Comment by safog | Hacker News Reader

Comment by safog | Hacker News Reader

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I don't think there are any claims that Tether the organization itself is doing anything like that. They just print USDT and send it to people who are interested in buying USDT like exchanges.

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.

These are a lot of ifs and I'm just not seeing the incentives here as best case Finex gets stuck with a bunch of BTC they inflated themselves which isn't in their interest.

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.

The settlement agreement shows that at multiple points Tether was not backed: https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

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.

> - Is USDT actually backed 1:1 by USD / cash equivalents as Tether claims? w/o independent audits we have no idea.

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).

Yes I agree, but still trying to figure out what impact that has on the broader eco system if USDT ends up being worthless starting now. How exactly will it impact the BTC price?

70% of btc volume is tether. Apparently the dollar exit points in regulated markets are rather narrow.

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.

That's interesting, I didn't know that, thx! Will look it up a bit more.

It's well known that USDT is not 1:1 backed and this is true since the AG started their investigation.

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.

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