The "Store of Value" coin that emerged out of Bitcoin's block size debate is not Bitcoin Core. It's Tether.
You can't "store value" in an asset whose daily price movements you have to monitor constantly. BTC does not fit the bill.
Tether's price is extraordinarily stable, thanks to the constant reassurances that every tether is backed by $1 USD (though it may not be redeemable due to constant "banking difficulties").
An asset, any asset, should trade with a premium based on counterparty risk.
Russian bonds, for instance, offer a premium due to risk of default. That's a country with plenty of natural resources and nukes that can serve radioactive sushi to naysayers.
Tether is a centralized currency. The backing assets are held solely by one company. So it should carry the risk of insolvency of that company.
It's fascinating that the risk premium that the market demands of tether is a flat $0. I can think of only two reasons for this, but happy to hear more from others.
(1) The markets have decided that the company is genuinely risk-free. Not only is there no fraud in tethers right now, but they believe that the risk of fraud going forward is also 0.
We can debate, as has been suggested, whether tether is a "fractional reserve," or an out and out fraudulent operation. I'm not making that point here. Let's assume that tethers are above-board perfect right now. That's not enough for a $0 premium.
To carry a true $0 risk premium, it has to be the case that tethers have to be operationally secure from all future failures. No CEO/CFO can abscond with keys, no bugs in underlying platform, no hacks, and of course, there is $1 USD backing every tether, and it can be redeemed.
If Tether Inc is indeed this kind of an operation, then they are truly unique. A cryptoasset operation with no risk. A complex operation, run by humans, dependent on so much, with zero possibility of failure. Tell us your secret sauce.
An alternative explanation: (2) People are more realistic and understand that tether is imperfect. But they treat $1 USDT as being $1 USD because everyone else does so. That is, this is market psychology at work.
So people pay $1 for 1 USDT because that's what they see everyone else doing and that's what has always been done.
This is fine, but it's a precarious equilibrium. It can collapse the moment there is a change in perception.
I don't know of any other way of explaining the $0 risk premium and curious to hear others' opinions.
But do spare us the "what if they are fully solvent?" posts. I would love nothing more if that were true. But we established that past good behavior is not enough to cover future risks.
I should have guessed that the trolls would try to take the top tweet out of context. Something can be a good investment without being a good store of value. We all made money on BTC, spare us the "I had $100, now I have $300" posts and engage at an adult reading level.
