Presumably the figures for Tether's holdings are based on their attestations. Should we believe those figures to be real?
There is no other source for estimates of their financial holdings than those attestations. For years, Tether has promised that they are working on an audit. No audit has emerged. This is suspicious because audits aren't particularly hard for legitimate organizations.
People have gone looking for evidence that Tether really has as much as it has said. Nobody has succeeded. For example https://www.bloomberg.com/news/features/2021-10-07/crypto-my.... Which, after noting Tether's settlement for past fraud, and prominent executives with suspicious criminal histories, famously said that Tether "is quilted out of red flags."
And yet, many strongly believe that Tether is for real. Given that nobody has produced evidence of their wealth, I regard this belief as a question of psychology.
Said psychological belief has a simple explanation. We humans have a strong tendency towards cognitive dissonance. Meaning that we reject evidence which questions our sense of identity.
If I'm a bitcoin millionaire, my likely identity includes, "I'm a millionaire." But the financial system does not allow us to directly trade bitcoin. What I can actually trade bitcoin for is Tether. And therefore my belief in my own wealth relies on trusting that Tether is equivalent to money.
How can I support that trust? I can point to someone smart and say, "They believe in Tether, so it must be real!" I can point to someone rich and say, "They believe in Tether, so it must be real!" I can get angry at anyone who doubts Tether. It is easy to observe all three behaviors from people into Crypto.
That Bloomberg article offers an ironic example. Back in 2021, many crypto enthusiasts pointed at Sam Bankman-Fried. Who was both rich and smart, and publicly believed in Tether. Therefore he was quoted on the topic. Today, of course, he is in federal prison for having run a Ponzi scheme. If we behaved logically, any crypto enthusiast who used to look up to him, should be saying, "Wait, am I sure I'm placing my trust in the right place?" But, predictably, few do that. Instead they dismiss this past mistake, and place their trust today in someone else.
Now everyone knows that crypto is full of Ponzi schemes on top of Ponzi schemes. People are often OK with trying to take advantage of the greater fool, because they don't believe that they will be the greater fool. Others see people apparently making money and get in, driven by FOMO. But statistically, most people in a Ponzi scheme will lose money. And yet they will look like really smart people - right until the scheme collapses.
So here is the real question. Does Tether really have the money? Or does the entire infrastructure of crypto Ponzi schemes rest on yet another Ponzi scheme?
> For years, Tether has promised that they are working on an audit. No audit has emerged. This is suspicious because audits aren't particularly hard for legitimate organizations.
Hey, that's not true! They had several audits in progress over time, but had to fire multiple auditors for ... reasons, I guess.
And then they got one completed, but they can't let you see it! Why not? Because uhh, checks notes it's in Mandarin! (I shit you not. Straight out of their own mouths: https://tether.io/news/tether-update/ )
I'm a little surprised that they expected people to forget that translation services exist. But it fits with how people get sucked into a lot of cults, fraudulent cults, MLMs and the like. (I'm obviously listing nefarious uses. Something similar happens in many relationships.)
First get your target (emotionally or financially) invested. Then put them in a position where they have to accept something uncomfortable (investing emotionally even more), or back out. Repeat and intensify
In extreme cases you try to get them to be swallowing a stream of erratic and blatant lies. At that point you can do anything.
Yes. This says that there is likely a direct connection between Trump's erratic behavior and the fanatical loyalty that he inspires. If you trust him, you have to follow his latest whim. And following his latest whim strengthens your trust. Many charismatic leaders do this.
I wanted to come back to this, and make it explicit how the US program may be running.
If there is a run on Tether, the US government will step in behind the scenes and buy Tether at a discount. This gives Tether a backstop. It also gives the US government an immediate paper profit (buy Tether for less than a dollar, get a dollar of Tether), which can be used to buy Bitcoin. The sight of Tether successfully redeeming currency and Bitcoin going up will trigger a desire to jump back in, and reverse the cash flow. Allowing the US government to withdraw as much money as was actually put in.
This results in a budget neutral investment in Bitcoin. We put $X into Tether, we got out $X. We also got y% of that as Bitcoin. Exactly as the executive order demands that the government should do.
Ponzi schemes collapse when the participants ask for their money back (redemptions). Tether handled $17B in redemptions in 2022 when their market cap peaked at $83B.
There is no other source for estimates of their financial holdings than those attestations. For years, Tether has promised that they are working on an audit. No audit has emerged. This is suspicious because audits aren't particularly hard for legitimate organizations.
People have gone looking for evidence that Tether really has as much as it has said. Nobody has succeeded. For example https://www.bloomberg.com/news/features/2021-10-07/crypto-my.... Which, after noting Tether's settlement for past fraud, and prominent executives with suspicious criminal histories, famously said that Tether "is quilted out of red flags."
And yet, many strongly believe that Tether is for real. Given that nobody has produced evidence of their wealth, I regard this belief as a question of psychology.
Said psychological belief has a simple explanation. We humans have a strong tendency towards cognitive dissonance. Meaning that we reject evidence which questions our sense of identity.
If I'm a bitcoin millionaire, my likely identity includes, "I'm a millionaire." But the financial system does not allow us to directly trade bitcoin. What I can actually trade bitcoin for is Tether. And therefore my belief in my own wealth relies on trusting that Tether is equivalent to money.
How can I support that trust? I can point to someone smart and say, "They believe in Tether, so it must be real!" I can point to someone rich and say, "They believe in Tether, so it must be real!" I can get angry at anyone who doubts Tether. It is easy to observe all three behaviors from people into Crypto.
That Bloomberg article offers an ironic example. Back in 2021, many crypto enthusiasts pointed at Sam Bankman-Fried. Who was both rich and smart, and publicly believed in Tether. Therefore he was quoted on the topic. Today, of course, he is in federal prison for having run a Ponzi scheme. If we behaved logically, any crypto enthusiast who used to look up to him, should be saying, "Wait, am I sure I'm placing my trust in the right place?" But, predictably, few do that. Instead they dismiss this past mistake, and place their trust today in someone else.
Now everyone knows that crypto is full of Ponzi schemes on top of Ponzi schemes. People are often OK with trying to take advantage of the greater fool, because they don't believe that they will be the greater fool. Others see people apparently making money and get in, driven by FOMO. But statistically, most people in a Ponzi scheme will lose money. And yet they will look like really smart people - right until the scheme collapses.
So here is the real question. Does Tether really have the money? Or does the entire infrastructure of crypto Ponzi schemes rest on yet another Ponzi scheme?