The cryptocurrency market’s reliance on Tether is a recipe for disaster

https://medium.com/s/story/is-the-price-of-bitcoin-based-on-anything-at-all-8989790678e9

by kimsk112 • 8 years ago

16 12 8 years ago

it's a laundromat

superkuh2• 8 years ago

The idea that the cryptocurrency market relies on tether is absurd. Everything follows Bitcoin. Tether is an irrelevant scam.

jeletonskelly• 8 years ago

A majority of the trading volume and, thus, the apparent market liquidity is in Tether. The problem with this is that Tether doesn't represent real liquidity since there's no way to redeem Tethers to actual USD. Tether currently represents a pool of USD that is trapped in the crypto market. This makes the crypto market seem much deeper and wider than it really is. The only Tether:USD market on Kraken doesn't have enough liquidity for a large entry/exit.

dragontamer• 8 years ago

A majority of the trading volume and, thus, the apparent market liquidity is in Tether.

Well, the majority of trading volume on some exchanges, at least.

While coinbase-pro (formerly gdax) is relatively insulated, I can see that a lot of Southeast-Asian exchanges collapsing when the Tether bubble finally bursts... taking the BTC price down severely with it.

But with that being said: do you have any hard numbers for the amount of trading volume that's tied to Tether? I've been looking for those numbers to satisfy my curiousity. I suspect you're right that a large portion of the BTC market is USDT trades instead of USD trades... but I never found exact numbers on this subject.

andrewla2• 8 years ago

Note that I have not tried this, but apparently USD withdrawals from Bitfinex are working again. I would be interested in seeing information to the contrary; I can't find people saying that they can do it, but I also can't find (recent) accounts of difficulties, so I'm not sure how to interpret the data.

If Bitfinex is allowing wire withdrawals in USD, then there is a mechanism for redemption of USDT into USD besides going through Kraken.

superkuh2• 8 years ago

All these things only matter if you think of cryptocurrency as a get rich quick speculation scheme.

If you care about actually using cryptocurrency and look at actual use then nothing is in the same league as bitcoin.

Additionally, even if you're a speculator it's obvious that the price of alt-coins follows bitcoin.

drcode2• 8 years ago

I fully support articles that give individual investors advice to stay away from tether (it is indeed a very shady product) but I fail to understand how this is a disaster for the crypto markets.

If tether fails, cryptocurrencies may drop to a lower price- That is not a "disaster", that is appropriate market behavior.

duskwuff• 8 years ago

The issue is that many exchanges have dropped out of direct cryptocurrency/fiat trade -- if you have a FooBarCoin and you want to turn it into USD, for instance, you will most likely have to convert it to Tether before exchanging that for USD. A lot of trade between cryptocurrencies passes through Tether as well.

If something catastrophic were to happen to Tether, it would have a significant adverse effect on all cryptocurrency trade.

drcode2• 8 years ago

I am not aware of even a single example of a FooBarCoin that can't be traded either directly to either Bitcoin or Ether.

andrewla2• 8 years ago

The reason that this doesn't scare me too much is that during the last crisis (when the price of USDT dipped significantly) the price on most exchange was unaffected, but Bitfinex and other USDT-based exchanges showed a significant discount on the price of USD (manifested as a premium in BTC prices). So the market is capable of assimilating information about the value of Bitfinex-held USD (and thus USDT) without it having a price impact on Bitcoin (or other cryptocurrencies).

The cryptocurrency market’s reliance on Tether is a recipe for disaster

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