Tether is a company that created a cryptocurrency (USDT) pegged to USD that is a popular substitute for trading fiat USD on cryptocurrency exchanges. Friedman LLP is the accounting agency that was supposed to be auditing Tether's USD holdings to ensure they were maintaining a full-reserve (1 USD in holding per 1 USDT in circulation).
And with no audits and some very sketchy behavior, the thinking is that there are hundreds of millions of Tether in circulation without any subsequent backing USD.
Thether Inc. is a company running a cryptocurrency scam.
They have create a cryptocurrency (also called Tether) that they claim is pegged to the US dollar. They have since emitted more than 2 billion of these tethers, and they claim that they are holding an equivalent amount of US dollars in their bank accounts.
Tether Inc. have never released a public audit proving that they have these billions of dollars that they claim to have. And today the company that they said was auditing them has apparently cut ties with them, which is yet another sign that tethers are a scam that is about to blow up.
The reason why this is important is the magnitude of the fraud here. Is is suspected that the billions of dollars of fake money that Tether has printed have been used to push up Bitcoin and cryptocurrency prices to their current high levels. There are many cryptocurrency exchanges accept tethers as if they were worth 1 USD and the latest price increase in bitcoin price that started last April coincides with when Tether inc became more active.
Don't worry guys, I'm sure Tether is a 100% legitimate operation that just happens to be conducting an ongoing research project to see how much like a scam they can appear. They've got the money, they're just keeping it hidden! ...very hidden! They had to fire their auditors because they were about to find proof the money exists, and that would have ruined the research project!
More seriously, I've got to ask: Why does anyone trust them? Why did anyone trust them? They've never offered the slightest reason to think they're anything else but a particularly lazy fraud.
Is this an "emperor's new clothes" situation where everyone assumes everyone else has proof of Tether's validity, and doesn't want to look dumb by asking? Or a "bigger fool" situation where everyone believes Tether is a fraud, but thinks they can get out and leave someone else holding the bag when it bursts? Raw wishful thinking because a legit Tether would be so useful to the ecosystem that people have collectively decided to pretend it does exist? Or what?
> Why does anyone trust them? Why did anyone trust them?
Greed. I get why people would trust BTC, Ether (before the DAO hardfork, that is) or Dogecoin, as these had real value and usecases (e.g. Bitcoin for getting high quality weed, ecstasy or guns, and Dogecoin for having fun + a quick-and-easy donation way on Reddit other than gold). But the other ~1.5k coins listed on https://coinmarketcap.com/? What in blazes? People stuck billions of dollars into altcoins!
Not really: just because the market cap of an altcoin is in the billions doesn't mean there's more than a tiny fraction of that amount actually invested (as in, bought with fiat) into it.
At 0.05% fee (public rate for Binance, is probably lower for people in the know), it is a four-figure USD investment to get your coin in the top 100 volume chart for a day. Then when real people start buying in, you can sell a tiny fraction of your holdings to finance more fake volume.
It also works when you own the exchange. There's pretty good reason to believe wash trading is happening at several exchanges...possibly performed by the exchange themselves. I'm more willing to believe Bitfinex is doing the BTC wash trading that's happening on their exchange, rather than some whale doing it (the very close connection between Tether and Bitfinex, sharing several founders and C-levels, makes this seem even more likely).
Volume is just as gamable with a bit more effort. One person can create $1B volume by moving $1M between two coins 1000 times. And consider that $1M could be inflated by a major creator/miner of the coin as discussed above. Get yourself up the volume and market cap charts with this inflation and people outside the scam will buy in. There you go, the basic anatomy of a pump and dump.
Yeah but the trading volume shows that there is substantial activity on a boatload of altcoins. Of course it may be artificially inflated but I do believe that a lot of people did invest back in the coincraze last December - and for what its worth now that prices are more down-to-earth it may be possible that the more adventurous want to buy in as long as the prices are low...
Large amounts of Tether is being printed to buy bitcoin, particularly when bitcoin has lost value quickly. Unsurprisingly, this tends to help the price rebound.
People don't really trust them, but it's not like you have a choice if you want to be in crypto. It's more of a calculated risk that you have to take.
The explanation behind them putting off the audit might have nothing to do with tether. It could be concerns about what an investigation could uncover in their creative bookkeeping, being an incredibly profitable, offshore, unregulated company and all.
In the end, the whole situation boils down to
1) Did people really wire them the equivalent of the entire tether market cap?
2) Did they use the money?
I don't think it's unrealistic that ~1.5B has entered the market in the last few months.
I also don't think it's impossible they didn't need to touch that money, given that they seem to pocket 8 figures in fees daily. That's not even counting all the other things they can legally do as an unregulated exchange, like front-running, liquidation fishing with unlimited assets, etc.
The most popular exchanges these days are crypto only. Thus if your a trader that wants to trade against the dollar, you have to do USDT, not the actual dollar
Doesn't this mean that all the market values on crypto only exchanges are kind of suspect? Because if you eventually want to get out of crypto and into dollars (to, you know, buy stuff in the real world) there is a good chance you won't be able to because no one is actually there willing to give you dollars for tethers?
But they will give you dollars for bitcoin or ether. However, I agree, I never trade tether because that is the last bag you want to hold if the crypto market collapses
While I'm mindful that all of this is always one fateful day away from collapsing, at the moment it's not a problem. A number of exchanges will trade tethers for any of the major coins (BTC, ETH, LTC) and any major exchange will give you dollars for those, at least on days when withdrawals are functioning.
> That's not even counting all the other things they can legally do as an unregulated exchange, like front-running, liquidation fishing with unlimited assets, etc.
Unregulated does not mean that they can ignore the law. Fraud is illegal either way. In fact, most businesses used to be unregulated and just had to follow the same laws as everyone else. That should be the natural state.
The more interesting question is why has Tether been allowed to run wild for so long?
Imagine if you were part of the current elite that had control over the current fiat currency system and something like bitcoin appeared. You could ignore it and hope it and its kindred doesn't catch on with the population, or you could allow a fraudulent scam like Tether to run that pushes up the price into the stratosphere and then allow the bubble to burst tar-and-feathering the whole concept of crypto currencies. It is not like hundreds of trillions of dollars are at risk if we move away from fiat currencies.
What I don't get about these conspiracy theories about the "current elite", is if they thought bitcoin was such a threat they could just put money in it.
Until I hear otherwise, I assume Hanlon's razor is at play here: regulators in all jurisdictions are still figuring out what to think about cryptocurrencies. US regulators have their hands tied in the case of Tether because they've gone to lengths to avoid US jurisdiction. Other regulators around the world may be less resourced.
Most governments really doesn't like people issuing anonymous assets that are "as good as dollars" like Liberty Reserve or Tether.
The entire point of Tether is to help cryptocurrency exchanges avoid AML/KYC laws (because it's expensive to comply with them) and their problems appear to stem from that. IIRC Tether is based in Taiwan and their mystical $2B bank account is presumably in some "offshore" jurisdiction. If Tether ever released an audit they'd have to reveal either that they have no money or what bank they're using and then that bank would be pressured to close their account.
No, because the value of controlling a fiat currency is that you can issue more. It is not any one crypto currency that is a threat, but the idea. To kill the idea you can't just ban something, you have to burn everyone so they hate it.
Since when has something being outside of US regulators sphere of authority stopped the US government from acting?
I know this is sacrilege to cryptocurrency believers, but the primary value of controlling a fiat currency is the ability to stabilize your economy. It permits you to decouple the unit by which you measure economic value, from fluctuations in the total economic value in your economy.
If you think of a currency unit as the unit of measurement for economic value, then when the economy shrinks you will need less of them, and when it grows you will need more of them. Fiat currency is desirable for the same reason a tape measure is more useful than a yardstick.
This is directly observable in the economic history of the United States. If you chart constant-dollar annual GDP growth from 1930 to today, there is an obvious decrease in volatility.
Yes this is right, but it is more than that. For example, you can use control of the currency to control the split between labor and capital, or save institutions such as the large banks in a GFC situation (look at the difference in how the owners of the banks faired in 2008 verses 1933).
(from a closed discussion group on the 24th: "I just spoke with the AICPA, Friedman has no professional responsibility to announce if they were ever auditing Bitfinex/Tether and/or if they withdrew from the engagement, so we will never know if there was even an audit in the first place.")
I've been personally pretty closely tracking the Tether situation, as I think it's basically the largest risk to the cryptocurrency market today. Here's a good even-handed summary that covers both sides and what it might mean: https://steemit.com/cryptocurrency/@cryptoscopia/making-sens...
Regardless of whether Tether is fully backed, it's certainly running fraudulently. The original premise promised not just 1:1 USD backing, but also regular audits, which AFAIK have never happened (first supposedly engaging w/ Ledger Labs, and then with Friedman LLP) and now appear like they will never happen. Of course, as bitfinexed pointed out, it's not like they didn't warn anyone about it in their white paper: https://twitter.com/Bitfinexed/status/957416416294068224
(The white paper of course does lie because it specifies regular audits and also banking partners that were aware of their business model.)
I'm just not understanding how a $1.5B scam coin would impact the crypto market dramatically at this point. Coincheck got hacked for $500M today and the markets are green across the board. There are alternative peg currencies to the dollar, including Dai, by Maker, which is backed by Ethereum, and seems like a better model for a stable coin: https://coinmarketcap.com/currencies/dai/
Tether isn’t a traditional “scam coin”. Tether is the currency used on many major exchanges, they don’t use USD they use USDT and if tether have printed 2bn in fraudulent dollars that underly the entire crypto market they could wipe out huge portions of the market when it implodes. The market cap isn’t the amount of money invested, a hundreds of billions market cap can come from a few billion in “real” dollars — and if those dollars don’t exist, well...
@guildenstern's response covers it a bit, but a bit more on why this is so important. While the nominal market cap of the cryptocurrency sector is somewhere between $500-600B these days, this is based on an estimated $10-20B of capital inflow (eg "real" dollars invested). USDT, as a de facto 1:1 USD peg acts much more like this money than another random coin, because trades into USDT are treated as dollar settled. While there are some weaknesses to some of the analysis, the recent Quantifying the Effect of Tether report [2] does a good job pointing out the correlation (if not the causation) in terms of pricing/demand.
You can also note that if you order the charts by 24h trading volume, USDT is #3 (right under BTC and ETH) [1] and if you dig into say the top 3 exchanges [3][4][5] you can see that BTC/USDT and ETH/USDT are basically in the top spots. Ignoring the Korean exchanges (who are their own little universe), you have to get down to GDAX @ #10 to get down to an exchange that doesn't directly touch Tether.
If you pay attention to the markets, you can see USDT clearly driving price movements and as long as everyone treats it as a USD equivalent, USDT drives USD prices. When new USDT is printed (easy money), then people (and potentially market manipulating bots if you are into conspiracy theories) use it to margin into BTC, increasing demand, driving the whole market up. If this is not organic demand (USDT issued due to USD deposits), then we have a huge problem, since this has been going on for months and represents a huge price distortion.
Now Tether isn't solely responsible for driving prices up - there has been a real mania (you can see it with the insane amount of signups going on for retail exchanges), with a lot of real money coming in, but there's some real dirty sausage making going on atm. A writeup that points out a lot of the messy stuff going on: https://medium.com/@Skycoinproject/state-of-the-cryptocurren...
Personally, I believe that most of the Tether is backed by real currency, however it is being driven primarily by large OTC swaps by those evading Chinese (or Korean) and potentially dark market capital controls. I don't know if this actually leaves the market any better off if/when Tether Inc and many exchanges get busted by governmental/international regulators.
These shenanigans btw hasn't gone completely unnoticed in the mainstream news. Nathaniel Popper, who covers the digital currency beat for the NYTimes has done writeups on Bitfinex/Tether [6], as has Bloomberg [7], heck, even Dr Doom is all in on beating the Tether drum now [8] although I don't think anyone is straight up talking about the likelihood of major ML going on...
In my opinion, people are using USDT to dodge the price swings that occur in the market. I don't know that USDT represents a fundamental underpinning of the price of Bitcoin, for instance. Coinbase had over a $1 billion in revenue last year, alone, so Coinbase is probably responsible for tens of billions of USD deposits on ETH & BTC markets.
Yeah if USDT crashed it might cause a big hit on the market, but not worse than anything else we've seen. 30-50% drops are fairly common in this market.
In the mean time, I think other stable coins (like Dai) will continue to grow in popularity. I've read Preston Byrne's article, but I've also read Dai's white paper and I think that they have a fine model to build a relatively stable coin, not a perfectly stable one, mind you, but a relatively stable one that trends towards $1. For those wishing to hedge their bets against the swings in the market (the great bulk majority of the USDT market) I think Dai is a great alternative. We'll see as it matures, it's still early days.
What I truly don't get from the tether is how its almost at parity on kraken (https://www.kraken.com/charts) You would expect a sizable discount going on for all the shennaningans.
I'm guessing this is because most people who trade tether don't intend on holding it for long, so the "shennanigans" surrounding tether aren't as likely to affect them.
They could be buying up the excess supply from the reserves. In fact, I thought that was part of the design of Tether, but I haven't really dug into the details.
What will be interesting, if that's the case, is what happens if their reserves are not enough to cover the outstanding supply. Things could go sour very fast.
They have to buy up the excess supply to keep the Ponzi scheme going. As long as it's lower than the amount they're able to get away with counterfeiting, it's just a cost of doing business. Even Ponzi paid some of his investors.
They'll keep buying back Tethers...until one day, they won't. And, I'd guess that day will come when there are a couple billion Tethers out there, and the folks running the scam decide it's enough to buy an island to retire on. What's that you say? There are already a couple billion Tethers? Well...I guess anyone unlucky or dumb enough to be holding Tethers ought to GTFO if they can.
Wouldn't that mean Kraken knows the purchasers of excess supply are bitfinex? That's a pretty large bit of info to leave to a competing exchange.
Its obvious that holding USDT has lots of exposure, but i dont understand the implication of the bitcoin price today. A 2 billion sellout of crypto must ravage the market. And with such an obviously looming effect, I cant undersatnd how this situation is sustaining itself , even accounting for what you are saying.
Well, I think everyone knows Tether and Bitfinex are the same people. That info leaked months ago (Panama Papers, I think?).
The only question remaining is where's the cash? If Kraken and Binance and Poloniex are sending USD to Tether and getting USDT back, they're nuts. I'm guessing people are moving money between exchanges using USDT (which is one of its intended purposes, after all, and a good bit of utility if the steward were trustworthy), and then Tether buys it back, keeping the other exchanges in the dark about what's going on.
Given how difficult it is to deal with fiat for crypto exchanges, I think they really want/need Tether to work. If it were legitimate, it would be a great thing...I think there's a lot of wishful thinking keeping anyone at the USDT supporting exchanges from looking too closely.
I dunno. It looks so freakin' shady, to me. I don't really understand why seemingly trustworthy exchanges are participating, and it makes me hesitant to deal with any of them (even though I'm not overly fond of Coinbase and its huge fees). Being trustworthy is kinda the most important thing in this market, though.
If people didn't value tether at $1, then the price for X/USDT pairs (on other exchanges) would be lower.
As it isn't the case, if the price dropped below $1, you could buy USDT here, transfer it to a different exchange and make a profit by buying back your coins there.
Arbitrage explains why prices tend to be the same across exchanges, but it doesnt explain why it isnt discounted today. Kraken is the only one where you trade tethers for dollars that I know of. You cant trade dollars for tethers on tether.to.
Its possible tether is able to sell tethers to exchanges alone and mint tokens at 1 on 1 rate and so it should tend to be so, but considering tether is issuing through bitfinex..
Kraken is a total disaster. You can barley login and trade on it. The several times I've tried I've never been able to. Point being that the Tether price there is not to be trusted. Can you even move Tether between exchanges?
Bitfinex just needs a bot to buy tether back when the price goes below $1.00. It’s fairly low volume so probably doesn’t cost much on most days. If there’s a run on the bank, that will change, though.
Check out the depth chart for USDT/USD pair. There is no buy-side demand at all. Anyone selling Tether would have to eat huge losses by selling their USDT well under $1. It is human nature to not sell at a loss, so no one is selling.
On the other hand, it takes very little effort ($100K) to prop USDT price up. Rumor has it that Tether themselves are propping up the price on Kraken.
Sad part is that once the prop crumbles, everyone in sell-side of the chart will become bagholders because USDT will be worth nearly zero.
This seems like a sound approach in general to be honest. If they succeeed, tether should remain 1:1 USD. If they fail, the price declines to 0. So the typical unlimited downside of the short is plausibly negated by their own definition of success.
Are there futures on Tethers? One could short Bitcoin, but it's hard to predict how soon this is going to come crashing down. I sold nearly all my cryptocurrency a couple of weeks ago on the belief that Tether would collapse the market, but others sold long before that...and before the massive run up to $10k+. Had those folks shorted back then, they would have had to close their positions...and would have lost a lot of money. Even though they are (I believe) long-term right.
I'm just saying be careful with shorting something with unlimited potential upside...like Bitcoin. But, if I could short Tethers, I would, though I don't know who'd take the other side of that deal.
The USDT/BTC price will go through the roof, but what does that matter? USD price will also skyrocket relative to USDT. Anything is worth more than a USDT that's known to be a scam. But, that doesn't make everybody holding non-USDT rich, it just takes a couple billion off the table and puts it in the pocket of the folks running Tether/Bitfinex.
The problem isn't so much what individual traders will do when Tether crashes or what that'll do to BTC. It's what Bitfinex/Tether have been doing with the Tethers they've been printing at a few hundred million per week. If we assume most miners sell most of their coins, and if we assume most of the Tethers printed over the past several weeks (well over a billion of them in just the past few weeks) have gone to buying Bitcoin, about half of miner output has been bought with counterfeit money over a long period of time. What happens when half of the upward price pressure disappears overnight, and miner output continues unchanged? I don't think it's alarmist to suggest BTC and much of the rest of the crypto market will drop 50% pretty rapidly. (I am long-term bullish on crypto. Short-term, I'm extremely bearish.)
I've seen people make the argument that Tether only accounts for a small percentage of the market cap of BTC, and so if it fails it won't be a big deal. But, when that "small percentage" is able to buy half the new coins coming into circulation day in and day out, you can bet it's able to move the price, and it seems to be what's been propping up the price these past couple of weeks; trends and signals are downward, but every couple days Tether drops another $100 million USDT on the market and, miraculously, BTC gets a bounce and it stays above $10k.
I'm not an expert, and I can't predict the future, but I've sold nearly all of my crypto, because this looks absolutely insane, to me. It looks like a blatant and insanely bold con, and I don't want to be one of their marks when they disappear with a few hundred million dollars worth of stolen Bitcoin purchased with money they printed out of thin air.
Market cap is only holders dream. It means nothing. People already have hard time liquidating anything more than 100k, i hear. The float is pretty low. And as you noted miraculously couple days after tether press prints money, bitcoin and most alts jump 10% magically.
Combine that with people attributing hundreds or even billions of dollars of market cap to something that doesnt have any tangible use or doesnt even have a github repo, i am goddamn sure tether can and will bring down the whole market down.
Technological adoption was the "news following the market" on bitcoins price rise. The real news will be when it explodes.
Another thing is bitfinex=tether, so tether imploding means bitfinex becoming insolvent, which will also bring downward price pressure.
This is dead easy to check and absolutely not true. BTC/USD 24hr volume on GDAX alone is $147M and you can liquidate $1M of BTC on GDAX right this second w/ less than 0.1% slippage.
Why would you even post something (or hold an opinion) that's so easy to confirm/disprove if you simply know nothing about it?
I find it constantly surprising by how low-information the posts on cryptocurrencies tend to be here on HN.
GDAX has withdrawal limits of up to $25M/day, however if you're liquidating that much at once, you're better off OTC. GDAX USD accounts are only FDIC insured up to the standard $250K.
I guess my point is with this much manipulation and fraud, it is not hard to see market go down big time due to tether.
Gdax volume is inflated aomewhat due to bitfinex' bot that keeps buying and selling/painting tape on gdax.
We saw what happened previously when a large exchange becomes insolvent. Tether will lead to bitfinex being insolvent, or better will lead to government raid or something.
I would also be careful about calling things low info. I have plenty invested in crypto, but unlike many i am not a mooner dreamer. Btc is trying really hard ti stay at its current price and relies on tether printing. I dont think this is hard to see...
I found you can short Tether on Kraken. So, I am (or trying to...it's currently trading at .97 on Kraken, and my sell order is for .99, so if it proves to be solvent in a month or two, I'll be out a few bucks plus margin interest). I have vague concerns that this is like betting against the house since presumably Kraken and other exchanges that accept USDT will be hit hard by the failure of Tether, so they have a strong vested interest in seeing it survive, even if it's shady as hell.
You beat me to this - a friend just pinged me about the possibility of shorting usdt at kraken for something like 1.8% /month. I did not confirm this myself.
I am also not sure if tether fails, what happens to kraken/bittrex etc, will you even be able to take your money out? I doubt. Don't know.
I'm constantly wondering if I have the fortitude for this.
I've been staring at the Feb BTC futures for a while. I mean, everyone knows that Tether is a scam. But the old phrase about the market remaining irrational longer than you can remain solvent is true. Bitcoin's basically hovered between 10k and 11.5k, for the past while, but this is something that's known for going up tremendously. That takes some fortitude to hold a short position in, that I'm not sure I have.
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[ 0.18 ms ] story [ 200 ms ] threadhttps://tether.to/announcement-transparency-update/
https://twitter.com/bitfinexed
They have create a cryptocurrency (also called Tether) that they claim is pegged to the US dollar. They have since emitted more than 2 billion of these tethers, and they claim that they are holding an equivalent amount of US dollars in their bank accounts.
Tether Inc. have never released a public audit proving that they have these billions of dollars that they claim to have. And today the company that they said was auditing them has apparently cut ties with them, which is yet another sign that tethers are a scam that is about to blow up.
The reason why this is important is the magnitude of the fraud here. Is is suspected that the billions of dollars of fake money that Tether has printed have been used to push up Bitcoin and cryptocurrency prices to their current high levels. There are many cryptocurrency exchanges accept tethers as if they were worth 1 USD and the latest price increase in bitcoin price that started last April coincides with when Tether inc became more active.
https://www.coindesk.com/tether-confirms-relationship-audito...
More seriously, I've got to ask: Why does anyone trust them? Why did anyone trust them? They've never offered the slightest reason to think they're anything else but a particularly lazy fraud.
Is this an "emperor's new clothes" situation where everyone assumes everyone else has proof of Tether's validity, and doesn't want to look dumb by asking? Or a "bigger fool" situation where everyone believes Tether is a fraud, but thinks they can get out and leave someone else holding the bag when it bursts? Raw wishful thinking because a legit Tether would be so useful to the ecosystem that people have collectively decided to pretend it does exist? Or what?
Greed. I get why people would trust BTC, Ether (before the DAO hardfork, that is) or Dogecoin, as these had real value and usecases (e.g. Bitcoin for getting high quality weed, ecstasy or guns, and Dogecoin for having fun + a quick-and-easy donation way on Reddit other than gold). But the other ~1.5k coins listed on https://coinmarketcap.com/? What in blazes? People stuck billions of dollars into altcoins!
Monero: anonymity.
But monero also tries to become practical too, which is huge plus
How it's relevant? Tether has fixed price: 1 USDT = 1 USD, you can't become rich by buying it.
Assuming this is an actual fraud going on and not real USD being held to back each Tether 1:1.
The explanation behind them putting off the audit might have nothing to do with tether. It could be concerns about what an investigation could uncover in their creative bookkeeping, being an incredibly profitable, offshore, unregulated company and all.
In the end, the whole situation boils down to
1) Did people really wire them the equivalent of the entire tether market cap?
2) Did they use the money?
I don't think it's unrealistic that ~1.5B has entered the market in the last few months.
I also don't think it's impossible they didn't need to touch that money, given that they seem to pocket 8 figures in fees daily. That's not even counting all the other things they can legally do as an unregulated exchange, like front-running, liquidation fishing with unlimited assets, etc.
You wire money in, you get tether in your account. Which can then be used to buy other coins.
Tbh I don't get the hate for tether.
Unregulated does not mean that they can ignore the law. Fraud is illegal either way. In fact, most businesses used to be unregulated and just had to follow the same laws as everyone else. That should be the natural state.
Imagine if you were part of the current elite that had control over the current fiat currency system and something like bitcoin appeared. You could ignore it and hope it and its kindred doesn't catch on with the population, or you could allow a fraudulent scam like Tether to run that pushes up the price into the stratosphere and then allow the bubble to burst tar-and-feathering the whole concept of crypto currencies. It is not like hundreds of trillions of dollars are at risk if we move away from fiat currencies.
Until I hear otherwise, I assume Hanlon's razor is at play here: regulators in all jurisdictions are still figuring out what to think about cryptocurrencies. US regulators have their hands tied in the case of Tether because they've gone to lengths to avoid US jurisdiction. Other regulators around the world may be less resourced.
can you offer some details about what you're describing?
The entire point of Tether is to help cryptocurrency exchanges avoid AML/KYC laws (because it's expensive to comply with them) and their problems appear to stem from that. IIRC Tether is based in Taiwan and their mystical $2B bank account is presumably in some "offshore" jurisdiction. If Tether ever released an audit they'd have to reveal either that they have no money or what bank they're using and then that bank would be pressured to close their account.
Since when has something being outside of US regulators sphere of authority stopped the US government from acting?
If you think of a currency unit as the unit of measurement for economic value, then when the economy shrinks you will need less of them, and when it grows you will need more of them. Fiat currency is desirable for the same reason a tape measure is more useful than a yardstick.
This is directly observable in the economic history of the United States. If you chart constant-dollar annual GDP growth from 1930 to today, there is an obvious decrease in volatility.
Just replace golden plates with USDT.
> But don't let anybody see these plates except for you...
> They are only for you to see...
> Even if people ask you to show the plates to them, don't
> [...]
> Even though this might make them question if the plates are real or not... "
(from a closed discussion group on the 24th: "I just spoke with the AICPA, Friedman has no professional responsibility to announce if they were ever auditing Bitfinex/Tether and/or if they withdrew from the engagement, so we will never know if there was even an audit in the first place.")
I've been personally pretty closely tracking the Tether situation, as I think it's basically the largest risk to the cryptocurrency market today. Here's a good even-handed summary that covers both sides and what it might mean: https://steemit.com/cryptocurrency/@cryptoscopia/making-sens...
Regardless of whether Tether is fully backed, it's certainly running fraudulently. The original premise promised not just 1:1 USD backing, but also regular audits, which AFAIK have never happened (first supposedly engaging w/ Ledger Labs, and then with Friedman LLP) and now appear like they will never happen. Of course, as bitfinexed pointed out, it's not like they didn't warn anyone about it in their white paper: https://twitter.com/Bitfinexed/status/957416416294068224
(The white paper of course does lie because it specifies regular audits and also banking partners that were aware of their business model.)
For those tracking the market conditions of an impending Tether collapse, I recommend reading this article (and tracking the author, @BambouClub's twitter feed): https://hackernoon.com/what-will-happen-when-the-shit-hits-t...
You can also note that if you order the charts by 24h trading volume, USDT is #3 (right under BTC and ETH) [1] and if you dig into say the top 3 exchanges [3][4][5] you can see that BTC/USDT and ETH/USDT are basically in the top spots. Ignoring the Korean exchanges (who are their own little universe), you have to get down to GDAX @ #10 to get down to an exchange that doesn't directly touch Tether.
If you pay attention to the markets, you can see USDT clearly driving price movements and as long as everyone treats it as a USD equivalent, USDT drives USD prices. When new USDT is printed (easy money), then people (and potentially market manipulating bots if you are into conspiracy theories) use it to margin into BTC, increasing demand, driving the whole market up. If this is not organic demand (USDT issued due to USD deposits), then we have a huge problem, since this has been going on for months and represents a huge price distortion.
Now Tether isn't solely responsible for driving prices up - there has been a real mania (you can see it with the insane amount of signups going on for retail exchanges), with a lot of real money coming in, but there's some real dirty sausage making going on atm. A writeup that points out a lot of the messy stuff going on: https://medium.com/@Skycoinproject/state-of-the-cryptocurren...
Personally, I believe that most of the Tether is backed by real currency, however it is being driven primarily by large OTC swaps by those evading Chinese (or Korean) and potentially dark market capital controls. I don't know if this actually leaves the market any better off if/when Tether Inc and many exchanges get busted by governmental/international regulators.
These shenanigans btw hasn't gone completely unnoticed in the mainstream news. Nathaniel Popper, who covers the digital currency beat for the NYTimes has done writeups on Bitfinex/Tether [6], as has Bloomberg [7], heck, even Dr Doom is all in on beating the Tether drum now [8] although I don't think anyone is straight up talking about the likelihood of major ML going on...
Re, other stablecoins, while they'd be nice to have in theory, I think one needs to be a bit skeptical: https://prestonbyrne.com/2018/01/11/epicaricacy/
A recent insightful quote I saw was that stablecoins trade volatility risk for blow-up risk.
The most interesting stablecoin announcement I saw was MUFG's plan to release a JPY-pegged coin soon. Now that'd be interesting...
[1] https://coinmarketcap.com/currencies/volume/24-hour/
[2] http://www.tetherreport.com/
[3] https://coinmarketcap.com/exchanges/okex/
[4] https:/&#x...
Yeah if USDT crashed it might cause a big hit on the market, but not worse than anything else we've seen. 30-50% drops are fairly common in this market.
In the mean time, I think other stable coins (like Dai) will continue to grow in popularity. I've read Preston Byrne's article, but I've also read Dai's white paper and I think that they have a fine model to build a relatively stable coin, not a perfectly stable one, mind you, but a relatively stable one that trends towards $1. For those wishing to hedge their bets against the swings in the market (the great bulk majority of the USDT market) I think Dai is a great alternative. We'll see as it matures, it's still early days.
What will be interesting, if that's the case, is what happens if their reserves are not enough to cover the outstanding supply. Things could go sour very fast.
They'll keep buying back Tethers...until one day, they won't. And, I'd guess that day will come when there are a couple billion Tethers out there, and the folks running the scam decide it's enough to buy an island to retire on. What's that you say? There are already a couple billion Tethers? Well...I guess anyone unlucky or dumb enough to be holding Tethers ought to GTFO if they can.
Its obvious that holding USDT has lots of exposure, but i dont understand the implication of the bitcoin price today. A 2 billion sellout of crypto must ravage the market. And with such an obviously looming effect, I cant undersatnd how this situation is sustaining itself , even accounting for what you are saying.
The only question remaining is where's the cash? If Kraken and Binance and Poloniex are sending USD to Tether and getting USDT back, they're nuts. I'm guessing people are moving money between exchanges using USDT (which is one of its intended purposes, after all, and a good bit of utility if the steward were trustworthy), and then Tether buys it back, keeping the other exchanges in the dark about what's going on.
Given how difficult it is to deal with fiat for crypto exchanges, I think they really want/need Tether to work. If it were legitimate, it would be a great thing...I think there's a lot of wishful thinking keeping anyone at the USDT supporting exchanges from looking too closely.
I dunno. It looks so freakin' shady, to me. I don't really understand why seemingly trustworthy exchanges are participating, and it makes me hesitant to deal with any of them (even though I'm not overly fond of Coinbase and its huge fees). Being trustworthy is kinda the most important thing in this market, though.
If people didn't value tether at $1, then the price for X/USDT pairs (on other exchanges) would be lower.
As it isn't the case, if the price dropped below $1, you could buy USDT here, transfer it to a different exchange and make a profit by buying back your coins there.
You can't engage in arbitrage if nobody is paying more than 50 cents on every dollar.
Its possible tether is able to sell tethers to exchanges alone and mint tokens at 1 on 1 rate and so it should tend to be so, but considering tether is issuing through bitfinex..
On the other hand, it takes very little effort ($100K) to prop USDT price up. Rumor has it that Tether themselves are propping up the price on Kraken.
Sad part is that once the prop crumbles, everyone in sell-side of the chart will become bagholders because USDT will be worth nearly zero.
Not saying Tether is legit. Just haven't heard that this report is especially persuasive.
I'm just saying be careful with shorting something with unlimited potential upside...like Bitcoin. But, if I could short Tethers, I would, though I don't know who'd take the other side of that deal.
The USDT/BTC price will go through the roof, but what does that matter? USD price will also skyrocket relative to USDT. Anything is worth more than a USDT that's known to be a scam. But, that doesn't make everybody holding non-USDT rich, it just takes a couple billion off the table and puts it in the pocket of the folks running Tether/Bitfinex.
The problem isn't so much what individual traders will do when Tether crashes or what that'll do to BTC. It's what Bitfinex/Tether have been doing with the Tethers they've been printing at a few hundred million per week. If we assume most miners sell most of their coins, and if we assume most of the Tethers printed over the past several weeks (well over a billion of them in just the past few weeks) have gone to buying Bitcoin, about half of miner output has been bought with counterfeit money over a long period of time. What happens when half of the upward price pressure disappears overnight, and miner output continues unchanged? I don't think it's alarmist to suggest BTC and much of the rest of the crypto market will drop 50% pretty rapidly. (I am long-term bullish on crypto. Short-term, I'm extremely bearish.)
I've seen people make the argument that Tether only accounts for a small percentage of the market cap of BTC, and so if it fails it won't be a big deal. But, when that "small percentage" is able to buy half the new coins coming into circulation day in and day out, you can bet it's able to move the price, and it seems to be what's been propping up the price these past couple of weeks; trends and signals are downward, but every couple days Tether drops another $100 million USDT on the market and, miraculously, BTC gets a bounce and it stays above $10k.
I'm not an expert, and I can't predict the future, but I've sold nearly all of my crypto, because this looks absolutely insane, to me. It looks like a blatant and insanely bold con, and I don't want to be one of their marks when they disappear with a few hundred million dollars worth of stolen Bitcoin purchased with money they printed out of thin air.
Technological adoption was the "news following the market" on bitcoins price rise. The real news will be when it explodes.
Another thing is bitfinex=tether, so tether imploding means bitfinex becoming insolvent, which will also bring downward price pressure.
Why would you even post something (or hold an opinion) that's so easy to confirm/disprove if you simply know nothing about it?
I find it constantly surprising by how low-information the posts on cryptocurrencies tend to be here on HN.
Also the volume is mostly bot driven even on gdax. That is why the whole volume and marketcap is crazy.
I guess my point is with this much manipulation and fraud, it is not hard to see market go down big time due to tether.
Gdax volume is inflated aomewhat due to bitfinex' bot that keeps buying and selling/painting tape on gdax.
We saw what happened previously when a large exchange becomes insolvent. Tether will lead to bitfinex being insolvent, or better will lead to government raid or something.
I would also be careful about calling things low info. I have plenty invested in crypto, but unlike many i am not a mooner dreamer. Btc is trying really hard ti stay at its current price and relies on tether printing. I dont think this is hard to see...
I am also not sure if tether fails, what happens to kraken/bittrex etc, will you even be able to take your money out? I doubt. Don't know.
I've been staring at the Feb BTC futures for a while. I mean, everyone knows that Tether is a scam. But the old phrase about the market remaining irrational longer than you can remain solvent is true. Bitcoin's basically hovered between 10k and 11.5k, for the past while, but this is something that's known for going up tremendously. That takes some fortitude to hold a short position in, that I'm not sure I have.