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Comment by grey-area | Hacker News Reader

When it blows up, it will take Bitcoin with it.

Yes it will blow up the Bitcoin price, as everyone wants to exit tether

That requires the Tether to exist or be worth anything. As I understand it it's a protocol on top of Bitcoin that allows the issuer to arbitrarily destroy it. [1] Even if it wasn't destroyed, the value could fall over a million fold if they were discovered to be totally irredeemable and without backing. Unlike the Papiermark, you can't even burn them.

[1] https://medium.com/wolverineblockchain/whats-the-situation-w...

Temporarily blow up the Bitcoin price and then crash down to oblivion.

I believe that's what you meant. If you think Tether implodes and Bitcoin's price goes higher and higher, I have more creepto to sell you.

What makes you think that?

Alternatively, it could make bitcoin stronger by removing an alternative cryptocurrency

> What makes you think that?

“Through Tether pass more or less 80% of bitcoin trades.”

I'm not an apologist by any means - I absolutely hate Tether, and cryptocurrencies - though for perspective, the most optimistic take is that if you exclude exchanges that are known for reporting fake volume, the breakdown is roughly 59% USD and 41% Tether. [1]

It will likely take the whole space down with it, not just Bitcoin, because what'll happen is on all USDT exchanges and insolvent USD exchanges, the price of crypto will reach millions of Tethers per coin as people try and flee, then on all real-dollar exchanges, the price will collapse to pennies as everyone tries to sell their crypto for actual people money that you can use to buy goods and services in the real world.

Think MtGOX on steroids.

[1] https://www.bitcointradevolume.com/

I think you underestimate demand massively. If bitcoin price ever starts to drop precipitously, it will be scooped up by a mass of buyers who have a ton of money to blow and a lot of interest in maintaining price. The only thing that could cause a real collapse to sub 4 digits is if something went wrong in the actual protocol or some unforeseen exploit occurred that affected the system in a way that was unrecoverable. If the cryptography and incentive systems continue to function, the price will probably never approach 4 digits again even if Tether blows up (which it probably will).

The logic here is that many people will buy a crashing asset because, if they all cooperate, they can keep the price up. That seems highly unlikely. You can't just will away a bad equilibrium or a collective action problem.

I think this gets to the crux of it. Tether/iFinex isn't just a bad player, it's a bad player that has become the plumbing of the crypto space.

> The only thing that could cause a real collapse to sub 4 digits

Only thing? I agree that Tether’s collapse won’t be the end of Bitcoin. But if Tether collapses amid a real recession, i.e. one where incomes fall, that potential demand may not be able to act on its impulses. And note that Tether’s collapse and such a recession are correlated.

There is a very, very strong suspicion that Tether is involved with market manipulation of bitcoin to keep the price high.

If that disappears, the price will be in freefall.

Wouldn't the price go up even more as people try to get rid of their USDT by buying stuff with it?

Temporarily. For all the talk of crypto replacing central banks and the FIAT system, people heavily involved in crypto want to be able to cash out and buy their Lambo and have fun not being poor. So there will be a rush to use fiat gateways such as Coinbase to liquidize their crypto assets. Enormous sell pressure.

I would imagine the USDT to BTC rate would skyrocket while the USDT to USD rate plummeted. The exchange value between BTC & USD would not really be impacted.

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