Bitcoin Forum

There appears to be a question of what purpose stablecoins like tether can be utilized for. What role they fulfill.

 :)

IMO stablecoins are one of the best options to purchase crypto via fiat.

Stablecoins retain value well. Its feasible to hold them long term until a good buy in opportunity arises. A trader purchasing $1 million dollars in tether today can rest assured it will be worth $1 million dollars 5 or 10 years from now. This makes stablecoins like tether a better intermediary option than altcoins which normally appreciate or depreciate in value over time.

Stablecoins do not suffer from disadvantages of bitcoin ATMs or services like localbitcoins. ATMs can carry 20% price markups. Localbitcoins can carry similar precedents and introduce possibility of scams. The lack of percentage price mark up make stablecoins a more attractive option.

US markets tend to be limited. The few options americans have for purchasing crypto are restricted to a handful of services like coinbase which do not have the best reputation.

There was a month in 2018 where tether reported $800 million dollars in tokens redeemed. This could indicate the tether and stablecoin markets are an avenue of crypto purchase for whales and large institutional investors.

If all of the above is true. Is correlation between tether volume and bitcoin demand, surprising? If indeed tether and stablecoins are one of the best options for purchasing crypto in current existence?

People might wonder what stablecoins or tether is used for. What if its primary role is an intermediary between fiat and crypto for large institutional investors looking to buy in?

This last pump from 7.5k to 10k probably has nothing to do with tether pumping as far as I can see. Tether marketcap stays same on CMC and bitcoin did a %30. There is still a possibility that it might be the earlier old tethers doing their thing though. So much of them around.

As long as Tether the company doesn't allow a proper audit of resources, there is every reason for people to question their business model, especially with how they have admitted to not have that 100% backing.

They also admitted that they used non backed tokens to buy Bitcoin with. I'm not sure about the amounts they bought Bitcoin with, but the act alone is already extremely shady which people rightfully worry about.

I agree with BitHodler, without transparency Tether is actually in the opinion of many a very suspicious project. If they first say that every Tether is backed with $1, then that this is not true entirely, but that it is backed by some other assets for which they do not want to reveal what it is. So if I have $100 at least I know I have them in my pocket, but with 100 Tether on some exchange, I only have promise that those tokens worth $100.

What if at some point the authorities prove that Tether is mostly printed with no real coverage in dollars? While I do not question the usefulness of a project like this, there are still too many possibilities for manipulation that justifiably cast a shadow over the whole project.

Bitfinex is absolutely corrupt and Tether is a scam.

I would suggest to everyone to have a read of the most latest lawsuit (of several) against Ifinex and Tether: https://www.courtlistener.com/recap/gov.uscourts.nysd.524076/gov.uscourts.nysd.524076.1.0.pdf. If you want a quick skim, just read points 1 through 14, 80 through 91, and 116 through 136.

Essentially, Tether prints USDT out of thin air, sends it to themselves at Bitfinex, uses it to buy bitcoin, and then sells that bitcoin back to users for real dollars. Any time they need to redeem Tether, they can sell the bitcoin they bought for nothing by printing Tether out of thin air, and claim they had that money in reserve all along. That's without even touching on the fact they loaned themselves $850 million by giving fake USDT from Tether to Bitfinex to stop them from being insolvent.

Tether has been changing their stand within the short time frame of just two years, I’m sorry sir we aren’t so forgiveful for even one lie, when there is a first time, there will sure be the second time, they will continue to lie their way out of every profit they could accumulate, I’m certain that tether will eventually backed by nothing but a promise, remember federal reserve? We never forget we never forgive we are nobody.

I guess the crypto-community does not easily forget the alleged controversy that Bitfinex illegally and secretly used Tether's fund worth more or less $700 million to cover up its losses which technically defrauded its investors!

Link: Bitfinex Allegedly Covers $850 Million Loss With Tether Funds (https://cointelegraph.com/news/bitfinex-allegedly-covers-850-million-loss-with-tether-funds)

I think the relationship between Tether volume and bitcoin price movement is only a theory that cannot be proven. However, the concern about Tether is legit because it's still a centralized entity. The fact that they don't back Tether 1:1 with USD told all the stories about our concern that we cannot audit what's inside their vault.

Moreover, the suspicion about their criminal activities is not baseless, https://cointelegraph.com/news/head-of-crypto-capital-arrested-in-connection-with-money-laundering

I'm not confident in that assessment. Centralized stablecoins are functionally no different than balances held on centralized exchanges. They are exchange-issued fiat IOUs. When you hold USDT on an exchange like Binance, the counterparty risk is actually two-fold: Tether could become insolvent because tokens are unbacked or Binance could become insolvent if their USDT wallet gets compromised.

In fact, we already know Tether is insolvent. (https://www.coindesk.com/tether-lawyer-confirms-stablecoin-74-percent-backed-by-cash-and-equivalents) Given the numerous exchange hacks, scams, and government shutdowns that have separated exchange customers from their money, I'd say holding USDT is pretty risky.


Neither Tether nor Bitfinex serve Americans anyway. There's no peer-to-peer liquidity either.


Of course not. People wiring money to Tether is the same thing as people wiring money to any Bitcoin exchange. It's being used to buy cryptocurrency.

Not to mention the thing they are supposedly "backed by" (even though we all know they aren't actually backed at all), is fiat. Even if your $1 million purchase of Tether is still redeemable for $1 million USD in 10 years time (and that's a big if), you will have lost a significant percentage of your purchasing power thanks to fiat being a sinking ship. So you can add that to the list of risks. If you own Tether on an exchange, then someone else is holding an insolvent currency which is constantly devaluing on your behalf.

Tether is a scam. Everyone would do well to exit it as soon as possible.

I still don't understand why institutional investors would have to use them at all.  They don't need an intermediary form of money to purchase stocks, bonds, or anything else.  I really don't see what purpose they serve...at all.

I don't believe there's anything criminal about tether or any other stable coin.  It's just that like ico's, there's very little utility other than the fact that a trader is using cryptocurrency rather than fiat.  Where is the advantage there?  I'm not asking this rhetorically.  I'd really love a good explanation, and I'll continue to watch this thread.

I srsly doubt that a shady company with mounting allegations against it would still exist in 10 years. And you know what will happen when the company would fall? USDT will go to zero instantly, since there will be no one to guarantee it's value. Stablecoins are just payment companies, and we've seen payment companies being taken down in the past due to their legal problems. Crypto and blockchain change absolutely nothing in this regard.

Exactly. If you wanted something "stable" why not hold real dollars, instead of a pretend dollar coin? Or hold bitcoin which at least protects you against inflation.

Exstasie's post appears to be the one people like the most, it echoed everything others said & so I'll try to respond to this one.  


#1  I disagree with tether existing as a variation of a gold standard or IOU. There is no IOU obligation once USDT tokens are redeemed for fiat. The only existing condition is that the exchange rate maintain a 1:1 ratio with the US dollar, which it is tied to. This falls under a category of currency manipulation which every nation on earth engages in.

#2  Imagine that a consumer deposits $100,000 in a bank. Its very common for banks to take $50,000 or more of that deposit and invest in it high risk schemes, which will fail. Leaving banks unable to pay those who deposited money in it. If tether is 74% backed, its far more liquid, stable and safe than the banking industry on average. The US dollar is far less than 74% backed in gold and I never see anyone complain about it.

In comparison to standards of global financial industries, tether is probably more liquid, safe, stable and better managed. All of which raises a question of why tether is criticized and questioned to a far higher standard in comparison to how banks or governments of the worlds do things.


Valid point. Tether discontinued support for the US market in 2017 after likely being pressured by certain special interest demographics to withdraw support.


I know this.  

You know this.  

Experts and professionals appear not to know this, however, as they continue to claim there is something shady, suspicious or criminal about it:

i dont think so man. When tethering is printed and depicted on exchanges, it is also the moment that bitcoin increased. This is a general rule of traders and should be noted.
Tether and Bitcoin and manipulation are very closely connected. It is just that the SEC does not have enough evidence to accuse those manipulators.

Tether is a good conduit for funnelling from fiat to a more fungible form of token that can be traded across exchanges around the world. There is nobody that is denying that.

What is being questioned is the legitimacy of the reserves that they claim to keep, as well as the fact that they have recently revised as to what "full reserve" means by adding in new assets that can be counted as reserves (essentially allowing them to invest in riskier asset classes with money stored with them).

Inherently there is nothing wrong. There is just a risk that they're running a fractional reserve, that's all.

It's actually pretty common for banks to lend out up to 90% of deposits, and keep only 10% in reserve. Hence the term "fractional reserve". However, let's not use the scam that is fiat banking as a bench mark for judging a good coin. Most coins look good when judged against these low standards.

Tether is 74% backed by unknown assets. From their website:

So cash equivalents, which includes the bitcoin they stole bought with USDT they printed out of thin air, as well as interest on the $850 million loan they paid to themselves. They printed $850 million out of thin air, loaned it to themselves, charge themselves interest on that loan, and then says your assets are backed up by the interest they are paying themselves. That is in no way liquid or stable.

Also worth noting that whatever percentage of their assets are backed up by actual USD, that USD is obviously being held in a bank and so is therefore subject to all the same issues with USD which you outlined above. Tether is compounding problem upon problem.

This wasn't common in the united states until 1999 when President Bill Clinton repealed regulation separating commercial banking from investment banking known as glass steagall, which was created in the aftermath of the Great Depression to prevent bankers from gambling on risky investments with the money of depositors.

I would be interested to know why comparisons between crypto and existing financial industries are not valid comparisons in your eyes. At least some of the negative content people read about tether, is published at the direction of banks. Most of the negative things you read or hear about tether likely comes from banks utilizing their influence on the media to push agendas.

What should the standard of comparison be if not tether vs our traditional financial industry?


Tether doesn't hold stablecoins in trust to back their product. What they hold are US dollars and assorted assets. The argument that tether prints money out of thin air to back their platform doesn't make much sense to me, in that regard.

When consumers purchase stablecoins like tether, essentially what they're buying isn't a digital token. Its a solution to a problem they face. For some stablecoins like tether are their optimal solution for purchasing crypto. Necessity being the mother of invention is what gives stablecoins like tether value.

The only real question I see is whether private enterprise should have the freedom and right to create their own solutions to problems utilizing digital assets like tether. Whether markets and consumers should be the one's to decide the value of stablecoins. Or whether some centralized authority which currently consolidates power should have the power to decide whether stablecoins like tether create intrinsic value enough for consumers to utilize them.

I didn't say they aren't valid, simply that the fiat banking system is a terrible barometer to uses as a comparison, and if Tether is in any way comparable to fiat, then that's an awful indictment of Tether. The whole point of crypto is to move away from these centralized entities being able to rig the system for their own benefit, with Ifinex/Tether categorically do.

That point isn't really up for debate. The fact that Tether isn't backed up 1-to-1 means they have printed Tether that wasn't backed up i.e. out of nothing.

Sure, I'll accept that Tether serves a purpose, but that doesn't make it any less shady. There are better stable coins out there if you so desire.

I don't mean to contend tether and neither I am sure that tether is a scam. But if you say that there is. 3.5 Billion reserve of U.S. Dollar stored in some bank (storage in cash being impossible unless one is Pablo Escobar) and no Auditor has been able to confirm such reserve I highly doubt your common wisdom. Even if they have stored such amounts of money from where is the cash continuously being stuffed in the Cryptocurrencies? We are talking about real cash here. Moreover why is the company behind tether is changing auditors continuously almost every year. Also we all like to call XRP a shit coin because it is too centralised and manipulative don't you think tether also accurately fits that criteria? I can not argue the utility it provides but I being a rational user demand some accountability too.
Edit:
An article from coindesk confirmed from numerous sources.

You know how shady it is for a company to dissolve relationship with it's auditor amidst the audit proceedings? It clearly states that certain material misstatement would have been prevelant in the books of Tether Limited which Friedman LLP were trying to report but they were removed before that.

Stablecoins are god's gift to crypto-currencies. It saves me the hassle from setting up ads on localbitcoins and then waste 1 or 2 days to sell off my BTC, instead I'm able to dump my wallet on Binance and come out with the same value of coins and save a lot of time. Also can avoid issues like taxation and hide your money in stablecoins if you'd like.

Used tether to trade BTC during the 20k bull run, had an amazing time and have no complaints - but to be fair I have no idea what the issue is with Tether and it being a scam.

If we are just talking stats, this doesn't sound that far-fetched... A lot of huge whales nowadays.

I guess they are worried the funds will be siezed.
Governments need to be alittle accommodating to things like this otherwise companies like tether will begin to move to alternatives.
I honestly wish most stablecoins have their reserve in fiat currencies for the sake of those currencies.  The relationship between cryptocoins and fiats should be mutual, in my opinion. That's probably what the stablecoins companies like tether want, unfortunately the hardness of governments is making similar companies consider the alternatives.

Naturally because at that point no counterparty relationship exists. Anyone who holds USDT, however, is exposed to considerable counterparty risk.


The way I see it, they are chipping away at their reserve ratio. If the ratio gets low enough, they could fail in a bank run. That 26% loss came from a single law enforcement seizure. They are one or two seizures away from total inability to honor their obligations.

I'm not comparing them to conventional banks. Maybe they are better than some. It's a fundamentally precarious situation though. There are other stablecoins I'd feel much safer holding (though USDT has vastly superior liquidity which is an obvious consideration for many people).


Yeah that old narrative has become tiresome for sure. At least there has been some pushback against it: Tether’s Impact on Bitcoin Price Not ‘Statistically Significant,’ Study Finds (https://www.coindesk.com/tethers-impact-on-bitcoin-price-not-statistically-significant-study-finds)

From your statement, why are you making tether look like it is a different technology entirely by making a separation between tether and stable coin, when tether is also a stable coin. Everyone is all entitled to their own opinion and have the right to love whatever they want to love, but I am not a fan of tether and I don't think that tether is on my mind right now.

You may have defended them to the best of your knowledge, but that does not stop the fact that bitfiniex is a corrupt company and they are still manipulating their tether coin, if you have $1 million dollars in tether now, you may not get up to that back in future because I have seen tether fluctuate down ward. I still trust usdc more than tether if I have to even get myself engaged in anything called stable coin.

The reason why Tether and stablecoins have bad reputation is most likely because how some people say bitcoin is the only best cryptocurrency, others are just trash. People repeat this words blindly and that's all. To be fair I was never interested with Tether but that's my conclusion from posts made there.
On another hand, why is Tether good option for purchasing crypto via fiat? You mean that you buy Tether via fiat and then buy bitcoin and this process is done for better anonimity?
Can't be stablecoins looked this way: Coins for better privacy than other standard payment methods that share privacy of cryptos but with fixed price? To make it clear, bitcoin with fixed price?

But it's not even remotely similar to bitcoin. It is completely centralized and completely under control of one agency, iFinex. They can print more at will and distribute it as they see fit. They could refuse to exchange it for real USD, and there is nothing you could do about it. It isn't worth its price because a significant portion of is either backed up by illiquid assets or not backed up at all. It's not trustless and it's not decentralized. It takes all the worst parts of fiat and more.

It's not like bitcoin with a fixed price at all, but rather like fiat but even worse.

What did I just read  :o

Tether worked for their bad reputation and it has nothing to do with bitcoin and shitcoins! Stablecoins were very rarely referred to as shitcoins. Shitcoins are coins with no use and no purpose. Coins that rely on big words and partnerships and coins that hire people like McAfee to hype the community so devs can take profit and leave.
Tether lied! They were repeating everywhere how they are backed 1:1 and later backed ( :D ) out of it. You could see how they were printing money during pumps and there was no proof that it was to fill real orders.

The unquestionable acceptance of USDt on exchanges gave them the ability to buy your coins for a promise. They promised to give you back the value in USDt if you ever need it but if they don't are you going to go looking for them around the world or start a class action and wait for another 10 years to get your money back?

No doubt its one of the best medium to buy cryptocurrencies, why should we focus on Tether anyway where today we can have other stablecoins aside from it. If the issues sorrounding it makes us uncomfortable then maybe we should refrain from using it and look for alternative until their audits are clear and reliable.

Perhaps just as the broker of Fiat substitute transactions in the cryptocurrency makes losses can be minimized at any time the price can drop drastically.
Usually, their pair is BTC/USD and it is not possible due to different currencies where one fiat and one is a cryptocurrency. USDT as the stable coin that follows the USD can be the intermediary.
Not only large investors who buy but many people to replace as a means of moving their assets using the stable coin.

I guess Tether might work for people who cannot exit to fiat for some reason like taxes or lack of bank account that accepts USD but want something stable but I don't believe in USDT and I wouldn't hold my coins there even if I had to.

Tether is too shady for my taste and the lies they were telling and lack of transparency destroyed its reputation in my eyes. Tether makes me think of a small private bank somewhere in Nigeria where people speak broken English and nobody knows anything but everybody is smiling and nodding. Would you trust them with your money?

The fact of the matter is when you have unlimited funny money you can obviously swing a market one way or another pretty violently, especially an illiquid one with no regulation. Was the last run partialy powered by blatant tether manipulation? No, of course not. But if you don’t think it had a huge hand in it at least, then you need to think again. None of this might be going on right now if it were not for willy bot and tether.

These things brought attention and people to the space for the mad gains. Slowly we are maturing and legitimate entities are showing up to expose and replace the shady players like tether, but the truth is we may not have gotten here wo them, or it may have taken much, much longer. Not too long ago bitcoin was used to trade magic cards and buy mushrooms or an illegally harvested kidney(lol) and by a few computer nerds. The gains were the major catalyst for growth and the gains were largely fueled by indisputable manipulation.