The story is that Tether has been printing tethers and buying Bitcoins. However, they haven't released any concrete holdings or submitted to an audit AFAIK, so there's a lot of speculation on how big of a problem this actually is.
The two problems as I see them are:
- Is USDT actually backed 1:1 by USD / cash equivalents as Tether claims? w/o independent audits we have no idea. So technically, if you hold USDT on an exchange and use it to trade alts and evade the taxman, then if this whole thing falls apart your USDT might be worthless.
- The owners of Bitfinex and the people who run tether are the same set of people. So theoretically it's possible that
+ Bitfinex generates artificial demand for USDT somehow
+ Finds a way to swap actual USD for USDT (customer
deposits? 19bn worth of customer deposits? Unlikely)
+ In turn goes around and buys BTC with that USD for some
reason
+ Does it w/ enough vol that all the arbitrage bots won't
be able to arbitrage it away.
I'm not a finance guru, so I'd love it if someone more informed than me can comment on how someone can pull this off.
I think the best case is tether printed usdt, used it to buy btc, inflated the btc price and is now fully backed by their btc holdings. This works as long as people want btc
They were able to do it because people accepted usdt as dollars.
I'm going to say no. Because Tether refuses audit, refuses to name banks, and would be, based on their printing rates, depositing $3.5B USD a week into their bank (a rate which would put them on par with AT&T, Samsung, or Alphabet). I'm not sure how a few people working out of Hong Kong, etc., do that while sliding under the radar and avoiding scrutiny (from their bank or authorities).
So it could be rather catastrophic if either the market loses confidence in Tether or subsequent Us enforcement action shuts them down or makes Tether untouchable to various exchanges.
Market doesn't care. Right now USDT trading is popular since people are used to it. There are so many stable coin alternatives (backed with various collateral, some like USDC backed by USD 1:1), so you can always remove the risk.
Good luck to those shorting crypto due to "Tether scam". If you're a newcomer, this kind of news makes rounds every X months and market sometimes reacts widely, just to return back and inexperienced crypto investors/users get spooked. I'm not saying that Tether is all good and for sure they run a hazy operation there, but there is a wider crypto adoption taking place now. Companies are diversifying their treasuries, starting to load on BTC as a hedge against inflation.
PS: Expect news of China banning bitcoin, India banning bitcoin, Russia takedown on crypto, Yelen commenting that BTC is a scam. All of this will be amplified to move price down and shakeout small time holders while large investors keep buying more and more.