The dramatic collapse of Luna and Terra (UST) reminds us that algorithms are fallible. Many trusted Terra, because it was endorsed by big names in the crypto space. Now everyone is with their hands on their heads. His fall was tragic and colossal. Now, “algorithmic” stablecoins, in a way, have emerged as an alternative to “non-algorithmic” stablecoins. It could be said that they are presented as a solution to eliminate the human factor from the equation. In other words, these are alleged “decentralized” stablecoins. Therefore, in the eyes of manynobler and more secure than their “centralized” counterparts. Or, at least, that’s how the narrative goes.
Tether is a cryptocurrency (a token). Its parity is 1:1 to the dollar. And that tethering is guaranteed by a corporation: Tether Limited. Now, Tether is the most popular representation of the dollar in the world of cryptocurrencies. On the other hand, it is a private and centralized model. Nevertheless, Tether owners are not very given to regulations. Apparently, they are “free spirits”. They are not very given to independent audits. They are not very accountable. In general, they are not the most transparent entity in the world. In fact, they have stepped on the courts on more than one occasion. And, to add insult to injury, over time, (the company) has been forced to reveal that not everything is what it seems. It turns out that the supposed parity is not such. Since fiat deposits do not cover all the tokens issued. This is not something said by critics of Tether. That is something said by the company’s own spokesmen.
Now, if the danger of an algorithmic stablecoin is a technical flaw, the danger of a conventional stablecoin is fraud. The Spartan solution of the libertarian current before both of these dangers is “personal responsibility”. Study alone. Take care of yourself. And he suffers alone. For many, the solution is not regulation, because that would mean inviting the government to the party. And we must remember that the Government is always “evil”. A “I told you so” were the words of encouragement, by these Spartans, for those who fell in the case of Luna-Terra. Apparently, this community is made up exclusively of tough guys. It’s not my case. I, frankly, am very sorry about what happened. I know of people who lost all their savings.
However, You don’t have to investigate much for the Tether case to cause concern. I recommend digging into his controversial past. The people involved do not inspire much confidence. And Tether’s lack of transparency doesn’t inspire much confidence either. No one knows what really goes on behind the scenes. In my opinion, we have a ticking time bomb with Tether. It is a project that is everywhere. His daily volume is huge. And its capitalization is gigantic. Speaking of an Achilles heel. Well, here we have one of epic proportions. Could Tether withstand a mass flight?
Now the big question: Why its popularity? Yes, all major exchanges accept Tether. And that in the minds of users is, in a way, an endorsement. It is assumed that the exchanges submitted the token to an admission test and the token passed the test successfully. Will that be true? On the other hand, Tether, so far, has worked. The company has been able to guarantee parity. So, we have a very popular, liquid, ubiquitous, and convenient token. Despite the criticism, it works. In other words, it does its job.
During the Luna-Terra crisis, many of the Tether users panicked and sold Tether to buy BUSB and USDC. Which could be telling us that confidence in Tether is not very strong. It is often used in the style of a necessary evil, but faith in the project is definitely not total. Is there something fraudulent in Tether? Will we have a collapse similar to that of Luna-Terra? I do not know. It may be a rather peculiarly managed project and nothing more. Rumors and suspicions may be baseless. However, Tether throws out a lot of red flags together. I repeat: The project does not inspire much confidence. Of course, this opinion is subjective. It’s a hunch. This is simply a skeptical user. Your ultimate test will be time.
What could we do? The support of Tether by exchanges is such that in most cases avoiding the peculiar token is practically impossible. One way or another, one always ends up running into Tether along the way. My solution has been to use Tether when I have to. But always for short periods and low amounts. I don’t have Tether in my portfolio. But it is a tool that could be used from time to time at your convenience. There are people who pay you in Tether. Well, I accept the payment and then I make the change. At the same time, there are people who ask you for Tether to make a transaction. Well, the changes are made and the transactions are carried out without major complexes.
Tether’s network effect is very strong. Without a doubt, it has established itself as the most used stablecoin. What is the dilemma? Stability in this space is necessary. Not all of us have the heart to endure the volatility of Bitcoin and other cryptocurrencies unconditionally. I tolerate it, but up to a point. Personally, I need that peace of mind that a stable asset offers to my portfolio. It should be noted that fiat in banks does not always offer you the same versatility as a stablecoin. However, accumulating stablecoins also poses a danger.
Exchanges will surely wash their hands of a Luna-Terra style crash. I have written to various exchanges about it and have gotten very Pontius Pilate responses. I would not be surprised if we were left alone in the hypothetical collapse of a Tether. Nobody is responsible. Because we return to the subject of “personal responsibility”. In this case, the available protection could be, on the one hand, diversification. In other words, don’t put all your eggs in one basket. And, on the other hand, trust the most “reliable” projects. In my case, “reliable” means “regulated”. I know it’s not a full guarantee. But I guess it’s about choosing the lesser of two evils.
When it comes to my finances, I am not an idealist. yesoh pragmatic. My priority is not to defend a dogma. My priority is to preserve my money. If I have to go to court to get my money back, I go. If it is necessary to ask for the help of the Papal State for this purpose, I am delighted with life. When it comes to being a victim of fraud, I turn to justice. At the time of placing my savings in a stablecoin, I’m going for the most transparent, regulated and secure option available. I am afraid that Tether does not meet this criteria.
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