> We take the 00:00Z price each day for 365 days and then average it
Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke.
> holds its price above a $0.98 average
When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg.
Suggest a better methodology crisscross, I'm happy to listen. The problem with $1 flat is that anyone can sign up and manipulate it over time, holding it a fraction of a cent under isn't hard for a moment each day. Constantly maintaining a few cents under each day is much, much harder, feel free to go look through historic charts of what it costs to sell tether for USD over the last few years.
All it takes is a few days of near zero in the next year to win the wager. Isn't that what patio11 has said would happen for what 4 years now?
I'm offering a chance to capitalise on such deep knowledge, surely that's a no-brainer choice for someone so convinced that Tether is done for?
> holding it a fraction of a cent under isn't hard for a moment each day
It shouldn't be. Not for a dollar-pegged asset. Fractions of a cent on billions of dollars, dollars easily lent and borrowed every day, every minute, is millions of dollars a year for an arbitrageur [1].
Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.
> what patio11 has said would happen for what 4 years now?
Four years isn't long. At the first sign of tight markets, the damn thing fell apart to the tune of 5%.
> that's a no-brainer choice for someone so convinced that Tether is done for?
People are shorting Tether [2].
The problem is counterparty risk. When Tether busts, you want someone on the other side who isn't all in on crypto. That's not easy.
[1] Coinmarketcap shows $0.9989 for 1 Tether, an 11 bp spread. Call money is 2.75% [1], or around 75 bps per day; too expensive. But the repo rate is 80 bps [2]; less than a basis point a day. Borrow a billion against collateral, buy one billion Tether, redeem it for one dollar each and pay back the loan. You'll make, round trip, a $1mm profit [c]. In one day. Unless we're arguing there would be $1mm transaction costs for this trade, one must ask why nobody is doing it.
> Hundreds of billions of dollars are deployed into funds exploiting smaller differentials on rates and futures curves.
Legally, IRDs and futures trade/settle on a few centralized exchanges with maybe one CCP (at least going by clarusft numbers on monthly dv01 volumes [some products way trade more on different venues compared to others], esp compared to all the places USDT trades) with many times rehypothicated US treasuries or other gov bonds behind it all, scheme blows up occasionally (was fun watching 30 year UST's trade ~30 bps under 75% of SOFR txs for a month before sept 2019 'surprise' fireworks happened).
> … buy one billion Tether
With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream. Maybe you can market make over the course [unknown amount] of time and pick it up on cex/dex's at/under $0.9989, but good luck trying that everyday (esp on chain where you will need to split that over many address all the time or addr tracking algos will front run if the MEV bots dont get you on every tx).
Shit show all around, ones just more concealed from the public and "regulators" than the other…
> With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream.
Slippage for an arbitrageur is price correction to the market. I made a math error in my comment: call money at 2.75% is less than a basis point a day. The trade makes money with no collateral.
I--me!--could call my broker and borrow $10mm at 5.75% (call money + 300 bps, because I'm not a billionaire) by lying and saying it wasn't for trading, buy 10 million Tethers for 0.9987, redeem them and pay back the loan the next day to turn an $11,425 profit.
I'm not going to do this. Because in that interval between buying and redeeming, an interval I'm sure would be marred by unnecessary delays--with my borrowing cost the trade breaks even between days 8 and 9--there is more than a 1 in 875 chance that Tether blows up [a]. (In other words, I'm betting, by not doing this trade, that Tether has no more than a few years to its name.)
[1] 1 / (11,425 / $10mm), the 11,425 being about $10mm - [$10mm * 0.9987] - [$10mm * {(2.75% + 3%) / 365} * 1 day]
Is it not well known that the Lehman International (London) book turned the all history record yield when finally unwound by the liquidators, and made LB fundamentally solvent at the death?
Edit: solvent at crisis time. LBI wasn't linked to onshore information systems.
The problem wasn't solvency. It was liquidity. The point of bank regulation is to ensure that banks can survive small bouts of illiquidity and remain solvent through major ones.
Take the average price at close of Lehman Brother's stock in 2008 and you get a positive number. That doesn't make it less broke.
> holds its price above a $0.98 average
When we say money market funds "broke the buck" in 2008, we are talking about one fund going to 97¢ [1]. Moving the goalpost to on average outperforming what counts as badly bust in real markets concedes a lost peg.
[1] https://www.investopedia.com/articles/economics/09/money-mar...