The UnTethering: What happened to Tether and Market today?

[Blackforce]

This will be a two part post. First will explain the Current Situation of Tether and market while the Second one will explain the Downsides of Tether and its Future Impact on the Crypto Market.

Impending Tether Collapse Rumors are not new if you have been in the crypto space for a while. But, today was a little different. The crypto market and Bitcoin investors went in for a shock today, as Tether, a self-proclaimed “stablecoin,” fell 6% below its U.S. Dollar (USD) peg touching its ATL at $0.86 while shooting its competitor coins above $1.10. A USD-peg stable-coin touching that mark was both funny and disturbing situation.

These are the few things that escalated the situation further:
1. FUD - Tether bank insolvency (https://www.bitcoinforbeginners.io/cryptocurrency-news/usd-tether-noble-bank-insolvency-news/).
2. FUD - Bitfinex stopping USD deposits and withdrawals. Same goes for Kucoin USDT pair.
3. Fake Rumour - Binance delisting USDT. (https://ethereumworldnews.com/reports-of-binance-delisting-tether-usdt-turns-out-to-be-fake-news/)
4. Bandwagon Effect - A Belief that everybody thought all USDT pairs are pumping because everyone wants to get out of USDT. Thus, I should also do the same.

FUD related to Bitfinex and Kucoin got cleared after Bitfinex released the statement that they will open the deposits in next 24HRS (http://twitter.com/bitfinex/status/1051750465782906880), or in case of Kucoin, already opened (https://news.kucoin.com/en/usdt-deposits-and-withdrawals-are-now-enabled-2/). That Binance delisting FUD was fake though. We even saw someone circulating fake Binance USDT delisting notice. And last but not the least the typical Bandwagon effect we can always see in trading markets.

Thus, Against the background of Tether fall, BTC and ETH were growing. But there is a significant difference in the rates between USD and USDT. At one point, the price spread between the value of Ethereum on Bitfinex and Coinbase surpassed 10%, which is nearly unheard of in the nascent crypto market. While USDT is one of the most liquid crypto assets in this market, the order books of the BTC/USDT trading pair couldn’t handle this unprecedented liquidation, resulting in Bitcoin’s unrelenting move above $7,500 on Tether-enabled exchanges.

However, it is unlikely that this irrational price action will be sustained for an extended period of time. All you need to do, is the math behind 'premium' value of USDT supporting exchanges, against ones with real US dollars.



(2/2) The UnTethering: Tether and its Impact on Future Crypto Market Collapse.


Now, even though we have cleared the FUD regarding Tether, we don't mean that Tether won't eventually collapse. There is a strong likelihood of that happening. You can count the situation today as a cautionary bell for future Tether implosions. We highly recommend you use other stablecoins as much as possible for stability requirements. The next scandal is brewing as we speak. The only thing we don't know is when. So, Better safe than sorry. Here is a simple explanation for the same.

Note: The idea behind this post isn't to create FUD, but to create awareness among the masses.

Q.  If tether's value goes to zero, but I have alt coins on binance, how would I lose some of my alt coins?
A - The idea is that on first sight Tether doesn't seem like a very big coin. Sure, it's top 8, but there are bigger coins on Binance. However with a lot of coins their market cap on paper is not their "real" market cap, it's not a real value invested in those coins, so a $1 billion market cap coin might only have a $5 million of value that was actually invested in it. So if somebody sold $5 million worth of that coin, it would basically drop to zero and have no market cap (some people would obviously buy it up at that point just due to the opportunity but that's a different thing).

So you have hundreds of coins on Binance, which combined on paper have a market cap of hundreds of billions of dollars, but the real value in them is maybe 5% of that.

But with Tether every 1 USDT is actually 1 real dollar of value invested (obviously this is debatable, but that's the premise of tether). So you have $2.4 BILLION of REAL value against maybe $10 billion of real value with other coins (if we exclude BTC). So if Tether collapses and goes to zero, Binance suddenly doesn't have the money that it "technically" owes its users, because Tether is never supposed to be under $1, it's not treated as a traditional coin where if it goes down it's your fault. Meaning, If tether is trading at 97.5, it means that people think there is a 2,5% chance they will not be able pay you the $1 when you ask. That’s the risk you take with your strategy. So, Binance will likely halt all trading and moving of tether, and that will create bunch other problems. There will be massive outrage and there will be thousands of lawsuits.

Simply put Binance will suddenly find itself in a position where they owe people $10 billion dollars, but they only hold coins worth $8 billion dollars, so they might be forced (either willingly or by law) to pay up and bail out the tether holders. But that might be debatable based on whatever the courts would decide at that point. Not to mention Binance (and just about every exchange out there) uses Tether for trading with other exchanges, and that could create a range of other issues.

Tether claims that every Tether they print is backed by real US Dollar, but although their website claims that they are subject to frequent professional audit, this has never happened. There has been one incomplete audit (and some conflict of interest) back in June. So basically nobody knows if Tether is backed or if they are printing it from thin air.

Thus, If tether collapses the entire market will break for YEARS. It might even be worse than Mt. Gox. Not to mention basically every exchange out there uses Tether and many people that have funds on these exchanges may lose portions of their funds or even all of it, even if they never touched tether. Thus, We need better stable coins, we can't rely upon a really shady currency propping up the market. There's starting to come better alternatives like Gemini, DAI and Paxos but they don't have enough circulation or volume to cater the needs of the crypto market. So, we need to carefully revisit our strategy and deliberate what's good of us in a long run.
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[1715671703]

1715671703

[DooMAD]

But with Tether every 1 USDT is actually 1 real dollar of value invested (obviously this is debatable, but that's the premise of tether). So you have $2.4 BILLION of REAL value against maybe $10 billion of real value with other coins (if we exclude BTC). So if Tether collapses and goes to zero, Binance suddenly doesn't have the money that it "technically" owes its users, because Tether is never supposed to be under $1, it's not treated as a traditional coin where if it goes down it's your fault.  

Unless by "Binance" you mean "Bitfinex", then no.  Binance are not guaranteeing the value of Tether, so they will not owe their users anything.  I'm pretty sure there was something in the fine print that said even Tether themselves aren't guaranteeing the peg.  If you lose all your money in Tether, it is your fault.  Don't treat it differently to any other coin, because I don't see any greater likelihood of someone bailing you out than with any other coin.

Having checked Tether's Legal page, even living in "certain US states" (although they neglect to mention which ones) is already enough to invalidate any claim you might think you have.

//EDIT:  and further down the page:

Force Majeure: Tether is not responsible for damages caused by delay or failure to perform undertakings under these Terms of Service when the delay or failure is due to fires; strikes; floods; power outages or failures; acts of God or the state’s enemies; lawful acts of public authorities; any and all market movements, shifts, or volatility; computer, server, or Internet malfunctions; security breaches or cyberattacks; criminal acts; delays or defaults caused by common carriers; acts or omissions of third parties; or, any other delays, defaults, failures or interruptions that cannot reasonably be foreseen or provided against. In the event of Force Majeure, Tether is excused from any and all performance obligations and these Terms of Service shall be fully and conclusively at an end.

So yeah, in plain English, if it goes to zero, don't expect any handouts.  

[Anarchist]

I didn't follow Tether story for a while now. Are you telling me Tether has still not been able to provide an audit? 

[DooMAD]

Are you telling me Tether has still not been able to provide an audit? 

"Able" and "willing" are two very different things.   

[figmentofmyass]

I didn't follow Tether story for a while now. Are you telling me Tether has still not been able to provide an audit? 

at this point, they've said that an audit is impossible because the major accounting firms are unwilling to engage in an audit. this is what they're general counsel said:

“The bottom line is an audit cannot be obtained.”

“The big four firms are anathema to that level of risk … [Tether has] gone for what we think is the next best thing.”

they did release a report earlier this year composed by law firm Freeh, Sporkin & Sullivan LLP that purports to show that USDT is fully backed. it's not an audit, and it's the most you're getting out of tether:

The Tether Transparency update may provide information on the amount of capital that Tether has access to, but it’s not an audit — notably, the report is composed by the law firm Freeh, Sporkin & Sullivan LLP (FSS), not the original financial auditing firm Friedman LLP. FSS, co-founded by FBI director Louis Freeh, didn’t conduct an official audit, but instead published data gathered during a two-week period in which the firm had access to Tether’s accounts at two different banks:

“Earlier this year Tether engaged Freeh, Sporkin & Sullivan LLP (FSS) to review bank account documentation and to perform a randomized inspection of the numbers of Tethers in circulation and the corresponding currency reserves.”

The entirety of the report, available via Tether’s website, consists of a mere three pages. The report shows that at a single snapshot point on June 1, 2018, Tether held a little over 2.5 billion USD across two bank accounts. The firm then concluded that “unencumbered assets exceed the balance of fully-backed USD Tethers in circulation” as of the same date.

[xtrump101]

I didn't follow Tether story for a while now. Are you telling me Tether has still not been able to provide an audit? 

they cant provide it because they never owned USD that equals the tther circulation in the market which is $2 billion dollar so they dont have the backing of it thus the cryptocommunity lost trust on it, and trust which the most of important in this space, eventually they will collapse i thnk.

[/arbab/]

But with Tether every 1 USDT is actually 1 real dollar of value invested (obviously this is debatable, but that's the premise of tether). So you have $2.4 BILLION of REAL value against maybe $10 billion of real value with other coins (if we exclude BTC). So if Tether collapses and goes to zero, Binance suddenly doesn't have the money that it "technically" owes its users, because Tether is never supposed to be under $1, it's not treated as a traditional coin where if it goes down it's your fault.  

Unless by "Binance" you mean "Bitfinex", then no.  Binance are not guaranteeing the value of Tether, so they will not owe their users anything.  I'm pretty sure there was something in the fine print that said even Tether themselves aren't guaranteeing the peg.  If you lose all your money in Tether, it is your fault.  Don't treat it differently to any other coin, because I don't see any greater likelihood of someone bailing you out than with any other coin.

Having checked Tether's Legal page, even living in "certain US states" (although they neglect to mention which ones) is already enough to invalidate any claim you might think you have.

//EDIT:  and further down the page:

Force Majeure: Tether is not responsible for damages caused by delay or failure to perform undertakings under these Terms of Service when the delay or failure is due to fires; strikes; floods; power outages or failures; acts of God or the state’s enemies; lawful acts of public authorities; any and all market movements, shifts, or volatility; computer, server, or Internet malfunctions; security breaches or cyberattacks; criminal acts; delays or defaults caused by common carriers; acts or omissions of third parties; or, any other delays, defaults, failures or interruptions that cannot reasonably be foreseen or provided against. In the event of Force Majeure, Tether is excused from any and all performance obligations and these Terms of Service shall be fully and conclusively at an end.

So yeah, in plain English, if it goes to zero, don't expect any handouts.  

Not true. Maybe Tether doesn't owes any money to their users but Binance definitely does. That's the whole concept of the stablecoin. Maybe not for other coins as mentioned but for Tether it does. Tether doesn't owes you to redeem it for money but it owes you to make the guaranteed peg of $1 at all times. https://tether.to/legal/. But, hypothetically if we consider, Binance doesn't owes anyone anything. Do you think the judiciary will accept the plea against billions of dollars of lawsuits? Definitely not.

[SuiMikira]

Tether (USDT) is NOT USD, we can't exchange 1USDT for 1 real USD so never believe it. Tether has still not been claimed that 1USDT worth 1USD by any bank or competent authorities. You will regret if you believe in USDT.

[tempus]

But with Tether every 1 USDT is actually 1 real dollar of value invested (obviously this is debatable, but that's the premise of tether). So you have $2.4 BILLION of REAL value against maybe $10 billion of real value with other coins (if we exclude BTC). So if Tether collapses and goes to zero, Binance suddenly doesn't have the money that it "technically" owes its users, because Tether is never supposed to be under $1, it's not treated as a traditional coin where if it goes down it's your fault.  

Unless by "Binance" you mean "Bitfinex", then no.  Binance are not guaranteeing the value of Tether, so they will not owe their users anything.  I'm pretty sure there was something in the fine print that said even Tether themselves aren't guaranteeing the peg.  If you lose all your money in Tether, it is your fault.  Don't treat it differently to any other coin, because I don't see any greater likelihood of someone bailing you out than with any other coin.

Having checked Tether's Legal page, even living in "certain US states" (although they neglect to mention which ones) is already enough to invalidate any claim you might think you have.

//EDIT:  and further down the page:

Force Majeure: Tether is not responsible for damages caused by delay or failure to perform undertakings under these Terms of Service when the delay or failure is due to fires; strikes; floods; power outages or failures; acts of God or the state’s enemies; lawful acts of public authorities; any and all market movements, shifts, or volatility; computer, server, or Internet malfunctions; security breaches or cyberattacks; criminal acts; delays or defaults caused by common carriers; acts or omissions of third parties; or, any other delays, defaults, failures or interruptions that cannot reasonably be foreseen or provided against. In the event of Force Majeure, Tether is excused from any and all performance obligations and these Terms of Service shall be fully and conclusively at an end.

So yeah, in plain English, if it goes to zero, don't expect any handouts.  

Not true. Maybe Tether doesn't owes any money to their users but Binance definitely does. That's the whole concept of the stablecoin. Maybe not for other coins as mentioned but for Tether it does. Tether doesn't owes you to redeem it for money but it owes you to make the guaranteed peg of $1 at all times. https://tether.to/legal/. But, hypothetically if we consider, Binance doesn't owes anyone anything. Do you think the judiciary will accept the plea against billions of dollars of lawsuits? Definitely not.

Binance owes customers who hold USDT exactly the amount they hold individually. Let's say you hold 5000 USDT and the value drops to 50 cent you will still be able to withdraw your 5000 USDT - but it would be devalued of course. Same if it would go to zero.


Binance would only be in trouble if the exchange itself should hold huge USDT-amounts. But the real shitshow will start with Bitfinex and in my opinion it already has started. Bitfinex and Tether are lead by the same guys and if Tether dies Bitfinex will most likely not survive - and the other way around. Since both companies are totally intransparent and working with a lot of shell-companies (very likely), having trouble to find banks who don't shut their accounts down after a few weeks because of anti-money-laundering-rules, the situation is already on the edge.

Best would be if both, Bitfinex and Tether, become slowly irrelevant. If they should go down in flames it would have a very bad impact on the whole space.

[disconnectme]

For me I believe this is a tergeted campaign against Tether, Tether holds more than 90% of the Stable coin markets and with the influx of new stable coins into the space they need to do something to  share this market with them so what do tey do, start a FUD campaign. I for one believe Tether is real but there is a cover up somewhere, maybe they don't have every tether backed with USD but I believe they have a huge Fiat to sustain the amount in circulation