We will count Tether as “de-pegged” if it spends at least one full day below 98 cents at any point during 2023.
This is question #36 in the Astral Codex Ten 2023 Prediction Contest. The contest rules and full list of questions are available here. Market will resolve according to Scott Alexander’s judgment, as given through future posts on Astral Codex Ten.
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This is a funny analysis of Tether red flags. I'm too dumb to understand it all, but it sounds plausible. Still I fear Tether will survive yet.
https://cryptadamus.substack.com/p/the-tetherers-apprentice?utm_source=profile&utm_medium=reader2
https://manifold.markets/BenjaminIkuta/if-tether-depegs-in-2023-will-any-o?r=QmVuamFtaW5Ja3V0YQ
It’s a pretty easy choice whether they want to be billionaires legitimately or decabillionaires hunted by interpol. In this interest rate environment it’s easy to make money legitimately on demand deposits that pay no interest, and rational self interest would be sufficient to keep them from doing anything too crazy. The surplus could even be used to plug any holes in their balance sheet that might have existed.
I mean it’s all par for the course, but I’m interested how little the price is moving on this, as tether experiences a fairly persistent depeg of 0.1-0.3 cents and is now having bigger spikes down to 0.987
I’ve been waiting for a catastrophic depeg since 2017 so I can well believe this thing can lumber on a bit longer
@MarcusAbramovitch From a few days into august until shortly after I wrote this. Visible on coingecko’s history. At the time it was also occurring on Kraken’s USDT/USD market, so wasn’t just a BTC/USDT v BTC/USD mirage.
Returned to peg shortly after my post though, has weakened a bit in the last couple of days but not like in August
@RobinBruce With interest rates being this high tether would make huge profits on the float without even doing anything illegitimate
@JonathanRay How familiar are you with how treasury prices change with interest rates? like not “google it and give me the answer” but I don’t know if I’m talking to someone who’s worked ten years in a prop shop or someone who thinks of treasuries as a savings account with a fixed principal and an interest rate that floats - i’m happy to provide an answer pitched at the appropriate level
@RobinBruce if they put it in long term treasuries back when rates were low would get fucked by interest rates rising, but assuming they just borrow short-term for 0 by issuing tether and lend short-term for 5% they're making a huge risk free profit. I think most of their portfolio is commercial paper.
@JonathanRay The market cap of 83 billion (roughly equivalent to current market cap too) was reached when rates where in the range 0.25%-0.5% prior to the hikes. I personally wouldn’t consider it plausible that they rolled these into 5% yielding treasuries without loss of principal
@RobinBruce I mean they would have put it into low yielding commercial paper back then and now they can put it into much higher yielding commercial paper without increasing the risk, just because of interest rates rising
@JonathanRay Since tethers are effectively demand deposits that pay no interest, it would be dumb for them to have a weighted average maturity over 1 year imo. Probably most of their portfolio from the expansion has already matured and been rolled over into higher yields
@JonathanRay What you say is certainly rational and informed. However, I think if we’re getting into the territory where you’re presuming that Tether management have acted with professionalism, foresight and sound ethics, and then we’re really getting into the heart of where we differ.
@RobinBruce It depends on what Scott Alexander decides, which unfortunately is sometimes ambiguous for these markets. If you are interested in something more specific, my market /BoltonBailey/will-tether-depeg-even-slightly-in uses CoinMarketCap closing price data.