ABST

mortymotron

Decline is a judicious way of putting it. Unless the powers who control Tether have a sudden change of heart and fundamentally alter the way Tether is backed (or priced), Tether will inevitably implode and collapse. We have precious few reasons to think those powers will do so (and a quite a bit of past and present evidence to suggest they won't). Meanwhile, the longer the status quo continues, with Tether's supply and notional value increasing as it does, the more catastrophic (and painful to holders) its collapse will be. The economic reality is that Tether does not and cannot have a stable value relative to the USD (or EUR). The reason is simple: the assets that back Tether's purported redemption rights are (likely very) unstable in value relative to USD or EUR and, even if at a given moment in time they are of sufficient market value, not even remotely liquid enough to satisfy Tether's potential redemption obligations in cash. Tether itself admits as much in its [Terms of Service](https://tether.to/legal/?__cf_chl_jschl_tk__=4c589b23c280f609babc870585c01535a183527c-1621456911-0-Ac1glAt0_VKKTFHlLAFnmWX2zjb-5RKc7cg5Z0hK62NM7SdI2E_zyvcCP7jbDsR0PK7QoIEOMyf7crp_ojShjbFpxvQoejGhIYseNd3BsXVUgGkyj3nr5uK7y9ckH0LSmbLbiLMdCdh9Sg3ioP8ejqmKB_LyUDokQyKlzA0zXSOmqEQFcgPW5eAbgCamkt9xYGAhpzaioHR6pl4iuSB1SS3xPkK73UFVZyrz0n68j0Lm9JgjXi9JYNkfQYUBlqqM8aqoUJrbzmsoAFCimjIb-MOXj2lRafIjfz0ABST2ehlbW11_5MUTpVjl7vQWqCfTB-Wr6GhM_GjeKQ7A9ibCz9HbE1DqDrey4HluRsUoHQqA_-b1xYGcpFLffcGcuoqP8jFqodHduJ72eXp8QjznrNY): >1.1.32 **“Reserves”** means traditional currency and cash equivalents and, from time to time, **may include other assets and receivables from loans made by Tether** to third parties, **which may include affiliated entities**; . . . > >3. The composition of the **Reserves used to back Tether Tokens is within the sole control and at the sole and absolute discretion of Tether**. . . . **Tether reserves the right to delay the redemption or withdrawal of Tether Tokens** if such delay is necessitated by the **illiquidity or unavailability or loss of any Reserves** held by Tether to back the Tether Tokens, and **Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves**. In plain English, when you hold Tether, what you're really doing is buying (with all other Tether holders) an unsecured contractual claim against Tether for a pro rata share of Tether's net asset value up to a maximum of $1/€1 per Tether Token. (Note that "Tether" means Tether Limited, if you are a US Citizen and otherwise Tether International Limited. Let's not even get into the fact that these both of these entities are subsidiaries of Tether Holdings Ltd., the BVI entity that published the reserves "breakdown", and it isn't clear which Tether entity or entities actually holds any or all of those assets). Tether's "Reserves" (by which Tether really just means the assets it buys with proceeds from selling Tether) could be any sort of asset Tether may choose, including loans to its own affiliates and insiders. When you request redemption of your Tether Tokens, Tether may delay your redemption due to, for example, losses or "unavailability" of its "Reserves." If and when Tether does honor your redemption, it can do so "in-kind" by giving you assets that its holds and values at $1/€1, rather than cash in that amount. So buying Tether Tokens is little different from putting money into a hedge fund and agreeing to share pro rata (or likely worse) in any losses if the fund's NAV falls without any corresponding right to share in any upside if the hedge fund's NAV increases. That's an unfathomably bad idea.