How are the big players in cryptocurrency not pushing back on this? It has potential to take down the entire ecosystem.
The few exchanges that offer USD to crypto and back are probably pretty safe, but if the entire ecosystem crashes, it stands to reason that's not going to stand up for long.
With Tether its basically the same situation, just more convoluted. Rather than counterfeiting dollars, they are rapidly printing USDT that the community, apparently on faith alone, believes are redeemable for $1 per Tether. Curiously Tethers have only been created, never destroyed, which would indicate that none have been redeemed back to USD. Many other (complicit) exchanges are also accepting these "tethered dollars" - the "USD" volume at exchanges like Bitfinex, Poloniex, Binance, Huobi, Bittrex, OkEX, etc is actually USDT based.
The endgame is the same as the simplified example with counterfeit dollars. The only thing keeping it going is the rising cryptocurrency price, which is keeping people hoarding coins instead of selling back to USD. This is also why the rate of tether issuance has been increasing - they need to keep the price high so people continue to hold. Eventually the selling pressure will increase (on the few exchanges that actually handle real USD), and as people attempt to convert their crypto holdings to real dollars the fraud will become readily apparent.
There will be huge distortions as the price of Bitcoin and Ethereum rockets on Bitfinex and other Tether exchanges as people try to get their money out, and simultaneously craters on GDAX & Gemeni as they try to get back in to fiat. In the end the massively decreased GDAX/Gemeni prices will be the only ones that matter since all faith will have been lost in the former tether-based exchanges.
If you're reading this, you have been warned.
Tether is the ideal instrument to let you absorb part of the market demand using bitcoin rather than dollars, protecting the price while you're continuing your cashout.
I'm not sure you can compare those numbers like that. If somebody used $450M to buy bitcoin, the market cap would likely rise much much more than $450M.
For example, if I look at the GDAX order book right now, I see that the bitcoin price could be pushed up $200 by buying less than $3M worth of bitcoin. That corresponds to increasing the market cap by $3.2 billion.
To put things in context, the MtGox heist was worth about 1/20 of the market. However, back then Bitcoin was pretty much the only cryptocurrency and it was still just a technological curiosity. If Bitcoin could be "hacked" at this level, then people didn't really have a choice than think that maybe this technology isn't all that great, and may actually disappear.
I don't think the market would crash for 2 years straight again if $40 billion in cryptocurrency were stolen tomorrow. It would take a LOT to take down the whole market for good.
Even if you had events such as world's governments uniting to ban all cryptocurrency exchanges, which is highly unlikely (see Belarus announcing to make crypto tax-free today), it would still make crash the market for 2-3 years, until people figure out how to get around those regulations with decentralized exchanges.
Look at the order book on GDAX. How much bitcoin do you need to buy/sell to increase/decrease the market cap by 1 billion dollars? MUCH less than 1 billion dollars worth...
Also, Belarus? It ranks as one of the most corrupt countries in the world. Not exactly the first shining example that comes to mind of a leader in financial regulation.
Thus Tethers represent 14% of the market. If MtGox crash was due to a 5% heist, this 14% scam will wipe out Bitcoin and establish Ethereum as the new king.
PS: What's the story behind your username?