Read OP's point, he/she claimed that a 5% drop in the price of Bitcoin would make Tether literally insolvent, that did not happen when BTC went from 60K to 30K
Insolvent doesn't mean that the company folds up shop immediately. As the person you're replying to points out, it is possible (if unethical) to lie about being insolvent.
And, as the other reply to my comment pointed out, there's a decent likelihood that Tether is actually already insolvent and is doing creative accounting to get the numbers to appear to come out to solvency. 100.2%--especially when a significant amount is in as volatile an asset as cryptocurrencies during an upswing--seems too precisely close to 100% to me to not involve some amount of shenanigans.
Read MY point, please prove (or show any evidence) that it did not happen.
You are claiming something that there is literally NO EVIDENCE of, while vast piles of available evidence points to the very opposite. Tether is, has been, and will continue to be insolvent. The only question is when people will notice.
I don't believe in Tether, but on the other hand, my logic that insolvency should lead to immediate destruction means...I should believe they are solvent.
I mean, that's basically it. Everything points to insolvency, but if it was, it would be history. Therefore, it must not be.
Anyone who "notices" should make it all fall apart instantly.
And loud mouth short sellers have certainly been wrong before.
> Anyone who "notices" should make it all fall apart instantly.
This is the flaw in your logic. How would you make it all fall apart? You have to force Tether to make good on more of its liabilities than it can make good on, but very probably, most of the people to whom Tether is liable are themselves drinking from Tether's money-printing trough, and it's not in their self-interests to pull the rug out.
To make Tether fall apart, you probably need to force an outflow of most of not only its hard currency reserves, but that of everyone else feeding at its trough. That is not an insignificant amount of money, and exactly how much is literally the $1M question.
If they are insolvent, then not everybody can get their money back, which means that you should take your money out immediately no matter what you expect other people to do. It follows that you can expect everyone rational to do the same. It's not that anyone chooses to "make" it fall apart, it's that everyone who finds out their secret should independently participate in making it do so and that reinforces itself.
This contrasts with a bank run on a solvent institution, where you only need to rush to get your money if you think other people will too and they will fail due to lack of short term liquidity.
> my logic that insolvency should lead to immediate destruction
But it doesn't. And it shouldn't.
Businesses can and do survive insolvency (sometimes without the public ever knowing!). Insolvency just means that either liabilities are greater than assets, or cash flow does not meet expenditures. Either one can be a temporary situation which can be solved with things like bridge loans. (Or bankruptcy proceedings!)
More nefariously, in the case of Tether, so long as they don't see redemptions exceeding their assets, they can continue to hide the fact that they are insolvent indefinitely.
You are equating liquidity with solvency, it seems to me.
People don't seem to want to admit insolvency is inherently worse than illiquidity.
It may be empirically true that entities can hide insolvency.
But it doesn't seem logical for anyone who knows they are insolvent to ignore it.
If they are solvent, sure, ignore the possibility of a bank run. Why should it start?
But if they are insolvent, then someone will lose their money, and you and everyone else who finds out should want to not be last in line, which should make it collapse almost instantly, provided that the information leaks to any number of people.
It seems sometimes like a lot of things are sort of like Wile E Coyote not falling until he looks down. Something can be widely known, but not believed until some catalyst makes it impossible to deny or rationalize or BS.
Still, learning that something is insolvent ought not to follow that pattern too much, because again, it doesn't matter if everyone else in the world is ignoring the problem, if you are certain it exists, you need to act.
I could be leaping to conclusions, as I'm not an accountant, but isn't that the phrase that distinguishes it from temporary liquidity problems?
Anyway, if people sometimes use insolvency to include illiquidity, that's not helpful in a discussion distinguishing short term problems from long term problems. Maybe it varies with context.
If you don't believe it does, and insist that insolvency includes illiquidity, then the appropriate thing is to find (teach me) a better word, that serves the purpose of excluding it.
