I agree with the general sentiment around tether acting very opaque / shady. That said:
1. creation/redemption of tether (read: actual USD wire transfers) has been done on the magnitude of billions of dollars a time by major players in the space
2. during UST collapse, something like $15b of tether was redeemed in less than 2 weeks. so they obviously had that much cash on hand at the time.
3. the academic paper that attempted to show that tether was being created to pump up bitcoin has an extremely simple alternative explanation: as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up.
so, IMO they could very likely have some bad commercial paper on their books, but i think its much more likely than tether is worth 90 cents on the dollar and not 0, and in the case that it is worth 90 cents on the dollar, it would be extremely likely to continue to trade at par as there's very unlikely to be a scenario which forces any kind of large-scale redemptions.
Taking SBF’s word as gospel is about the least informed thing you can do. Do you notice how they say things like “redeemed” and “backing” which are very vague terms. In a normal security, redemption is clearly defined. But Tether isn’t normal. We know from players like Celsius that Tether will issue loans collateralized by crypto. You say yourself it’s likely they have other toxic assets on their balance sheet.
So imagine this scenario:
1. I issue a note for $1B to Tether and they send me 1B USDT.
2. I go about my business, trading crypto, doing whatever, and hopefully I end up with more than 1B USDT.
3. When I redeem, I send my 1B USDT back and Tether retires my note (or sends me back my crypto collateral) likely less some fees.
No actual dollars changed hands. And yet this fits in exactly with their narrative and language.
I mean hell they have issued a huge amount of USDT over weekends when you couldn’t possibly have wired any money (mayyybe some people banked at Deltec and could transfer between accounts, or via Finex…maybe)
I think people dont fully understand the risk of debanking in crypto. If you go to the regular players with a billion dollars in cash, say you are cryptocurrency firm and would like a bank account they will turn you around.
This is such a major factor with every cryptocurrency company. Especially 5 years ago when tether was made.
Tethers ‘dodgy’ investments is partially driven by there being no other options.
If their backing were as solid as you suggest, it is difficult to understand why they have been so unwilling to demonstrate that fact, given how much uncertainty exists around it. Their willingness to sue in NY to keep their backing out of public record, does not suggest that they are at ~90%.
This mentions the Celsius loan without mentioning that it was overcollateralized and liquidated with no loss to tether (confirmed by tether at the time and by Celsius's lawyers in court filings).
As noted in the article, they announced that the loan was liquidated at a date where the difference in BTC price between when the loan was emitted and the loan was liquidated was greated than the overcollateralization ratio.
As expected, no source on the date, just making up nonsense.
If you'd look at the documents filed in the Celsius bankruptcy, you'd see a sworn affidavit that says Celsius stopped providing additional collateral in May 2022:
>In May and June 2022, Celsius made the difficult decision to forgo providing one of its lenders, Tether, issuer of USDT, a stablecoin, additional collateral and agreed to an orderly liquidation of its loan. During the market crash, Tether issued a margin call to Celsius with regard to an outstanding $841 million USDT loan. Although Celsius had always provided sufficient collateral to support its loan, and had never previously been liquidated by Tether, the Company agreed to an orderly liquidation and settlement of its loan with Tether to preserve the remaining collateral in excess of the value of the loan
Bitcoin dropped around 30% in May-June, so this timeline lines up exactly with the 130% collateralization ratio.
I can give you exact dates, I just didn't bother to look it up. You can see it in this address [1] which is a Celsius-owned payment rail between tether treasury and Celsius trading addresses.
The exact transactions start here [2] (aug 11, 2021). I got the date wrong in my previous post because I didn't remember and was too lazy to check.
As for your misreading of legal documents and misunderstanding of how loans are written:
The loan was not written in May 2022 -- it was written prior to October 2021, when its existence was confirmed. The loan is denominated in BTC at the price at which it was underwritten (early August 2021, BTC price low-mid $40k)
The fact that BTC dropped 30% in may-june 2022 has no relation to the total loan value from Celsius' side. It only changes the amount of collateral tether would be margin calling Celsius for.
Celsius faced a margin call in May 2022 (price 30k) because the loan was written around a BTC value around 30% higher than that (~40k). Note the math checks out here as well.
It took over a month for the margin call to result in liquidation, hence tether's loss of $250-300m at a price of $21k. If tether immediately liquidated in May 2022, they would have skated by without a loss.
It doesn't matter the price when the loan was originated, because as the affidavit says, Celsius had provided additional capital. When you have an overcollateralized loan, as soon as it goes below the required threshold a capital call goes out, and you liquidate if that's not met. You don't wait until it's at bankruptcy to issue a call.
>“If bitcoin drops, they give us a margin call [and then] we have to give them more bitcoin,” Mashinsky told the FT in October. He said the loans were typically 30 per cent overcollateralised.
The price of bitcoin has since dropped by about half to $30,000. The person familiar with the matter said Celsius had indeed posted more collateral as a result of the falling price.
Sure, maybe everyone's lying, including in sworn declarations. Alex has obviously lied a lot leading up to the Celsius bankruptcy, so I'm not going to say that anything he says must be true. But I don't see any particular reason to doubt the claims here that tether's loan was overcollateralized, called, and liquidated with no loss (and in fact they returned excess collateral to Celsius, as per the court document above "preserve the remaining collateral in excess of the value of the loan"). I do think it's unlikely he'd swear to that specific claim under oath if it wasn't true, as he'd have nothing to gain from it?
Sure, Celsius may have topped up collateral in the meantime. But that would imply taking in the loan at a higher initial value. The numbers aren't exact, since we don't know when the loan was signed & negotiated.
The numbers don't need to be exact in any case given the magnitude of the discrepancies.
The core issue is, again, that Celsius stopped providing margin in May 2022 but were liquidated on June 15th.
Tether ate the loss for the difference in price between those two dates. Tether should have liquidated Celsius in May 2022, but didn't.
There's no way the math doesn't check out with tether ending up at a loss.
Similarly for the $190m of Celsius equity Tether bought, which is now worthless in bankruptcy proceedings.
The fact is Tether lost a 9 figure sum on Celsius. The only question is what the X is in a $X00,000,000 figure.
This is again, nonsensical. As I pointed out above, Bitcoin dropped about 30% from May to June. If the loan was overcollateralized by 30% before that 30% drop, then they'd have been able to liquidate without losses.
The equity is a loss, but that's not what I took issue is, which is your evidence free claim that there was a loss on the loan.
If Tether was 50% backed and there was a depeg it would probably be much worse than 50%. Presumably USDT would be redeemed at $1 until Tether's reserves were almost gone at which point Tether would have to stop accepting redemptions and the price of USDT could fall arbitrarily close to $0 in a short time.
SBF is not the horse, and he has a vested interest in ensuring that the market believes that the market is not built on sand.
Bitfinex and Tether have a history of fraud, of losing money, for Tether to be backed today would mean Bitfinex/Tether did a complete 180 and went legit after years of bad dealings. Even if you believe they did a 180, how did they rectify the mess from before they went legit? How did tether become solvent?
Even if Tether is 90% backed (a wild supposition) - if there is a run on the bank - they don't have liquid assets, and they'd have to cash out at WAY less than 90%.
and btw there are liquid tether credit risk products you can trade if you believe that tether is going to collapse that cost around 20bp / month (so something like 40x payout on annualized premium if tether goes to 0).
So in that theory they do get sufficient USD to cover USDT (as opposed to printing it out of thin air) but are using it to buy questionable CP.
I think many people believe they don't even have enough USD to start with, eg because some of their assets are loans collateralised by crypto (such as the Celsius 1B loan).
I believe both are true - Tether printed USDT against non-cash, and used some of the actual cash to buy dodgy assets for more yield.
I agree with the general sentiment around tether acting very opaque / shady. That said:
1. creation/redemption of tether (read: actual USD wire transfers) has been done on the magnitude of billions of dollars a time by major players in the space
2. during UST collapse, something like $15b of tether was redeemed in less than 2 weeks. so they obviously had that much cash on hand at the time.
3. the academic paper that attempted to show that tether was being created to pump up bitcoin has an extremely simple alternative explanation: as bitcoin went up, holders of bitcoin sold it for tether on centralized exchanges on the way up.
so, IMO they could very likely have some bad commercial paper on their books, but i think its much more likely than tether is worth 90 cents on the dollar and not 0, and in the case that it is worth 90 cents on the dollar, it would be extremely likely to continue to trade at par as there's very unlikely to be a scenario which forces any kind of large-scale redemptions.