Bitcoin Forum

So I think even if FUD, the tether story has sufficient noise in the net to affect the price.

I had been expecting tether to die a few years ago. The fact that it hasn't is plus in my book that tether is legit.

HOWEVER

the fact they have not been audited makes me think they are fractional reserve.

I also think most exchanges are fractional reserve in crypto.

In fact, except for signed addresses/crypto and dex/uni swap every other financial instrument is fractional, it's just a question of how much.

We have faked USD chaseing faked btc, so it should probably even out, excepting that real BTC is likely undervalued

I kinda wish tether would just go, take the BTC hit an carry on. However that's just wishful thinking, a new FUD will be invented and the cycle will continue.

Every Epoch will have its Gox.

Pretty much my opinion too, in a nutshell. It irks me that everyone hyper focuses on Tether but ignores the possibility of insolvency on every other exchange, none of whom has ever been audited. It's so strange.

Tether did admit they weren't fully backed in 2019, due to fallout from a Bitfinex-related bank seizure: https://www.bloomberg.com/news/articles/2019-04-30/tether-says-stablecoin-is-only-backed-74-by-cash-securities

After the LEO token offering later in the year, they claimed to be fully backed again, which honestly is believable to me: https://www.coindesk.com/tether-says-its-stablecoin-is-fully-backed-again


Tether is like a cockroach. I don't like to bet against them anymore. The fact that so many people are expecting their demise makes me think it'll be someone else, maybe someone no one expects. Coinbase, Kraken, Gemini......

@jubalix. Tether has become a systemic risk for bitcoin. We can only ask questions and speculate on its legitimacy, however, the NYAG is after it and it would not be surprising if other government agencies would also begin their own investigations because of money laundering, fraud, illegal security issuance and market manipulation.

I am shaking my head because USDT is 50% or more of bitcoin's volume. Amusingly, this questionable company called iFinex has bitcoin underpinned.

I honestly can't wait for the day that tether is removed from the bitcoin/exchange ecosystem.  The concept of stablecoins in general is toxic to the all of crypto.

When tether collapses, it will cause a short squeeze capital exit via altcoins, followed by full panic mode and crypto market crash.  Only after that will we see true growth and long-term stability.  Right now, bitcoin's true value is tainted by tether.  I think we'd have a lot less volatility without tether and stablecoins.  They have the opposite effect on crypto price stability as a whole.  They suck the stability out of the market.  I really hope it happens this year.

January 15 is a key deadline in the NYAG case, so we'll see what happens pretty soon.  Or maybe nothing will happen.

Says who? Nouriel Roubini, Dr. Doom? He's also been saying for years that Bitcoin is headed to $0. :P

Nocoiners always begin their analysis from the conclusion that Bitcoin will collapse; the only thing that changes is the future cause. First it was regulatory crackdowns because of illegal activity. Then it was the Mt. Gox Willy Bot, and how it had fooled everyone into buying too high. Then it was Tether.....

I don't know exactly what a Tether collapse would look like, but I am definitely not convinced the devaluation of one of Bitcoin's primary base pairs (USDT) would lead to Bitcoin's demise. Maybe some short term chaos and volatility, but I really don't understand why people freak out about this.

What do you even mean by "systemic risk" anyway?

@ exstasie. Systemic risk is when a market is open to risks of collapse or instability because of interdependecies within. A collapse of one part of the market where the whole is interdependent, can cause instability or collapse on the whole market.

Similar to what we have been arguing before, USDT’s share of the total volume and liquidity is more than 50% of the whole cryptospace market. Take down USDT, the market will become unstable or begin another bear market.

In any case, this is an old article where I saw this idea of USDT as a systemic risk for the first time.



All investors, institutional or otherwise, have a duty to try to see the world as it truly is. Not as they wish it to be. This is especially true when putting investment dollars at risk. One needs to ask questions to understand elements influencing the outcome of an investment.

One of those questions is: How could things go wrong here?

Investment guru Charlie Munger, for example, says: “Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there?”

There is potential for catastrophic, systemic risk in crypto right now. Recent events surrounding Binance, Bitfinex and the stablecoin Tether necessitate this conversation.

Yet it is strange how infrequently one hears the concept of systemic risk mentioned in this space.

Remarkably, USDT is still the most widely used stablecoin. Traders use it extensively to move into and out of positions on crypto exchanges across the globe.

However, it’s possible USDT could get locked up or otherwise become unusable. There would likely be a cascade of activity following that. This could cause massive, ecosystem-wide harm to the entire crypto space.

Many exchanges (including Binance nd Bitfinex) likely couldn’t function. Assets would likely get locked up in court battles that could take years to resolve. Think Lehman Brothers.

When they fell, the rest of Wall Street felt the pain.

Source https://www.coindesk.com/binance-bitfinex-and-tether-whats-the-worst-that-can-happen

It is not.
Trading volume of bitcoin against USDT is always less than 10% of the total volume. Whenever there is a huge volatility and shitcoin pump and dump like these days, a lot of traders transfer funds between exchanges using Tether which increases its volume.
It is also currently closer to 23% not 50. That is $17,180,972,728 out of $75,276,784,300 if you believe (shit)coinmarketcap.com data which is another issue, the fake volume that altcoin exchanges have always been reporting to stay on top of this table.

I'm aware of what the term means. I'm asking what you mean when you apply it to Tether and the Bitcoin market. What would a Tether collapse look like? How exactly would it affect the Bitcoin ecosystem?

You vaguely assert it would crash the BTCUSD price. Why? How?


How do you know? Maybe value would quickly converge on another stablecoin like USDC. The market uses USDT as a hedge and for stability; if it no longer serves that purpose, the market will go elsewhere.

Also, in my experience, no bad news can stop a raging bull market. If Tether goes down during the current bubble (at least during the early stages) I don't think it will cause the crash you''re hoping for.


Binance and other altcoin exchanges would quickly recover. The market would price USDT on secondary markets like Binance based on the prospects of monetary recovery. Bitfinex would probably be affected, yes, because they are an affiliated company with the same owners and directors and they obviously share banking liquidity.

Bitcoin is the reason that tether keep on being in the market and relevant so you could be thinking or wishing for what may not be real to take effect. The high level of price is making hodlers hide gains in tether and other stablecoin and that is a big plus. Stable coin IMO is now the major advantage of cryptocurrency. Is like an individual regulation of his bitcoin hodling and takes away the bubble story away.

You know what this would mean. Tether has become a necessary part of the cryptospace market. Taking down Tether might pop the bubble and might begin a new bear market. There is nothing vague about this. Exactly how like a storybook, I am not certain.

How do I know? Unless we witness the exchanges begin to converge on USDC now then I would not change this bearish speculation.

I am also not hoping for a bear market hehe. I am holding bitcoins and speculating on altcoins like everyone.

Also, I cannot speculate how fast each exchange would recover, however, bitcoin bear markets of the past are minimum 2 years long.



@pooya87. Are you implying there is wash trading? The biggrest exchanges hold the biggest volume of USDT.

It's also a necessary evil for many participants in the market when alternatives are lacking, mostly due to various regulations.


Even if that date proves to be prophetic, it will take longer until enough events unfold to affect Tether/Bitfinex/iFinex, and potentially the price of BTC.

@malevolent. Agreed! January 15 will only be a submission and presentation of documents. The NYAG cannot declare their next recommendation before the review. The documents might contain pages of millions of blockchain transactions, I reckon. This might take the NYAG many months of careful review and double checks hehehe.

To some extent yest. The biggest exchanges that involve altcoins have always been reporting fake volumes, that's nothing new.

To be clear I also am not denying the effects that Tether's inevitable downfall is going to have on bitcoin price, but I'm saying that the effect Tether has on bitcoin has always been greatly exaggerated. Consequently the downfall and the price crash that would probably follow will mostly be panic sells, something similar to whenever a big exchange gets hacked and people panic sell bitcoin.

Bears could use the 15th to start a dump. Just for no reason. Spread some fake FUD, drop the price... Like they did many times.

You just keep repeating "if Tether goes down, bear market." That's pretty damn vague and I don't buy it, not in the early stages of a bubble. I've pointed out repeatedly with examples how bad news simply cannot stop a bubble. I've been through too many "Silk Road crashes" and "China banned Bitcoins" to take your word for it.

You think institutions give a shit about Tether going down? They'll be ecstatic! You realize what happened when Silk Road was taken down, right? Bitcoin was legitimized and then surged into the October/November 2013 bubble!

If Bitmex and Tether didn't exist, we'd probably have an ETF by now.

On top of that dynamic, the April 2017 experience (when Bitfinex and Tether lost banking capabilities) tells me the "panic buying out of USDT and into crypto" factor will skew the market bullish in spite of the negative sentiment arising from a Tether takedown.


Very open minded to alternative possibilities eh? You don't sound biased at all. :P

@exstasie. What is damn vague in tether has become a systemic risk on bitcoin because tether has become interdependent with the whole of the cryptospace?

Why should I be biased? I am realist.

DNM activity always contributed to a very small percentage of total transaction volume and the price was recovering weeks before the arrest.  


If there was no demand for services like BitMEX and Tether (in the current regulatory landscape), it would mean interest in Bitcoin has dropped to levels too low to warrant the creation of an ETF.


Short term, maybe, but medium-long term?

Despite all that has been mentioned and all the problems that have been raised about the Tether in the past, it is still the most used currency in most exchanges, there are many stable coins in the market, but the Tether is the most used, there are few exchanges that provide the real dollar pair and therefore most users trade Vs Tether.
Personally, I don't trust Tether, especially after the New York State Attorney's lawsuit against Bitfinex and its affiliate Tether, my money cannot be safe with Tether.

Stablecoins are convenient for crypto trading,but that's their only purpose.
If Tether dies,there will be another stablecoin taking the place of Tether.Sad,but true...
The rumors about Tether having fractional reserve will continue forever.I don't know why the Tether team hasn't done anything to prove the legitimacy of their stablecoin and provide some solid evidence.
I'm not a Tether fan and definitely not a stablecoin fan.The crypto market will be way better without the stablecoins and most of the smaller altcoins.

What are the statistics, now vs. 2013 when Silk Road was taken down? At the time, there weren't that many services and as I recall SR was considered a very important part of the economy.

Narrative wise, I believe the government shutting down Silk Road gave Bitcoin the sort of legitimacy that began getting the attention of serious investors and even hedge funds. It was no longer just a currency for drug traffic. That was the narrative anyway.

Ignoring short term effects, I believe the same dynamic would play out if the ecosystem's shadier elements (like Tether) were shut down. The SEC implied as much in their commentary on why ETFs were rejected in the past.


Not sure I follow, but I don't mean to say there wouldn't be demand for no-KYC secondary markets. I'm just saying the SEC has complained they are an avenue for market manipulation, money laundering, etc. and this is an impediment to an ETF approval.


All I'm saying is, don't be so married to the idea that "Tether going down must cause a bear market." We tend to hyper focus and dwell on these narratives while ignoring more important supply/demand realities like institutional accumulation. Like I said, institutions aren't going to stop accumulating because Tether goes down. The exact opposite would happen. Retail investors might panic sell but smart money will be buying the dip.

As I said earlier, timing is everything. If Tether goes down in a year while BTC is trading at $350K, it'll make the perfect catalyst for a bubble pop and bear market. But that's going to happen anyway, regardless of what happens to Tether.

If Tether went down right now, in the early stages of a bubble, I'm much less confident a bear market would ensue. I think it would look more like the Silk Road crash in October 2013.




You can't seem to accept the possibility that stablecoin value could converge on other alternatives like USDC or BUSD in the wake of Tether going down. You assume it must be some giant apocalypse that will destroy the Bitcoin economy and send it into some huge bear market. Maybe, maybe not, but you haven't exactly made your case.

Tether is just a mere part of Bitcoin’s price discovery to 6-digits. Without Tether, I believe it would be something else, simply because Bitcoin is useful to the entities involved, whether to HODL, moving value, scamming, buying heroine, trading profits, so on and so forth.

And there will be always FUD about it. In fact, the more people are planning to use it, the more likely this FUD will be spread.

I remember that, back in 2017's top, one of the most reasonable strategies was to take some profits via Tether. I remember that, this last quarter of the year and first of 2018, the FUD about it being a scam was everywhere (I follow various crypto-journals, and received these kind of news almost every day, and the same happened in crypto-twitter). Because of that, many members I know didn't take profit, because hodling BTCitcoin was more safe, and then came the dump.

Well, most of us know the story. What I want to explain with that is the thesis from the first sentence, and if I'm not wrong, the higher the FOMO, the higher will be the FUD about Tether too, regardless of the real reasons behind that fear, that could be real.

Then (2012):
https://www.cylab.cmu.edu/_files/pdfs/tech_reports/CMUCyLab12018.pdf


Now:
https://blog.chainalysis.com/reports/darknet-markets-cryptocurrency-2019

The percentages are even lower but they were never high to begin with.

https://i.imgur.com/Ya0g6Z3.png


Bitcoin was on its way to a 2nd bull run that year after the previous bubble collapsed a couple months earlier. Seizure of SR may have contributed to the rise in price, but there were other factors:

https://royalsocietypublishing.org/doi/10.1098/rsos.180643#d3e1959
See articles 3.1 & 3.2.


I don't know if the death of Tether alone would have been enough, but it certainly looks like a major impediment...


Banking problems and regulations most exchanges have problems dealing with is the only reason something like Tether came to fruition. It wouldn't have been created if there was no demand for it. If there had been no demand, the price, global interest, etc. would have been so low no one would be thinking about any Bitcoin ETFs.

Well January 15th came and went and bitcoin didn't crash and USDTUSD didn't go to 0. So FUD as usual. Most people didn't even know what the Jan 15th date was about. It was just about submitting documents to the NYAG.

Seems its very easy to create FUD these days. If you looked at the USDTUSD and USDCUSDT pairs yesterday you would see that people were actually selling their Tether in exchange for USDC just in case there was some negative reaction. The %'s difference was very little however.

So is it your contention that investors didn't care that Silk Road got taken down, because it was so small and nobody cared about it?

Or are you suggesting that nobody cared that Bitcoin's image was being cleaned up, including all the illegal activity being FUD'd about in the media? It was irrelevant to the bubble?

At the time, American Congresspeople were demanding a crackdown on Bitcoin and the Silk Road.

It's easy to erase this stuff in hindsight, but Silk Road was a very big deal at the time. You can say it was only 5% of transactions, but that's a big deal, honestly.


Now you're shifting the goal posts. Wasn't your claim that Tether being taken down will cause a bear market? ???

The media will peddle whatever brings in clicks, FUD or not. The kind of entities that would stay away from Bitcoin due to its potential use for DNMs stay away to this day. Whatever institutions that are investing nowadays aren't investing because Silk Road got taken down but because it's easier, and most importantly because the entire ecosystem is significantly larger. To give a sense of perspective, in late 2011 a $20k buy or sell was enough to move the market by 10% on Mt. Gox, the biggest exchange.

Grossly overstated is what I'm saying, 5% estimate is a far cry from saying Bitcoin was only used for drugs, there were thousands of places already (mostly small online businesses) accepting Bitcoin by the time of SR's seizure, and its major usage wasn't too far off from today, namely speculation.


I'm not outright saying it will, only that it may.

Not probably, there IS actually something at play here. The Tether truthers have probably missed the golden opportunity to buy and HODL Bitcoin because “Tether bad”, then have torturously watched it surge to $20,000, $30,000, then $40,000 next. Tether is simply a creative way to infuse capital in Bitcoin, if not Tether it would be another way.

So what? What really matters is news media and popular perception. That there was a popular narrative (in the news media, among politicians, etc.) that Bitcoin was primarily a currency for criminals and drug dealers in its early days is pretty undeniable. I lived through it.

Narratives are extremely important to market trends. Nobody cared what actual percentage of Bitcoin transactions were used on the Silk Road. What mattered is that Bitcoin (in the media, in the legal system) was previously painted as illegitimate, and was being made legitimate by shutting down criminal entities like the Silk Road.

There exists a similar narrative today that Tether is an illegitimate, criminal entity, one of the primary ones casting a shade over the entire Bitcoin market. A boogeyman just like Silk Road was in the early years. The USD values in question are larger, but then again, so is overall Bitcoin market liquidity.


Exactly. Tether is just a way to bridge the gap between fiat exchanges and secondary markets. It doesn't matter whether USD flows into Tether or Coinbase. Either way, it's going to push crypto prices up.

From what I understand the process works like this. At least it was this way back in 2017. No idea if its the same as today.

Someone wires money into Bitfinex, they don't want to trade any USD pairs on Bitfinex but want to send the USD elsewhere to buy alts like on Binance. So then Bitfinex converts the USD to USDT. Then that individual withdraws this USDT and sends to any exchange they want that accepts USDT. Right now Bitfinex has USDT pairs however back in 2017 they didn't actually trade Tether on their exchange. Their BTCUSD pair was actually against USD and not USDT.

When the individual sells their alt back for tether, they send their tether back into Bitfinex and Bitfinex converts it back into USD or you could go to the Tether.io website and have the funds sent into your bank account. I never tried the latter because the Tether.io function to withdraw was disabled and you could only trade better back into BTCUSDT, then sell that BTC on another exchange like Coinbase or Gemini for USD and withdraw that. Was annoying due to the fees involved.

After Bitfinex and Tether's banking troubles in 2017-2018, they realized it wasn't sustainable to service high volumes of small customer withdrawals. Tether basically stopped servicing individuals directly. They only interface with whales, companies, institutions. Last I heard, the minimum withdrawal amount was $50K. Bitfinex followed suit in 2018, raising the minimum fiat withdrawal amount to $10K.

It was a smart move and kept them in business. Making small customers do their fiat banking elsewhere drastically reduced the load on their withdrawal network. At the same time, the ability for whales to redeem large amounts of USDT for USD from Tether kept the markets pegged very effectively. All downward pressure on USDT (or Bitfinex USD) prices from retail customers cashing out gets absorbed by Tether's arbitrage whales.

Love them or hate them, the people running iFinex are very good at what they do.

I read this article which says that all the volumes is basically USDT based in non-US exchanges. If you takeout USDT volumes then nothing much is left with regards to volume.

https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3

It seems that the Tether FUD is still ongoing. People are panicking like crazy on Crypto Twitter and people are Reddit are getting their posts deleted because there is too much posting of claims without evidence. I am actually surprised that so many people are talking about Tether this week because I would of assumed that tether was so 2017ish.

Either way, there is a post going around Twitter that 3 days before they handed in the documents that the tether prints stopped. So its been 5 days and no tether prints yet. Looking at the market cap for tether, they usually did a print every few days or so. So its either a coincidence, especially that its a weekend now or if there are no prints for the next few days or weeks. People will start to panic because they will think "Why did the printing stop " and maybe sell their BTC in anticipation of a crash.

"China banned bitcoin" is also so 2013is FUD but still we hear it even today, they even get creative sometimes and replace the word "China" with some other country to make the FUD look new. Tether FUD is no different from that or any other old FUD. As long as people pay attention to them and they can cause weak hands to panic sell, they will be repeated over and over again.

I believe some of those people spreading the Tether Truthers’ FUD, might also the same people who have lesser than $30,000 bids placed. Sorry, but it would take MORE to get these Bitcoins from these two strong hands.

There is still time for that, the authorities will scrutinize the entire market in the next 5 years and it is inevitable, if i am not wrong investigation regarding Tether is going on and i am sure they will be audited and then we will get a clear picture about how they are minting billions worth of coins whenever the price of bitcoin starts rallying. 

What the authorities are "investigating" is not the market, it is the companies. What the crypto people are afraid of right now is the fact that their crypto will be investigated and regulated and all but that is not happening, not going to happen neither. What happened was XRP which is a token was free and nobody cared about it, the Ripple company however? That was investigated, same with tether, the USDT was fine nobody cared about that, but Tether company? That was investigated.

Since bitcoin doesn't have a company like that behind it, we can safely assume that it is going to be fine and you do not have to worry about it. Those are the difference, check a token or a coin you want to buy and if you see there is an organization or a company behind it then you should stay away from them, if there is none then you can be fine about it as well.

Agreed

At the end of the day if one day Tether company is found guilty on american soil, they will not be used by any american exchange at all and that is an important development. I know that Tether is not an american company and what they are doing is working with Bahamian banks and all by the guise of "USA wants everyone to obey, Bahama gives us freedom" but the reality is that they do not want ot be found guilty of anything so they ran away and opened an off-shore account as their main account and that's it. It wasn't to make sure usa doesn't get involved unfairly, it was to get away from fair audits so that is why they are there.

Hence when one day USA decides that Tether is bad business and nobody can work with them, all their american partnerships will end, and all the american exchanges will delist them, which is why it is quite important that they have a plan for that situation.

I don't get why some of you think that those who suspect Tether of foul play have their own agenda and are spreading FUD.

People who run Tether were lying about their reserves and being backed 1:1.
I always support transparency but if a business is not transparent it's their choice. It's going to limit the number of clients and make people suspicious but it's fine if they choose to go this way. What I can't stand is lying. When they finally admitted that rumors of them not being 100% backed by USD or even any fiat were true on their site it still said that USDt is backed 1:1. I remember it because when the news came out I went there to check if this information was changed or not.

Now it says:


:D

So if they make a few more tethers (not backed) and lend them to someone, they can say these tethers are backed by IOU. This is a very smart way to make value from debt and get people to sell them real bitcoins for their USDt that is backed by other USDt loaned to other people for a promise of return.

I think unless you work at Tether its difficult to prove whether they are fake or not exactly backed 1:1. When crypto crashed in 2018, there actually was some tether which was redeemed back to US dollar however it was a small amount that would of not been proof whether they are solvent or not. Well it went from $2.8B to $1.8B so about $1B, not exactly small however if there was issues redeeming tether back then, somebody would of made claims.

So it proved that they at least had 33% in reserves which we all knew in 2019 when it was proved it had 75% in reserves. Hence even if BTC crashed to $5K again, and 33% of all tether was removed from circulations, it still wouldn't prove a "tether bank run" since it wouldn't remove enough reserves to make them run out of money.

I think eventually people will just switch from Tether to USDC or DAI and call it a day. Eventually in a few years, Tethers market cap can be replaced with USDC. USDC grew alot in the last year and still minting every day.

@adaseb. There is certainly nothing that can be proven for or against about Tether unless there was a transparent audit of their accounts. Why will they not do this if they have nothing questionable?

In any case, read this article. To not make some people angry, assume this is FUD but fact based FUD, however.

https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3

Their general counsel has said in the past that the big auditing firms won't touch them:


https://cointelegraph.com/news/tether-has-enough-usd-to-back-tokens-says-law-firm-in-unofficial-statement

Tether is pretty shady, which lends some credence to that statement. :D

Giancarlo, one of the founders of Bitfinex, infamously said a few years ago, "We're not criminals, but now we have to learn to bank like criminals." I don't doubt it!

@exstasie. However, we should be skeptics and ask why do the big auditing firms do not want to audit Tether? Afraid themselves of what they might find in those accounts hehehe?

Maybe they are not telling the whole story? Or Tether asked of them to put something in a report that they weren't willing to?

@malevolent. It might also be those audit firms being afraid to discover accounts of Tether’s clients that might bring them threats of bodily harm if they publish the real report hehehe. I am clearly joking, however, we certainly do not know and it only brings more questions.