The current price of USDT is $1.01 on coinmarketcap. In the past few days it went as high as $1.03. This is happening because people are using USDT as a safe haven from broadly falling crypto prices increasing demand. However, USDT is supposed to be pegged at a fixed $1 per tether. So if people are willing to sell their bitcoins to Bitfinex at >$1 then Bitfinex should take the deal. If the demand for tether goes away and the price drops <$1/tether, Bitfinex can use all the bitcoin they just acquired from their earlier sale of tether to start buying back tether.
In the process of doing this, Bitfinex 1) stabilizes the price of tether at $1 and 2) makes a small arbitrage profit.
This arbitrage profit isn't without risk, of course. Ultimately this system works as long as the downside variance on tether isn't much larger than the upside variance. i.e., if tether goes as high as $1.03, it shouldn't go below $0.97. However, if the market loses confidence in tether broadly then everyone might try to dump their tethers at once and Bitfinex will run out of reserve bitcoin/usd to buy back tether.
Side note: This is exactly what happened to the British treasury when Soros did his famous run. Soros kept selling Pounds on the market and eventually the British treasury ran out of USD to buy the pounds and the price plummeted. The reason he was able to sell so many Pounds is because he was shorting them (borrowing from others and selling back on the market). So Bitfinex is in fact taking on some risk to run this strategy, but as long as Tethers aren't easily shortable, and the market doesn't completely lose confidence, there shouldn't be too big an issue.
All of this is irrelevant if Tether is committing fraud. They could easily be selling Tethers and not holding the Bitcoin they gain in reserve, rather spending it on yachts. If that's happening the price of Tether is bound to fall <$1 and with no one buying them back, the whole thing will crash.
But I don't think the blog presents evidence that this is happening.
Long term, being seen as a reserve currency is probably worth trillions vs. a few billions in short term fraud.
But I guess all the numbers get fuzzy at that level of wealth.
Edit: Maybe this one? https://news.ycombinator.com/item?id=16182423 from 18 hours ago?
They've printed 1.6 Billion Tether.
They are completely opaque in every conceivable way that could inspire confidence in them.
Yes, we've thought of it and dismissed it repeatedly.
> Isn’t it possible they are well aware of the possible risks but have the numbers to justify their printing?
They could easily be transparent. They choose not to.
> Tether is a magical internet money issued by world’s biggest cryptocurrency exchange Bitfinex
As I understand it, Tether is a completely separate company to Bitfinex. The only thing they have in common is an investor.
> It was designed as a mean to launder money
It was designed as a way to transfer USD without having to wait for bank transactions, and without having to worry about banks closing down accounts.
> I’m pretty sure this resemblance in name is deliberate to confuse owners
It's not meant to "confuse", it's meant to mean "USD Tether".
I think this post is intending to mislead far more than Tether is.
Isn't the fact that Tether explicitly state in their terms and conditions that Tethers are non-redeemable for USD enough to know not to trust Tethers? Why do we have to make up lies about them?
There's been an awful lot of FUD being spread about Bitfinex for the past year or longer, so you'll excuse me for not taking these claims seriously.
If I recall correctly, the details were that the account the stolen Bitfinex funds were extracted to was then used in some way tied to some Bitfinex or Tether action. Like I said, I don't remember the details, I just read the article and verified the TXes on a blockchain explorer and moved on with a more confirmed worldview.
I should start thinking about carrying a low balance on exchanges and putting my holdings into an offline wallet.