I'm not saying that I'm a big Tether fan or anything. However to say that it "doesn't make sense" when they print more Tether during market crashes is false.
Why? It's worth exactly one dollar. Which they have in an account. That's the point. The price of the other cryptocurrency will come down, and the value of USDT compared to that cryptocurrency will indeed rise, as it should when people want to sell to a market where there's more demand on dollars than the asset.
> They are not "magicking" Dollars, they are magicking a commodity (USDT) pegged to Dollar.
But it's supposed to be pegged to the dollar by a real dollar backing. In the scenario you're describing, it's a floating asset not backed by anything, with a value maintained purely by supply manipulation, and being issued to prop up an asset price. The opposite of what it's supposed to be.
> However to say that it "doesn't make sense" when they print more Tether during market crashes is false.
It still doesn't. I mean, it makes sense from a "lets conjure up some money to prop up the price of BTC" angle, sure, but that's not the same as it making sense for something that's backed by cash on a 1:1 basis. Tether should only be issued when people give dollars to the tether foundation. That's the claim on their front page, and the basis of their peg.
Take a look at their homepage.
I am 100%, absolutely, positively not saying 1:1 backing is required for a currency peg.
I am saying that in the case of tether, that is the explicit claim they are making about their cryptocurrency. They are claiming that each and every one is backed by a dollar in their account. This is their value proposition, this is what you are buying when you buy tether. An open, audited, 1:1 backed US dollar token * .
Please go and read their homepage if you have some sort of issue with this, it's right there at https://tether.to/
The idea is very much that you can park money in tether and it's not vulnerable to a run on the currency and it cannot drop below a dollar, because each one has a corresponding dollar in an account.
(* unfortunately they are not very open and have never been audited)
"100% Backed
Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD."
Whether Tether's claim is actually true is at best unclear, of course.
But the secrecy, false claims of regular auditing etc. don't look good from here.
Friedman only gave a report explicitly specifying "THIS IS NOT AN AUDIT" because Bitfinex wouldn't provide the documents and access beyond simple statements.
Friedman LLP recently removed all mention of ever having been involved with Bitfinex from their webpage.
Previously visible here:
http://www.friedmanllp.com/insights/auditor-engagement
The Bloomberg article states that Friedman was issued a subpoena from the CFTC, at the same time Bitfinex was subpoenaed.
Friedman LLP, a New York-based auditing firm, was also
subpoenaed by the CFTC after Tether hired it last year to
assess claims that Tether held enough U.S. dollars,
according to a person familiar with the matter.