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Stablecoin Wars, Forced Binance Conversions, and the Irony of it All

World’s largest crypto exchange will automatically convert users’ deposits of rival stablecoins into its own Binance USD.
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Crypto is Real

Stablecoin Wars

Stablecoins cannot pay interest or they would then be regulated as securities. And with rising interest rates, there's a lot of money collecting interest at the exchanges. 

A battle is on for that money. The result is a stablecoin war as  Binance Makes Move on Rivals.

Binance, the world’s largest crypto exchange, said it would automatically convert users’ deposits of several rival stablecoins into its own stablecoin, Binance USD, starting this month. Analysts say Binance’s decision could escalate the rivalries among the largest stablecoin players, such as Tether and Circle, and generate additional revenue for Binance as the market cap of its stablecoin grows. 

Circle Internet Financial Ltd., which issues the second-largest stablecoin, USD Coin, held $40.1 billion in short-term Treasurys as of Sept. 15, according to its website. The Boston-based company earned $28.5 million in interest income on USD Coin in 2021 and $100.4 million for the first six months of this year, according to a recent filing.

Circle estimated it could earn $438 million in total interest income this year and as much as $2.2 billion in 2023, it said in a financial outlook presentation in February. USD Coin has a market cap of $50 billion.

Tether Holdings Ltd., the company behind the largest stablecoin with a market value of $68 billion, held $29 billion in U.S. Treasury bills at the end of June, according to its latest attestation. Tether also charges a 0.1% redemption fee for a minimum withdrawal of $100,000. 

On Binance, many tokens and derivative contracts are still quoted and collateralized in tether. Mr. Shah wrote that Binance users may be more likely to withdraw their Binance USD as USD Coin than tether “given the inconvenient inability to convert BUSD to USDT without executing a trade.”

Tether said Binance’s move could be “aimed at taking out USD Coin’s number two spot and replacing it with Binance’s own BUSD” stablecoin. 

Tether Audit 

Tether has promised an audit for years and has not delivered. Instead it offers an "attestation."

This is a "trust me, the money is there" statement, of which only $29 billion of which is actually in US Treasury Bills. 

The rest can literally be anything (or nothing at all), but whatever it is (or isn't), it's not as liquid as short-term US treasuries. 

Please note that a Bloomberg Investigation Tried to Find $69 Billion in Tethers and couldn't. 

On February 23, 2021, Coindesk reported NY AG’s $850M Probe of Bitfinex, Tether Ends in an $18.5M Settlement

The New York Attorney General’s office (NYAG) has settled with Bitfinex over a 22-month inquiry into whether the cryptocurrency exchange sought to cover up the loss of $850 million in customer and corporate funds held by a payment processor.

The NYAG’s office announced the settlement Tuesday, formally ending the inquiry that kicked off in April 2019. Under the terms of the settlement, Bitfinex and Tether will admit no wrongdoing but will pay $18.5 million and provide quarterly reports describing the composition of Tether’s reserves for the next two years. More significantly, these reports will match information Tether already provided the NYAG about its reserves. The NYAG will bring no charges as part of the settlement.

Settlement does not imply lack of guilt nor does it imply the money is really there.

Indeed, the conclusion was that it isn't. 

Happenings in El Salvador 

That's Max Keiser and Stacy Herbert with Nayib Bukele, El Salvador's president.

Bukele has adopted bitcoin as legal tender to the consternation of the US, other developed countries, and the IMF.

Arguably, that alone is enough to cheer for Bukele. He is running again for president but that is against the Constitution. After Bukele packed the court, it approved him running again.

A Gallup poll gave Bukele an 85% approval rating and an 95% rating in security matters. So who am I to object to him running again for president? 

That aside, isn't there a better way like changing the Constitution rather than packing the courts. 

Billboard in Austin

Ben Hunt on Bitcoin

Ben Hunt on "Bitcoin!"

Note "Bitcoin" and "Bitcoin!" are not the same thing. 

Unfortunately, that is paywalled. I will ask Hunt if he might unlock that. 

Scroll to Continue

RECOMMENDED ARTICLES

A Hint at Hunt's Thoughts on "Bitcoin!"

You vs "You!"

Noting the importance of the "!" in previous Hunt writings (without having read or being a subscriber to Hunt) I commented on June 18, 2022 The Crypto Crash and Why It's Impossible For "You!" to Cash Out

Memes of the Day

The newly circulated idea of the day looks like this: 1 BTC = 1 BTC.

I have seen that in perhaps a hundred Tweets recently. Yes, truly genius. And one US digital dollar = one US digital dollar. They are all alike.

$1 = $1 is equally brilliant. 

"Can't Go Below $20,000" 

Several people Tweeted Bitcoin could not possibly dip below $20,000 because they have seen the order flows.

Damn, it seems the order flows did not care what those fools thought. 

"Bitcoin Does Not Care What You Think"

That's true of course, given that Bitcoin cannot think at all.

Here's another "brilliant" truism.

Bitcoin does not care where Bitcoin believers think the price of Bitcoin is headed.

Stable Coins

The allegedly stable coin LUNA went to $0.

Many more are headed that way. 

"You" Can Cash Out But "You!" Cannot

  • What's the difference?
  • You is an individual
  • You! is the collective

At an individual level, "You" can still get the current quoted bid for a Bitcoin ($17,600 as I type)

But "You!" cannot get the current quoted bid. If everyone tried to sell, the price would crash to $500 or whatever the price marginal buyers are willing to pay.

Looking ahead, "You" may be able to get more than $20,000 tomorrow for a bitcoin but "You!" certainly cannot.

But hey that's OK because I have it on great authority that $1 BTC = $1 BTC and nothing else matters because "Bitcoin is Money" and "Money Always Goes Up."

You vs You! is not just about Bitcoin. The same applies to Tesla, Apple, gold, and silver. A lot of imaginary wealth has already blown up and more is coming up. 

Cult Hero Worship

Money Always Goes Up 

Bitcoin is Money Always Goes Up Forever

Bitcoin Will Go Up Forever

"Bitcoin will go up forever, like money is supposed to do, unless you don't know what money is."

What a hoot. 

Irony of the Day

Luna, a stablecoin, went to zero. Tether is less than 50% backed by US Treasuries. 

Bitcoin and the crypto space was founded as an anti-dollar alternative. 

But competition in the crypto space is heating up for unaudited tokens partially or allegedly backed not by dollars, but derivatives of dollars. 

That's worth another hoot.

Finally, other than barter, the only way to do anything with Bitcoin is to trade it for dollars, euros, or other fiat currencies.   

If you think you are directly buying stuff with Bitcoin from a merchant, you are mistaken. It's overwhelmingly likely the merchant convert that Bitcoin to dollars or euros pressuring the price of Bitcoin in the process. 

Still think "you!" can cash out"?

"You!" can't. Bitcoin is far too volatile for use as money, permanently relegating its use as a speculative play thing. 

This post originated at MishTalk.Com

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