I mean, if I had substantial bitcoin, I'd not sell it for tether. Maybe I'd use tether as some intermediate currency, but in the end I'd either buy stocks or real estate or yachts. Or I would keep the BTC. But I would never sell BTC and keep tether. Who does that and why?
This initial purchase drives btc-usdt up, arbitrage bots then buy btc-usd so that it matches btc-usdt. The media and people notice the price increase and jump into btc-usd because it's going up, narratives are created to justify why the price went up (paypal, fidelity, rich investor), btc-usd further increases, and now Tether (the company) sells its btc for dollars, so that they make a profit, and also to cover whomever else wants to redeem tether for usd, thus maintaining the illusion that tether is fully backed by dollars. Tether then decides to start the cycle again after a certain amount of time.
So, if the above is true then yes this is a scam and there's gonna be a lot of bagholders if/when tether is kaput (they are under investigation by NY AG).
Note, that since March 2020 Tether has printed $13 billion in tether. Is this really a result of organic growth/demand? (https://imgur.com/i78BTXg)
Most of the tether is in storage at the exchanges: https://i.imgur.com/eIKDzJl.png
So it looks to me that they know it's worthless.
It's not implausible to think that there's $13B of inflows to BTC this year.
This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges".
* it isn't and Tether wants to keep people in the dark
* it is, but a hammer is ready to fall that probably involves OFAC freezing funds
Any other options I'm missing? Because neither of those look good.
> This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges".
This whole Tether speculation / hit piece is basically people thinking it's implausible that people are physically capable of redeeming Tether for USD, ever. Not a single audit has ever been conducted - except for one that was started and then the auditor literally quit half way through. If you begin there, the rest all falls into place.
Come on, you've got a super shady organization based somewhere between a virtual office in Hong Kong and a corporate entity in the BVI.  Who pretended not to be involved with Bitfinex until the Paradise Papers showed it to have the same principals.  Who lost banking access repeatedly - being cut off by Wells, before issuing a letter that they were now banked in Nassau, Bahamas with Deltec that Deltec then denied ("The bank previously declined to confirm any relationship with Tether when reached").  For about as long as I can remember they promised to release an audit, but of course, their most recent auditor literally walked out once they got a peek under the covers . Then when Bitfinex (care of Panamanian company CryptoCapital) had $850M seized they just transferred it from whatever mattress is keeping Tether funds and left Tether with an IOU . And are now the subject of 5 or 6 ongoing investigations and lawsuits, most significantly by SDNY .
If I didn't have sources for all this you'd think this was the most absurd conspiracy theory ever. It's all true, though, and what sane person could possibly believe $2B of fresh new money is making its way to their big ol' Bahamian mattress?
Bitfinex is a massive fraud, and Tether is a massive fraud, it's plain to see for anyone willing to take a quick peek.
If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.
Tether might be shady in all kinds of ways -- their operation has a lot of red flags to it. But it basically can't be responsible for massive BTC rises all on its own, because the rises happen even at pure USD markets, and that can only happen when a lot of real USD actually got injected.
My hypothesis is they get dripfed onto these markets so as not to spook them. Or just transferred off to collateralize other trades - hey it's free money to them, why not set up another trade elsewhere while they are in?
It is not safe to assume anything based off market price action. You seem to be assuming there is some essential relationship between volume traded and price. These are market prices, they can be totally irrational, especially if there is some fake news (Tether is fully backed) behind them.
Also, because the order book is pretty thin on most exchanges, it may not take much arbitrage for the USD price to catch up.
Remember this is newly printed tether which means net deposits of new actual usd, if you believe them - and of course I do not.
In the time since it was published, when Tether had issued about $4.5 billion total, there have been over $14 billion additional Tether, a 4X expansion of the total supply, or 7.5X what was described as "large swaths of Tether" in this article.
Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally.
It still doesn’t really explain who is holding almost $20 billion of Tether though.
The reason being is that I want to keep my capital pegged to the dollar, but need something that's native to the Ethereum blockchain. If there's a trading opportunity, I need the ability to swap Tether for [X] token in a single blockchain transaction. There's no time to route actual dollar deposits from a real bank.
Considering that there's something like $13 billion locked in all the various defi protocols, that's a lot of potential demand for stable coins.
No sane person would hold USDT over USD.
The reason I say this should be pretty obvious to anyone whose familiar with the inner working of a Ponzi scheme or other similar investment scam.
Bitfinex and Tether wanted to legitimize the use of Tethers, so they found one guy, Matuszewski, they knew was in a position to help them do so. They actually set aside a relatively tiny slice of capital (a few million out of 3 billion) and treated him the way they should be treating all customers but weren't. Then they let him loose on the talk circuits to tell the world of the sheer upstanding nature and legitimacy of Tether.
This is exactly the kind of stuff Madoff did.
Audit, or gtfo. (To Tether, Inc. not you of course)
One thing that has stuck out at me from a white-collar crime reading spree is the amount of time that passes between something widely being seen as fraud by those who looked closely and when the walls actually start crumbling down. Enron, Madoff, Theranos, etc. all had people ringing the alarms long before the music stopped.
Short sellers first identified suspicious activity at the company around 2006. But it took 13 years for the house of cards to collapse. For over a decade, Wirecard stock just went up.
The company is bankrupt and worth practically nothing today.
If/when shit finally hits the fan at Tether, the crypto bagholders will look back with the same bewilderment as Wirecard investors did: “Wasn’t all this talk about fraud proven false long ago?”
Note that all of this is over a year before the Tether printer kicked into overdrive around April this year and started inflating from $4B to the current $18B+.
Unless of course you have a theory about where an institution without a banking relationship, let alone an American banking relationship is storing just shy of twenty billion dollars US? And why legitimate investors are plowing two billion dollars per month into this scheme instead of putting it somewhere with audits and regulation like gemini or coinbase.
(2) A larger issue is that not everyone is in America but still require USD as is it is the most liquid exchange pair.
Sounds like what they need is more liquid exchange pairs in global currencies instead of fictitious money.
I don't get this part. What can you buy using tether, even if it is worth only $0.70? (Well, obviously you can buy bitcoin but this doesnt make any sense to buy the bitcoin back that you just sold. What else can you buy?)
People who believe (in varying degrees) that 1 USDT == 1 USD.
In countries with strict capital controls (China, Russia, etc), USD is inaccessible to most people. And the fact that USDT has been trading at 1 USD for the most part is the proof that most of its users either believe 1 USDT == 1 USD, or they simply don't care.
In these countries, you have large amount of OTC desks due to lack of access to exchanges. Those OTC desks have to provide liquidity for large amount of trading activities (very large but I wouldn't think it's anywhere close to the 13b USDT that was printed in the last 6 months), and therefore they have to hold sufficient amount of USDT for that purpose.
Once you have a group of people (miners, traders, etc.), USDT could act as as a token valued at 1 USD among those people, and at any given point, there would be a significant amount of people holding large amount of Tethers. After all, the Tether "FUD" has been ongoing for years and nothing bad seems to have happened, right?
I totally get that part. But then what? With USD I can buy, e.g, a house or a yacht. With USDT I can buy what? I guess only other crypto currencies. So what is the endgame here?
Notice that the general confidence in the crypto ecosystem (HODL culture), and in Tether itself (it's just a FUD, it's been so many years and nothing have happened) contribute to the desirability of USDT. Also notice that when I say cash out, I'm not talking about redeeming USDT, but buying crypto then selling the crypto on an exchange or OTC that has an off-ramp.
Go do a search of "tether site:news.ycombinator.com" to see how laughably wrong HN has been for the last 4 years on this subject. The adherents simply refuse to give up and many still identify with this "conspiracy"
I'm not sure we have enough eggs for the number of faces.
We said it wasn't backed by dollars, they admitted it wasn't backed by dollars and instead crypto and swaps, and other ious. We said you couldn't redeem them, you can't. We said they didn't have a banking relationship, they don't and didn't. Crypto advocates keep pretending none of this is real because number go up.
The fact it's still around doesn't invalidate a single thing anyone's said and if anything time showed this all to be quite accurate.
So after the govt seizes almost one billion from tether, they are not fully backed anymore? Color me surprised!!
In fact as I recall they continued to tell people they were backed 1:1 for many months after the seizure.
Remember BFX and Tether pretended to be two separate companies until the paradise papers because of course those clowns used Appleby. 
I simply do not believe that the core tenets of crypto (decentralization, trustlessness, irreversible, “hard money,” etc) are good things to have in a currency. I don’t think trustlessness extends past cryptocurrency in a meaningful way beyond things captured entirely on the blockchain as that breaks down at the boundary between on and off chain (ie garbage in garbage out). I believe humans are fallible and trust is a massive optimization - and a system that doesn’t take those into account isn’t worth the NAND it’s stored on.
I’ve yet to see anything solved with a blockchain better than a classical solution - 12 years and billions of dollars scammed later. Such a thing would change my mind, and I would certainly eat my, err, hat (Hi Mr McAffee) and admit publicly, on Twitter, and here, and anywhere, that I was totally and incredibly wrong.
At least I’m on message! :)
Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.
But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether?
> Day traders use tether to slip in and out of positions in a volatile market. Unregulated exchanges use tethers in place of real dollars.
But day traders close their positions at the end of the day (or at least regularly) so they will not hold tether.
The exchanges will make money if btc goes up and more people buy it through them. By accepting tether for bitcoin they help pump up the price. Holding useless tether is fine as long as more retail comes in to them for bitcoin with USD.
But how can that be a scam if they hold the tether? It can only be a scam if someone else now has the tether and they have the real money. I'm trying to understand who is getting scammed here.
Moreover, why are they printing tether if they already have too much?
Tether is pretend-dollars that allows them (bitfinex and Tether the company) to fraudulently pump btc. As long as enough people believe 1 tether = 1 dollar, the show will go on. Tether has yet to be audited to prove their reserves, and the crypto community believes them even though they talk about trustless systems all the time.
So this is a two party scam, one is Tether, the company, printing money out of thin air, who then the exchange, the second party, accepts and gives btc in return as if tether was backed 1:1 by USD. This transaction is what kicks off the chain reaction that pumps btc's value. Tether, the company, now sells btc for USD at a profit, and can use that money to convert tether back to USD if say, the exchange comes to them looking to trade tether for btc. So both parties win, and tether is just weird monopoly money that they know is useless but they have to continue pretending it's worth 1 USD or else they can't keep rinsing and repeating this cycle.
He may not have an off-ramp (which means he can only sell the Tether to someone else, either directly or using cryptos as a bridge). He might be a crypto trader or even trader of other kind of merchandise and need the liquidity provided by Tether (which is for all purposes, "real" as long as the entire thing doesn't collapse)
Majority of the USDT volume come from SE Asia where countries often have strict capital control, and in these situations USDT or cryptos do provided utility by allowing people to circumvent the capital control. That's also why there's a crackdown of crypto OTC desks in China reported a few weeks ago.
Or is the theory that Tether is actually backed by Bitcoin, in a sort of circular way that is sustainable as long as the Bitcoin price goes up but would unravel disastrously if the price were to come down?
The people that printed tether now sell their btc for a profit and can now cover their tether obligations to keep the illusion going that tether is 1:1 backed with usd. They can now repeat the tether printing cycle.
And who is getting scamed here? Who is sitting on the tether at the end of the day?
> Retail people seeking to get into bitcoin in the middle of this bubble are getting scammed because tether is being used to artificially inflate its value.
But how? Let's say I have one BTC. You offer me 15k USD to buy it, I say no. You say, ok, what about 18k USDT (that you just printed)? I reconsider and say, yeah, ok. So you inflated the price ok, but then what?
I now have 18k USDT, but I can't spend them on blackjack and hookers. In fact, I can buy nothing with the 18k USDT except crypto!
So I have two options:
* I keep the 18k USDT. But why should I do that?
* I buy back my BTC. But then somebody else has the problem of spending the 18k USDT! Where do they eventually end up? I dont get that part.
It doesn't really work like that. It's more like: you see BTC being traded at 15k, and you refused to buy because that's ridiculously high. Two days later, the price pumps to 18k (which is, at least partially, caused by Tether printing). Now FOMO kicks in and you saw a tweet by some rando that says that Bitcoin will breach the ATH and get to 25k for sure due to his TA. You decided to buy in at 18k.
Notice that in this entire thought process, there's no difference between USDT price and USD price. They are considered one and the same, at least in the vast majority of traders, holders, miners and crypto media.
Now, you may have access to USD exchanges like Coinbase, but many people don't. For those, their only FOMO option is USDT exchanges like Bitfinex, which means they need to buy USDT first, which means the Tether ecosystme just got some new cash inflow and someone else got to cash out their USDT.
The price of btc denominated in tether (BTC-USDT) goes up after our transaction. Now, arbitrage bots will look at this in crease in btc-usdt, and be mandated to buy btc with USD so that BTC-USDT and BTC-USD are in parity. Now bitcoin's price in dollars has gone up and people notice this, and news articles are printed and people get FOMO.
But at the root of this pump is a fraudulent transaction. I printed tether that I know is not worth one dollar each, and you played along with me and we exchanged tether for btc, and we caused btc to go up in price so that we both benefit. Whomever buys btc (i.e. retail investors) after I've pumped the price is in great danger of being scammed because there was no real money behind the initial tether transaction. You, the exchange, might be holding a lot of useless tether, but it doesn't matter because you've already profited from the price increase in btc via higher trade volume and usage of your platform plus all the publicity you get from a media that is always happy to report insane btc valuations.
So you don't do anything with the tether, you don't care about it as the exchange. It's unclear if the tether in these exchanges, which is a lot, will be redeemed for dollars at some point in the future by coming back to me, the Tether company, where I would use some of my profits from selling btc high to trade some of your tether for USD and help maintain the appearance that tether is fully backed by USD.
This is the bit that doesn't make sense.
Arbitrage bots trying to push BTC-USD up to match BTC-USDT will end up holding a lot of USDT. So what do they do with it? You can't just magically make USD markets go up; that needs actual USD to enter the system (as part of the arbitrage process, if nothing else).
The world where no one tests the peg too hard is incompatible with the world where Tether caused huge BTC runups all on its own.
> Where do they eventually end up? I dont get that part.
Without a chair.
They can be redeemed on https://tether.to but the minimum is 100K$ if I recall correctly.
Because if it's a currency, it way too useless and volatile compared to EUR/USD/AUD/CAD/GBP etc.
If it's a market (a la share market, commodities etc), then the volatility is fine, but what advantage does being a crypto-currency bring here? Because I'd rather invest in a normal company on the stock market instead of a crypto-currency, because at least with the former I am far, far less concerned about yet another exchange disappearing off the face of the earth or doing something illegal...
Fine, do that.
I would say, in general, the phrase "bubble" is used much more frequently when talking about cryptocurrency than equities even though equities are more overpriced than they've ever been.
For example buy back tether yourself whenever the market is spooked that you may not be legit due to internet fud or have your collateral invested in US bonds.
Instead they've opted into a system where a small group operate the printer for their own ends, with no oversight.
Am I just being thick? It seems like the article has cause and effect the wrong way around. Demand for bitcoin would be expected to drive creation of tethers not the other way around.
If, however, you assume Tether is engaged in a conspiracy with crypto exchanges: Tether prints USDT and buys BTC from a friendly exchange, demand for BTC will go up when people see the difference between USDT-BTC and USD-BTC and try to arbitrage. Tether then sells BTC for USD.
Which is more likely? You can be the judge, but the fact that "exiting USDT for dollars" typically means "selling it for USDC" makes me pretty pessimistic about the first.
This was not the case for any early internet service. They were all immediately useful and became part of my life. The only reason I stopped using something (eg Usenet) was that a better replacement became available.
Not sure what the advantage is to you though.
Tether doesn't get to print currency. If Tether doesn't like it, too bad. Tether can get an aircraft carrier or a nuclear arsenal then we can talk.
I am to busy to go into detail, but if you'd care to know more, I can explain, prepare an analysis or consult you at 1200EUR/h
USDC and USDT trade at basically 1:1, as you can see here: https://www.binance.com/en/trade/USDC_USDT
FUD around Tether (like this article) is noise.
"Trust me I'm fully backed, give me your money for tether" reeks powerfully of a scam to me.
I think the criticisms towards tether are fully substantiated given their lack of transparency.