If tether pops, what happens?
Do people try to cash out immediately or do they flock to the "stable" coins like BTC or ETH?
To my knowledge the only thing you can trade tether for is other cryptocurrencies.
Do people try to cash out immediately or do they flock to the "stable" coins like BTC or ETH?
To my knowledge the only thing you can trade tether for is other cryptocurrencies.
a. As per coinmarketcap, currently the largest BTC market is the BTC/USDT on OkEx. On looking closer, 3 out top 10 markets are USDT (excluding Bitfinex). So that is nearly 10% of only BTC liquidity gone.
b. As Tether and Bitfinex are connected so the exchange shuts down. It is the 2nd largest bitcoin exchange. So all that liquidity vanishes too. That brings our above total to 15%.
c. There will be many cross connected trades relying on USDT so my guess is the liquidity number will be higher, maybe even in 25-35% range.
d. This will cause panic and people selling BTC left and right. So BTC prices taking a huge hit. It might go down as low as 1-2k.
e. Most other cryptos are pegged to BTC. So with BTC liquidity gone they will take another huge hit too.
1) Cashing out to fiat, I don't know these exchanges well enough to determine if people actually managed to cash out their Tethers with real money in a meaningful sum.
2) Buying crytocurrencies available on these Tether based exchanges in order to get off these exchanges, which would actually cause prices to go up, but only in terms of USDT, not USD.
After that it really depends on what those folks would do next, they might choose to hold onto the coins or try to liquidate to fiat which would cause prices of coins on non-Tether exchanges to go down.
Alternately, it might drag down other currencies by taking away the illusion of easy crypto-to-dollar exchange that tether offered, but other than that the dominant effect would likely just be investor panic.
So, no one knows how things will turn out! Such is finance. It makes for fun stories, at least.
I've always wondered though - how do you move multiple hundreds of thousands of dollars worth out to fiat in a single instance? Is that possible?
Doing a trade of that size is no problem; you just enter it. Getting the money out via ACH or wire would require being pre-verified and upping your limits. AFAIK Gemini has higher limits than Coinbase/GDAX.