Because the only customers at risk before where those who held Tether (which is a small amount for the exchange). Now there is the risk that the whole exchange goes down by Tether holders taking advantage of the guarantee by UpBit, transfering to them once or shortly before the collapse is in progress.
RE: The fear around the Tether situation is overblown, and here's why: - by @voiceofreason
You are viewing a single comment's thread from:
The fear around the Tether situation is overblown, and here's why: - by @voiceofreason
So because of this guarantee, you think that Tether holders are going to transfer all of their Tether over to Upbit because they are fearful of a collapse? If they are that fearful, wouldn't they just buy btc or some other coin with that money?
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Because the guarantee is 1USD for 1USDT. The price at that point may not be, or the liquidity may not be enough to get a large amount out at 1 USD
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Don't you think they would decide not to honor new transfers that come in AFTER things are collapsing, before they would allow their exchange to become insolvent?
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
That's not how guarantees work. I'm sure they might try to argue that in court, but no I don't think that would have any impact.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Who is gonna hold them to it? These exchanges are not regulated. In whatever court they happen to be sued in, they could argue that they are liable for every tether on their exchange at the time of the guarantee. All that aside, if they had $2 billion, which they very possibly do, they could still cover every tether in existence. I mean you are reaching pretty far to try and come up with the most extreme possibility that makes this situation dire.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
You say this, and you act like I'm the one reaching. You don't think exchanges are legally liable for their guarantees? Then what's the value in such a guarantee in the first place? There was no "up till now" clause in their statements.
You don't think national courts will see these exchanges as under their jurisdiction if they have customers in those countries?
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
I merely provided a way that they could make a counter argument in your doomsday scenario where every other exchange tried to take advantage of a good will statement they made to protect the interests of their current customers. Whatever the courts (yes it would be plural) decide to do in that situation is anyone's guess (including mine).
The kind of arguments you are making in this entire debate are the same kinds of arguments made by people who say that if bitcoin collapsed it would pull down the world's economy. Even though there is vastly more evidence countering those beliefs. However, it can never be known for certain unless such an event actually happens. Which both that one and this current one you are suggesting will likely never happen.
Which is unfortunate for purposes of this debate. ;)
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
By the way, the primary holders of Tether are exchanges themselves. Did you know that? They use tether to arbitrage amongst themselves and help close price discrepancies on different exchanges.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Yes, that is a major reason to be concerned. If exchanges are the main holders of USDT, then potentially the largest Bitcoin exchanges are all insolvent.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
You are talking about a $2 billion dollar liability max, spread over all the exchanges, in a $500 billion dollar market. Plus, most of these exchanges did over $1 billion in revenue last year alone. Look at the numbers, even in the worst case scenario where every tether is backed by nothing there is no way "the largest bitcoin exchanges are all insolvent". It's simply not big enough.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
This is ignoring the multiplier effect, whereby most of their solvency is in illiquid assets the value of which is affected by the existence of Tether itself. The maximum liability is currently $2.3 billion, but how much assets will be available to cover that in a collapse is unknown.
The liability of the Tether USD's themselves is $2.3 billion but the potential losses to the whole Bitcoin ecosystem are vastly, vastly larger.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Again, another straw man argument. How do you know most of their solvency is in illiquid assets? It's uncertain where those earning are/went.
And again we are talking about one exchange in a $500 billion dollar market where there is a very good possibility at least some of those tethers are backed, if not most!
Apart from all that, if this is your true belief are you selling everything to get out of the way of a potentially market crippling event?
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Bitcoin is not a $500 billion market. The market cap of the whole space is $420 billion currently, but there is far less money in the space than that. $1 million moves the cap far more than $1 million, because of the low liquidity and high volatility that comes with a lack of actual commerce.
The vast majority of exchange assets are held in the crypto that they hold on behalf of their customers and the crypto they hold for liquidity. How many exchanges do you think are actually holding double reserves, where they hold both the crypto and an equivalent amount in fiat assets? In the song of the history of Bitcoin, exchanges going insolvent and everyone losing all their money is the repeating chorus.
Yes, I held a significant amount of EOS which I sold entirely due to the connection to Bitfinex and Tether.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Ok, good luck to you! I took the other side of your trade and bought more on the likely misplaced fear, uncertainty, and doubt.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit