Gold/Bitcoin doesn't produce a yield, so there is no giant incentive for them to put too much into those.
As the article snarkly points out. They have a great business model, which is borrowing and 0% and investing in Treasuries at 4.5% - point being their incentives are to hold as much treasuries as possible to maximize their profit.
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and can't bypass the paywall.
newsletterhunt link at the bottom.
- Sort of. He's saying that it's weird to plunge what's supposed to be 1:1 dollar into non-dollar denominated assets (with crazy volatility)
- entirely, since a) banks aren't 0 reserve -- don't get hung up on that non-binding Fed announcement a few years ago -- b) Tether isn't regulated like a bank (I think?) or having support of the LOLR, so presumably that there's a different level of risk if you promise a 1-for-1 stablecoin (that somehow no longer is one for one).
But in practice, yes you're right: nothing bad will come of this since the run has to be SO GODDAMN MASSIVE for them to be in actual trouble.
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