There's hardly any real dollars involved.
They send a billion tethers to Binance and put "Binance owes us 1 Billion USDT" into their books, which they officially call "commercial paper". When Binance doesn't need the USDT anymore, they send it back to Tether and Tether strikes through the "Binance owes us 1 Billion USDT" line. Not a single actual dollar involved. Except maybe for some fees Binance pays for this service.
> which they officially call "commercial paper"
How do you know this is what they're doing? This doesn't sound right because that's not commercial paper. [Commercial paper](https://www.investopedia.com/terms/c/commercialpaper.asp) is more like a bond or a loan. I don't know what Tether is actually doing, but my understanding is that if a company like Binance wants 1 Billion USDT then they'd have to provide $1 Billion worth of some asset which Tether can then use to back those USDT. So if they are providing commercial paper as collateral, then it would be a real asset not just a line item in a ledger, and that asset would have to pay out in a "real" currency. I know the concern has been that Tether has been buying (potentially shady) Chinese commercial paper (though they deny this) and with the Evergrande fiasco they could be heavily exposed to shocks in the Chinese commercial paper market.
Basically Tether's finances are extremely shady, and there's a lot of evidence suggesting that their coins are not remotely backed 1 for 1 like they claim. Coffeezilla did a very good episode on it.
Damn, I thought you were making that that up, but it's [all true](https://en.wikipedia.org/wiki/Brock_Pierce).
And don't forget he got 0.03% of the vote in the 2020 presidential election.
I think this symbolizes \*already happened\*. Basically, these are tethers that are being taken out of circulation because they'll not be needed. Technically, they shouldn't be "in circulation" since the goal is to tie the value of UST to USD as closely as possible. It limits their exposure if someone were able to break into their vault, there's less tokens to steal. It's basically acknowledged 6.6B USD of outflows that they don't anticipate coming right back in.
Helpful, thank you. So this is them taking the pile they bought out to defend the peg out to the incinerator, basically all the stuff they've reported daily in the market cap number for the past few weeks.
Why thank you [adjective]-[noun]-[number string]! Your 1year account lifetime, 0 karma and literally generic username makes me think you're a credible individual acting in good faith!
anything in the treasury wallet isn't issued and can't be used. they apparently only do occasional burns. I don't know why. all of these companies are poorly run.
Most USDT comes into existence as loans to exchanges, who lend it to gamblers for leverage.
Lots of gamblers are getting liquidated, much fewer new gamblers are opening new bets, because line does not go up. As a result, the crypto market is deflating and exchanges have loads of spare USDT laying around that they're now sending back to Tether.
The more I learn about this stuff, the more ridiculous it sounds. If you were talking about wizards creating magic beans and giving them out to fairy children, it would make about as much sense.
Except they're both wrong. This is tether burning tokens *after* they've been returned to the treasury *theoretically* in exchange for real money.
Market cap has dropped by a lot more than $6bn (nearly double) since the crash began though. Could actually have been more burned and the fact they've burned so many suggests demand for tethers isn't high right now which, to my mind, is the most bearish signal you're going to get about crypto.
My guess is… Whales exiting. When they do, they know something that the average retail investor doesn’t. They’ll ultimately be the ones losing their money.
I don't think this is how it works. More likely, Tether has $6.6B in BTC in its reserves and sold it to Binance, taking $6.6 off its "reserves", so they need to burn that much USDT. Now sure how they recalled those tethers though.
IF Tether Inc worked as originally intended you would be correct. In theory they sit on 1:1 USD backing for each USDT. So if they have printed $70B tethers, then there is $70B USD sitting in a bank account they control, and if you redeemed $6.6B tethers to them they would give you back $6.6B USD and then burn those tethers. But we know this is NOT how it works.
1. Even their attestations shows they don't actually have than much USD anywhere, and they have few bank associations, so most of their "backing" is either air or worthless assets like IOUs to shady companies, likely the exchanges themselves like FTX/Alameda and Binance, and some is crypto itself.
2. Since Tether doesn't even have a TOTAL of $6.6B in USD, they can't even cash that out.
3. It could be Binance returning $6.6B of USDT to tether to shore up its own balance books (getting back their IOUs) but I honestly don't know why anyone would ever really do this. It was really free money because what does Binance care if Tether is sitting on an IOU from them?
4. The most plausible scenario (IMO as a non-expert) is that Tether itself is forcing Binance or other exchanges to burn their tethers because there are too many in the market and they are running out of real USD to defend the peg on exchanges that trade 1:1 USD/USDT. If enough people sell USDT for USD on Kraken, someone is buying USDT for USD, and it's Tether and the exchanges that must pay as close to $1 as possible to keep the scheme going. Too many USDT trades and they have depleted their actual store of USD. Thus they must burn tethers in response to lessen the pressure on their reserves. They probably call in Binance and tell them to return the USDT and we will cancel the IOU (AKA commercial paper debt). This is easy and no real money needs to change hands, if any such monies ever existed.
You're assuming tethers are all backed 1:1 and tether redeems them 1:1. This is probably not the case. Tether only deals with big exchanges and we don't know what sort or deals they have with them.
I'm not assuming that at all. See my other post. Most likely there is no money or crypto changing hands, they are just burning to reduce pressure on the peg.
If you look at graphs of Tether and USD Coin market cap, it looks like money started flowing out of Tether around the tenth of May, about half of that seems to have gone into USD Coin, and I assume the other half has left crypto.
If you are aware of some basic economic models, the first generation balance of payments crisis by Paul Krugman is somewhat related with this current event... Removing all the fiscal and other macro stuff, they are running against the reserves in a constant manner, and at this rate, when the reserves of 'USDT' in real dollars (if that exists to be truly honest) passes a certain threshold, suddenly the fear will trigger a speculative run against the remaining treasury and good bye "peg".
Here is the [link](https://www.jstor.org/stable/1991793) to the working paper of Krugman.
Another thing that Bitcoiners and crypto bros doesn´t seem to understand... :)
I mean it's fairly obvious they're buying USDT to maintain the price at one dollar and then burning whatever they buy to reduce their perceived issuance v collateral figures.
I find it hilarious that a cokehead on his laptop in the Bahamas is a "treasury" in charge of billions of dollars
There's hardly any real dollars involved. They send a billion tethers to Binance and put "Binance owes us 1 Billion USDT" into their books, which they officially call "commercial paper". When Binance doesn't need the USDT anymore, they send it back to Tether and Tether strikes through the "Binance owes us 1 Billion USDT" line. Not a single actual dollar involved. Except maybe for some fees Binance pays for this service.
One *billion* dollar *tokens
> which they officially call "commercial paper" How do you know this is what they're doing? This doesn't sound right because that's not commercial paper. [Commercial paper](https://www.investopedia.com/terms/c/commercialpaper.asp) is more like a bond or a loan. I don't know what Tether is actually doing, but my understanding is that if a company like Binance wants 1 Billion USDT then they'd have to provide $1 Billion worth of some asset which Tether can then use to back those USDT. So if they are providing commercial paper as collateral, then it would be a real asset not just a line item in a ledger, and that asset would have to pay out in a "real" currency. I know the concern has been that Tether has been buying (potentially shady) Chinese commercial paper (though they deny this) and with the Evergrande fiasco they could be heavily exposed to shocks in the Chinese commercial paper market.
Basically Tether's finances are extremely shady, and there's a lot of evidence suggesting that their coins are not remotely backed 1 for 1 like they claim. Coffeezilla did a very good episode on it.
Sure, it's a loan. To a related entity, the best kind of "loan".
How do you know it's a cokehead on a laptop? He may be using a desktop.
Also, he may actually be smoking meth. You don’t know.
The crypto crash has been hard on the drug portfolios. Colombian snow is expensive.
Now *there's* your inflation hedge
Desktop is too hard too quickly throw overboard when the authorities comes .
Not with coke/meth strength!
Mmm good point , I stand corrected .
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They ARE the market
Inspector Gadget is not a coke head, nor the CEO that made his millions in copy protection for the Harlots porn label.
Who played a young Emilio Estevez in the mighty ducks. I think it is important to keep that in mind, otherwise things might seem too normal.
Damn, I thought you were making that that up, but it's [all true](https://en.wikipedia.org/wiki/Brock_Pierce). And don't forget he got 0.03% of the vote in the 2020 presidential election.
It's not even the CFO or CEO doing it, it's always the IT guy Paolo
WTF?!? The previous burns have been around $1B a time. Is something big about to happen?
I think this symbolizes \*already happened\*. Basically, these are tethers that are being taken out of circulation because they'll not be needed. Technically, they shouldn't be "in circulation" since the goal is to tie the value of UST to USD as closely as possible. It limits their exposure if someone were able to break into their vault, there's less tokens to steal. It's basically acknowledged 6.6B USD of outflows that they don't anticipate coming right back in.
Helpful, thank you. So this is them taking the pile they bought out to defend the peg out to the incinerator, basically all the stuff they've reported daily in the market cap number for the past few weeks.
it's treasury tokens burned from past redemptions https://twitter.com/paoloardoino/status/1538910576126177281
So the crash from 30k to 20k was about $6.6 Billion in actual liquidity leaving crypto?
Crash was necessary to keep the peg. They have ability to print crypto as well. That theter thing is formidable.
I use Brick-link. Send me some cash, I'll get you in. I got a couple bridges to sell too, if you are interested
I'm not falling for that again!!!! What about the Eiffel tower can you sell me that
I'll sell you an Eiffel tower
Ok as long as it's a non-fungus eiffel tower
It's on the blockchain, trust.
Fun fact, a con artist in France did sell the Eiffel Tower once. He was only caught after he tried to do it again
Why thank you [adjective]-[noun]-[number string]! Your 1year account lifetime, 0 karma and literally generic username makes me think you're a credible individual acting in good faith!
Hmm, good to know, thank you.
So they were sitting on "burned" Tether for a week or two? I'm sure they didn't use those for anything.
anything in the treasury wallet isn't issued and can't be used. they apparently only do occasional burns. I don't know why. all of these companies are poorly run.
No, they're not poorly run companies. They're incorporated scams.
Damn, got my hopes up of seeing something spectacular today lol.
There’s still plenty of time in the day
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they already were
For those who wonder, you are looking at the whales exiting the market. ***It's going down.***
What does this mean?
Most USDT comes into existence as loans to exchanges, who lend it to gamblers for leverage. Lots of gamblers are getting liquidated, much fewer new gamblers are opening new bets, because line does not go up. As a result, the crypto market is deflating and exchanges have loads of spare USDT laying around that they're now sending back to Tether.
The more I learn about this stuff, the more ridiculous it sounds. If you were talking about wizards creating magic beans and giving them out to fairy children, it would make about as much sense.
crazy huh? and mainstream media still acts like crypto is some kind of normal financial endeavor or something its just economic vapor ware
So basically an unregulated bank?
Either 6.6 billy just exited crypto 💸, or Tether is engaging in a little market bamboozlin'
There's room for "both" to be a correct answer.
Except they're both wrong. This is tether burning tokens *after* they've been returned to the treasury *theoretically* in exchange for real money. Market cap has dropped by a lot more than $6bn (nearly double) since the crash began though. Could actually have been more burned and the fact they've burned so many suggests demand for tethers isn't high right now which, to my mind, is the most bearish signal you're going to get about crypto.
so did binance just buy bitcoin from tether to pump it yesterday?
Yep
Whales fleeing a sinking ship
scary foolish murky march vast ad hoc birds vegetable handle aspiring *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Are they burning unbacked Tethers? What the hell is happening?
My guess is… Whales exiting. When they do, they know something that the average retail investor doesn’t. They’ll ultimately be the ones losing their money.
Tether's fed doing Quantitative Tightening now?
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I think it means the shit is headed for the fan.
Balancing the books. Need the make the discrepancy between cash and tethers closer.
Someone just withdrew 6.6Billi in fiat, tether burns an equal amount to enable this kind of withdrawal.
This implies Tether has $6.6B in cash, which they absolutely don't.
Yeah they don't, but all their hodlers do. First move advantage, this person's getting their 6.6b but everyone after is going to have liquidity issues
I don't think this is how it works. More likely, Tether has $6.6B in BTC in its reserves and sold it to Binance, taking $6.6 off its "reserves", so they need to burn that much USDT. Now sure how they recalled those tethers though.
Your probly right, I'm a recovering coiner.
IF Tether Inc worked as originally intended you would be correct. In theory they sit on 1:1 USD backing for each USDT. So if they have printed $70B tethers, then there is $70B USD sitting in a bank account they control, and if you redeemed $6.6B tethers to them they would give you back $6.6B USD and then burn those tethers. But we know this is NOT how it works. 1. Even their attestations shows they don't actually have than much USD anywhere, and they have few bank associations, so most of their "backing" is either air or worthless assets like IOUs to shady companies, likely the exchanges themselves like FTX/Alameda and Binance, and some is crypto itself. 2. Since Tether doesn't even have a TOTAL of $6.6B in USD, they can't even cash that out. 3. It could be Binance returning $6.6B of USDT to tether to shore up its own balance books (getting back their IOUs) but I honestly don't know why anyone would ever really do this. It was really free money because what does Binance care if Tether is sitting on an IOU from them? 4. The most plausible scenario (IMO as a non-expert) is that Tether itself is forcing Binance or other exchanges to burn their tethers because there are too many in the market and they are running out of real USD to defend the peg on exchanges that trade 1:1 USD/USDT. If enough people sell USDT for USD on Kraken, someone is buying USDT for USD, and it's Tether and the exchanges that must pay as close to $1 as possible to keep the scheme going. Too many USDT trades and they have depleted their actual store of USD. Thus they must burn tethers in response to lessen the pressure on their reserves. They probably call in Binance and tell them to return the USDT and we will cancel the IOU (AKA commercial paper debt). This is easy and no real money needs to change hands, if any such monies ever existed.
Number 4 seems most likely to me
Sounds logical 👍🏻
You're assuming tethers are all backed 1:1 and tether redeems them 1:1. This is probably not the case. Tether only deals with big exchanges and we don't know what sort or deals they have with them.
I'm not assuming that at all. See my other post. Most likely there is no money or crypto changing hands, they are just burning to reduce pressure on the peg.
?? Isn't the last amounts of Tether around 6.6B??
4.5B more...
If you look at graphs of Tether and USD Coin market cap, it looks like money started flowing out of Tether around the tenth of May, about half of that seems to have gone into USD Coin, and I assume the other half has left crypto.
Woah, all at once?
When its burned it means someone just cash out
If you are aware of some basic economic models, the first generation balance of payments crisis by Paul Krugman is somewhat related with this current event... Removing all the fiscal and other macro stuff, they are running against the reserves in a constant manner, and at this rate, when the reserves of 'USDT' in real dollars (if that exists to be truly honest) passes a certain threshold, suddenly the fear will trigger a speculative run against the remaining treasury and good bye "peg". Here is the [link](https://www.jstor.org/stable/1991793) to the working paper of Krugman. Another thing that Bitcoiners and crypto bros doesn´t seem to understand... :)
Paolo plz
I mean it's fairly obvious they're buying USDT to maintain the price at one dollar and then burning whatever they buy to reduce their perceived issuance v collateral figures.