What'll happen when USDT collapses?

[theymos]

I've been looking into USDT a fair bit recently, and it really stinks. At this point I would be a bit surprised if it's not some kind of scam. A lot of the USDT deposits may be legit, but let's assume for a moment the worst case: USDT was created as a scam from the start, and has been slowly leeching BTC from USDT-supporting exchanges; almost none of the $600 million in USDT is from real deposits, but was printed from thin air. If we assume that hypothetical, then what would the effect on the Bitcoin price be?

I suppose that it would be a big negative force, but not as bad as some might fear. Although USDT-supporting exchanges have a lot of volume, I think that there's vastly more money on regulated exchanges like GDAX, and arbitrage between the two won't be possible if USDT is illusory. So maybe a 15-20% drop in price and recovery over several months, assuming a total instantaneous USDT collapse? Thoughts on this?

I also suppose that altcoins would be hit far harder, since they are almost exclusively traded on USDT-supporting exchanges.

I think that someone or some group has been trying to manipulate the BTC price by spamming these worries on various social media over the last couple of weeks, which has created some natural pushback against the idea. But that doesn't make the idea false. One speculative (IMO plausible) timeline for recent events is:

1. USDT is printed out of thin air over a long period of time, and there's grumbling about it constantly, but nobody really does anything.
2. Someone looking to affect the BTC price grasps onto the above issue and spams social media about it. Eg. "Check out what this one guy says will crash Bitcoin to $0.01, you won't believe what this company did!".
3. Due to the spam, a USDT bank run starts, but USDT runs out of actual money.
4. To buy time, USDT creates the "theft transaction" as an inside job. This creates an excellent and essentially irrefutable excuse for stopping further withdrawals.

[colombuszka]

First if all I was very surprised when I saw an administrator created this thread.  I know, I should not be surprised over things things like this, but this is kinda the first time for me seeing this in a important topic like this.  Great!

On the other hand, you have concluded almost everything which is worrying me for a while.  I think the whole stuff started with hack of Bitnifex and lot of suspicious movement is made on the USDT line nowadays too.  For me, it's like pushing up the price with "printed out of thin air" USDT, while there is nothing behind it.  The whole situation is worrying.

If this turns out the market may collapse due to this, alts and btc will suffer like hell, but IMO it will be like the first collapse in 2013.  It is a very dangerous game today and I don't have a clue how much time we got until the crash.  Any opinion on this?

[AT101ET]

USDT is alledgedly backed by real USD and can be cross checked by the reserves held in the Tether LTD bank balance that is supposedly audited on a regular basis.
Let’s say that you were right and that the coin was created with no real productive intent then I’d say the following is possible.
Simple demand/supply would result in an increase in the price of BTC if all other variables were kept at a constant. However that would be quite unrealistic. USDT holders would start dumping their ‘leeched’ BTC causing a flood of selling driving down the price of BTC which would trigger the panic selling of all the short-term holders and day traders.
As suggested, alts are more dependent on USDT than BTC is and coupled with the declining price of BTC there’d be an alt sh*tshow of a meltdown. 
Exchanges will suffer too and may not be able to deal with the financial losses.
In essence the problem is that USDT has become too big a player in some of these exchanges that makes any such scenario pretty damaging.
At the end of the day I think the loss (a $600m + wipeout will be too difficult to deal with, unlike the DAO fiasco which was just a minor slip up) and the consequences would be much greater.
I don’t know what the long term affects would be on the price of BTC #keynesianspeculation but in the short term I think things would look bleak.
Let’s just hope that we’re both wrong 

[colombuszka]

Let's say the total amount and value of USDT is around $650,000,000.  With the current bitcoin prices, it is around 81,250 BTC.  The 24-h volume of BTC today is $4,493,980,000 and 549,322 BTC.

549,322 vs 81,250 BTC.

Now beside the fact this whole calculation is totally theoretical, if we say that the full amount of USDT would gone in a second, almost the 1/7 of the daily volume would gone away, which is kinda crazy.  This is the worst scenario, and we cannot count the negative impact on the investors/exchanges/etc.

[gentlemand]

This creates an excellent and essentially irrefutable excuse for stopping further withdrawals.

Withdrawals stopped months ago. Bitfinex claim that if you have over $50,000 in USDT you can withdraw it via their special arrangements. I have never come across anyone who's stated this was possible for them.

The most likely outcome for the death of USDT is a shutdown initiated by the US. Tether only exists to bypass regulations. Soon enough they'll punish that and put the frighteners on the exchanges trading it.

[michkima]

They also state that all USDT are really supported by 1:1 real USD to USDT. Which I can't believe would be possible, will this mean they have like billions of dollars already in their reserves?

Just to illustrate, bitcoin prices has risen far beyond how much deposit USDT has gotten but USDT keeps on coming. Like for example on poloniex all trades in fiat are in USDT which means when the prices of bitcoins increased USDT was always ready to match the increase. Coincidence? Probably. But I agree with thymos, I don't think this USDT is legit all the way.

[Torque]

The most likely outcome for the death of USDT is a shutdown initiated by the US. Tether only exists to bypass regulations. Soon enough they'll punish that and put the frighteners on the exchanges trading it.

Lol. Yeah they'll shut it down eventually, only to replace it with their own one day.

Tether is essentially what USDFedCoin will be when it launches. Both are fractional reserve, inflatable, and backed by nothing.

And Bitfinex is really not getting it if they don't think they have been put on notice for all their scamming. I wouldn't be surprised one day if their office gets raided and someone led out in handcuffs.

[Denker]

Something definitely seems fishy with Tether therefore with Bitfinex.
The thing is we will know for certain what's going on when it is too late if they are not coming with a full documented auditing around the corner!
Just try to avoid exchanges who deal with Tether as much as possible. Not easy as almost all altcoin exchanges deal with it.
BTC's price and the whole crypto market in general would definitely take a hit. However to guess how bad it really could get is not really possible imo. But there would be definitely blood on the streets. Lot of blood!

[Ludwig Von]

Something definitely seems fishy with Tether therefore with Bitfinex.
The thing is we will know for certain what's going on when it is too late if they are not coming with a full documented auditing around the corner!
Just try to avoid exchanges who deal with Tether as much as possible. Not easy as almost all altcoin exchanges deal with it.
BTC's price and the whole crypto market in general would definitely take a hit. However to guess how bad it really could get is not really possible imo. But there would be definitely blood on the streets. Lot of blood!

Tether-Bitfinex = extremely fishy. They seem to have a very strange concept of audit-transparency. Some people even suspect common owners. And sooner, rather than later, both are gonna blow up.

What worries me more is indeed how deep other exhanges are "Tethered". The biggest danger resides there, not so much for BTC directly.

[gentlemand]

Tether-Bitfinex = extremely fishy. They seem to have a very strange concept of audit-transparency. Some people even suspect common owners. And sooner, rather than later, both are gonna blow up.

What worries me more is indeed how deep other exhanges are "Tethered". The biggest danger resides there, not so much for BTC directly.

There's no real secret about it. Ifinex is the parent company of Bitfinex and Tether. Ownership overlaps. What extent the overlap is is another matter and they're not the most forthcoming bunch when it comes to facts.

[Paashaas]

They also state that all USDT are really supported by 1:1 real USD to USDT. Which I can't believe would be possible, will this mean they have like billions of dollars already in their reserves?

I cant find any info about that proof that Tether is beeing backed by real U.S $.

Tether is a straight up scam as far i can see it, things will be more clear later this week.

[AT101ET]

They also state that all USDT are really supported by 1:1 real USD to USDT. Which I can't believe would be possible, will this mean they have like billions of dollars already in their reserves?

I cant find any info about that proof that Tether is beeing backed by real U.S $.

Tether is a straight up scam as far i can see it, things will be more clear later this week.

They made the claim on their site and said it could be verified by looking at there audited accounts. That being said, even there accounts showed certain discrepancies (http://www.newsbtc.com/2017/03/21/tether-balance-sheet-unveils-large-discrepancy-usdt-usd-reserves/) and what's to say that the auditing wasn't fabricated either...

[TheQuin]

I cant find any info about that proof that Tether is beeing backed by real U.S $.

Tether is a straight up scam as far i can see it, things will be more clear later this week.

Apart from the audit from reputable New York accounting firm Friedman LLP.

https://ftalphaville.ft.com/2017/10/02/2194319/tethers-transparency-update-is-out/

They made the claim on their site and said it could be verified by looking at there audited accounts. That being said, even there accounts showed certain discrepancies (http://www.newsbtc.com/2017/03/21/tether-balance-sheet-unveils-large-discrepancy-usdt-usd-reserves/) and what's to say that the auditing wasn't fabricated either...

That's from March the most recent audit was in October. Do you think an accountancy firm would risk its license by fabricating an audit?

[AT101ET]

I cant find any info about that proof that Tether is beeing backed by real U.S $.

Tether is a straight up scam as far i can see it, things will be more clear later this week.

Apart from the audit from reputable New York accounting firm Friedman LLP.

https://ftalphaville.ft.com/2017/10/02/2194319/tethers-transparency-update-is-out/

They made the claim on their site and said it could be verified by looking at there audited accounts. That being said, even there accounts showed certain discrepancies (http://www.newsbtc.com/2017/03/21/tether-balance-sheet-unveils-large-discrepancy-usdt-usd-reserves/) and what's to say that the auditing wasn't fabricated either...

That's from March the most recent audit was in October. Do you think an accountancy firm would risk its license by fabricating an audit?

I very much doubt it. If it was truly audited by a reputable firm then the question as to whether or not the USDT was backed should be clear. If that's the case then I guess we could be more at ease knowing that at least part of their claims are true.

[TheQuin]

I very much doubt it. If it was truly audited by a reputable firm then the question as to whether or not the USDT was backed should be clear. If that's the case then I guess we could be more at ease knowing that at least part of their claims are true.

I'm pretty comfortable that the funds are real and that has been proven. The hack is more of a PR and reputational problem that could cause serious issues. At the moment they are saying they can prevent the stolen funds being moved by amending the code. If that turns out to be the case they might survive this.

[Ludwig Von]

I very much doubt it. If it was truly audited by a reputable firm then the question as to whether or not the USDT was backed should be clear. If that's the case then I guess we could be more at ease knowing that at least part of their claims are true.

I'm pretty comfortable that the funds are real and that has been proven. The hack is more of a PR and reputational problem that could cause serious issues. At the moment they are saying they can prevent the stolen funds being moved by amending the code. If that turns out to be the case they might survive this.

I have read that there is no official audit data provided by a competent body. And there is a very good reason for that : there are no funds. And the hacks, as well Theter as Bitfinex are false flags to cover exactly that : there are no real funds. It is only counting down now for the cover blowing off the kettle... .

[abercrombie]

Bitfinexed was on LIVESTREAM last night debating the issue.

Contenders: Bitfinexed, Jimmy Song, Tone Vays (vs) Flibbr, and BTCVIX

TLDR Takeaways:

• Tether not being created out of thin air. Tether issued upon deposit of the dollar. Huge investor(s) with wiring issues make deposit arrangement to Bitfinex.  After deposits, Bitfinex creates respective tether.  Notice, the huge spike in tether happened once the bull market started picking up and hitting mainstream media.
• It would be highly unintelligent to create fraudulent tether in a fully public blockchain.  
• Friedman LLP balance sheet audit matched $400mm in bank account to 400 teather at the time. They make about $1mm in fees each day.
• Charts show no direct correlation between tether & price spikes.  
• If there is possible Fraud, the market would price in $1 USDT at less than $1 USD.
• There is no proof that Bitfinex is have withdrawal problems, no complaints anywhere.
• Tone Vays has an awesome haircut

"Bitfinexed on why Bitfinex is in trouble - Off Chain Live 2017.11.20"
https://www.youtube.com/watch?v=TerIjELO7IY

[TheQuin]

I have read that there is no official audit data provided by a competent body.

Then what you read was wrong. I have read the actual audit report from a well-established accountancy firm that most certainly is competent.

[Torque]

I have read that there is no official audit data provided by a competent body.

Then what you read was wrong. I have read the actual audit report from a well-established accountancy firm that most certainly is competent.

You may be right, but we don't know if this accountancy firm is on the level.

To this day it still blows my mind that for years now, trusted people like Andreas Antonopolous makes themselves known and available to the crypto world as a trusted independent auditor (who at one point he was even offering this service for free). And yet none of these exchanges will have him come in and do one.

In my mind, that speaks volumes.

It reminds me of Janet Yellen's garbage responses:
Q. "Why won't you let the Fed be audited?"
A. "The Federal Reserve is one of the most trusted and transparent organizations.. blah blah blah...."

[Ludwig Von]

I have read that there is no official audit data provided by a competent body.

Then what you read was wrong. I have read the actual audit report from a well-established accountancy firm that most certainly is competent.

Can you provide a link to where to find a report ?