I have wondered for awhile why the crypto mega-whales in my vicinity are trading USDT at par or better over the last year or two.
My conspiracy theory is that when insiders trade a distressed asset at par or better it’s often a bailout expectation that’s really being traded.
Who has unimaginable access to financing, a “stablecoin” going so/so, and a primary line of business critically dependent on Tether, like, I don’t know, a massive exchange with the highest volume pairs all sharing USDT as quote?
It’s not that hard. When Bitcoin goes down, people like tether because it’s “safe” at $1. So bitfinex makes more tethers and trades them for bitcoins. When Bitcoin goes up, bitfinex sells the Bitcoin and gets dollars.
It’s fractional reserve banking swapped around, with no reserve requirements. The market is the bank.
And because bitfinex is not obligated to redeems tokens for $1 they have no risk. It’s in their interest to keep the market price at $1 because the longer it runs the more money they make but if there’s a run on the currency they can just shrug and go home with their bag of dollars.
This is like giving central-bank levels of power to private entities. Which obviously follow from de-centralization. It’s insane.
The only way this could be a reliable replacement for our existing financial systems, would be with strong oversight from.. some kind of central entity that acts on behalf of society’s collective best interests.. staffed by people chosen through popular voting..
I stay away from USDT. The sooner it disappears, the better.
We no longer need central authorities to create good trusted products. Centralized can suck (communism, Federal Reserve bailouts of banks they regulate). DAI decisions are decentralized and done by the DAI holders. You may want to check it out.
The price of things like USDT are effectively set by Tether rather than the free market. If Tether have billions of US$ and offer in the market to buy back USDT at 1:1 then that's what they price will be near enough.
What you've described is metastasized moral risk. We could argue that maybe some risk should be rewarded. But not all risk, such as spending billions in beanie babies as a corporate strategy.
Eh, there are some important distinctions here. Pricing risk is an activity with fairly clear value, and as a result you can make a ton of money by being good at it. Assuming risk is something that every individual and organization does to one degree or another, and to the extent that they do so in a rational way it’s because they are pricing risk well or delegating that.
Your use of the word moral makes me think that you might be talking about shifting risk off onto others. Keeping the upside in some more favorable ratio to handing others the downside is (IMHO) immoral but also one of two main ways that people get rich, the other being inheritance.
My conspiracy theory is that when insiders trade a distressed asset at par or better it’s often a bailout expectation that’s really being traded.
Who has unimaginable access to financing, a “stablecoin” going so/so, and a primary line of business critically dependent on Tether, like, I don’t know, a massive exchange with the highest volume pairs all sharing USDT as quote?