Terra 2: Electric Tetheroo
Since my previous journal was right on the money about Terra/Luna's collapse even correctly guessing the time frame of 2 months (by a quoted Redditor), I don't see why we couldn't do the same with tether. There are differences though.
Terra was an obvious ponzi, hands down. In theory, tether's business model could work, assuming they actually get dollars for each tether issued and when redeemed, they keep burning the used tether. I mean selling for a dollar and buying back for 98-99 cents, is not a bad business model, while maintaining the peg.
But there is a very objective assumption that Bitfinex doesn't have 100% backing of all the issued tethers, not even close. Lately they have started burning tethers indicating redemptions by brokerages. Now tether has survived 5 or so years, so why now a collapse journal? Well, there are some signs of concerns:
1. The collapse of Luna caused a distrust in stable coins. That includes tether.
2. The peg started to drop and Bitfinex is defending it, by buying them back, that lowers their reserves. This is all according to plan, as long as they do have their reserves or their investments can be called back quickly.
3. Bitfinex suddenly offers 30% return on your money if you don't cash out. Remember Terra promised only 20% and that was unsustainable, they had to lower it and the collapse started.
The market cap (number of issued tethers) was just over 83 B. Now after buying a few billions back in the last few days, it is around 76 B. Redemption is only for preferred customers (whales).
I am not going to put a time frame on this collapse, because as history taught us, scams can survive for quite a long time, but the current general weakness of the crypto market (and the general market too) doesn't bode well for the future of the biggest stable coin.
Since my previous journal was right on the money about Terra/Luna's collapse even correctly guessing the time frame of 2 months (by a quoted Redditor), I don't see why we couldn't do the same with tether. There are differences though.
Terra was an obvious ponzi, hands down. In theory, tether's business model could work, assuming they actually get dollars for each tether issued and when redeemed, they keep burning the used tether. I mean selling for a dollar and buying back for 98-99 cents, is not a bad business model, while maintaining the peg.
But there is a very objective assumption that Bitfinex doesn't have 100% backing of all the issued tethers, not even close. Lately they have started burning tethers indicating redemptions by brokerages. Now tether has survived 5 or so years, so why now a collapse journal? Well, there are some signs of concerns:
1. The collapse of Luna caused a distrust in stable coins. That includes tether.
2. The peg started to drop and Bitfinex is defending it, by buying them back, that lowers their reserves. This is all according to plan, as long as they do have their reserves or their investments can be called back quickly.
3. Bitfinex suddenly offers 30% return on your money if you don't cash out. Remember Terra promised only 20% and that was unsustainable, they had to lower it and the collapse started.
The market cap (number of issued tethers) was just over 83 B. Now after buying a few billions back in the last few days, it is around 76 B. Redemption is only for preferred customers (whales).
I am not going to put a time frame on this collapse, because as history taught us, scams can survive for quite a long time, but the current general weakness of the crypto market (and the general market too) doesn't bode well for the future of the biggest stable coin.
