That's only because people wanted to reduce exposure to crypto today, and USDT is the closest approximation to that available for some exchange-committed funds.
Isn't the entire point of it to be pegged 1USDT === 1USD? Obviously it fails at that by being backed by nothing like enough USD, but what does it being worth $1.07 even mean? Also, where do you sell Tethers given Bitfinex won't exchange them for USD?
You can't without difficulty, you have to convert them to BTC or ETH and send them to Coinbase or other reputable exchange then cash out in fiat, in a window where all three securities wallets at respective exchanges aren't in maintenance, network isn't blocked by cryptokittes, and you've passed all AML/KYC including possibly justifying where incoming has came from. There are a lot of people that will find cashing out to fiat very difficult hence why some are parking in Tethers even though they aware of the dubious nature, and thus tether is trading at greater than a dollar. Personally, I wouldn't want to touch tether even for a few minutes, as sod's law it would be my luck that Securities & Futures Commission of Hong Kong or Hong Kong police decide to act just at that moment I buy tethers (well technically the problem will be once it's on TV and value drops to 0).
doesn't the fact that its trading at 1.07 mean that tether doesn't have easy access to USD or an easy way to exploit the arbitrage. tether as a company can take USD and print tethers. so they could take USD $100, print 100 tethers, exchange them for USD $107 and walk away with $7 profit. i don't think people would even be mad if they did this. this is exactly what they should be doing to preserve the peg.
People have, in fact, been getting mad when it appears they may have been doing this because people are weird like that. (Though I don't think there's enough market depth for that particular Tether-related arbitrage to be profitable, unlike some of the other options.)
I continue to be astounded that the BitFinex boys haven't been locked up for the blatant fraud they've committed. If the feds don't get them, the Russian mobsters will.
For starters, they don't deal in USD at all. They deal in "USDT", which isn't at all USD but a token called a tether that is somehow magically supposed to be pegged so 1 USDT == 1USD that you can... well... I dunno what you can do with a tether but one thing you can't do is turn it into actual fiat money on Bitfinex. You might be able to convert it to cold hard fiat on some other exchange though, but odds are good said exchange will be even more sketchy than Bitfinex.
Better still, the "market cap" for tether is over 1.6 billion USD with 5.5 billion in volume today. What happens when people actually want to turn that 1.6 billion of outstanding tether into dirty fiat? Who is gonna buy all those sells into USD? The exchanges? You think those guys are holding 1.6 billion in actual fiat money?
So if you like the idea that the most active "USD" exchange (bitfinex, according to coinmarketcap) isn't actually trading in "USD" but some kind of funny money that is supposed to always be pegged to the dollar but backed by absolutely nothing at all.... Consider what will happen when the crypto bubble collapse really starts to pick up and all those tether holders want back into filthy dirty American dollars. Good fucking luck.
It's just another facet of what makes the crypto "space" so fascinating. It is just layer upon layer of scams. Scammers scamming scammers. And yet people, even some supposedly smart people here on HN, continue to fall for the crypto scam every day.
The fact that Tether does not guarantee in their terms and conditions that they'll exchange Tether back into equivalent reserve currency makes it _super_ sketchy from my point of view.
The only way that Tether should be considered backed by and equivalent to USD (risk-reduced) is if Tether is contractually obligated to convert it back into USD. Instead, this is what their TOS says:
> Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money.
> We make no representations, warranties, or guarantees to you of any kind, including with respect to any right of redemption or exchange of Tethers for any property.
I'm by no means an expert, but I'm wondering why the people responsible behind Tether do this? Why don't they ask people for a dollar for each Tether coin and then store those dollars indefinitely, wouldn't that guarantee that the currency is pegged? They would always be able to exchange the Tether back to a dollar.
>> Why don't they ask people for a dollar for each Tether coin
AFAICT they cannot bank in dollars at the moment, which is where the origins of the tether currency lie in the first place. They say that theey have the money to back it... but given they minted a quarter billion over the last three days seems a little less than credible.
> Why don't they ask people for a dollar for each Tether coin and then store those dollars indefinitely, wouldn't that guarantee that the currency is pegged? They would always be able to exchange the Tether back to a dollar.
They could do that, but why would they when they can instead ask people for a dollar for each Tether coin and then spend those dollars on crack and hookers?
Well, someone might do what you describe - or, instead, they might say that they will store those dollars indefinitely but actually spend them. Why should they care about being always able to exchange the Tether back to a dollar, when they can simply take the cash instead?
Nothing can be more legit about a half remembered third hand account from an anonymous Internet source.
My default assumption when I see a cryptocurrency exchange is that it is either fraudulent or incompetently run, because that has been the case overwhelmingly in the past. It takes extraordinary evidence to make me trust one.
If you trade it for bitcoin someone is selling you that bitcoin for tether. That person will go ahead and trade that tether for some other coin.... rinse repeat, but in the end someone is holding that Tether, if exchanges stop accepting tether eventually your only option is to cash out to USD. USDT is basically being used as a trade coin, to avoid cashing out (maybe to avoid taxation) or to speculate on USD with the intent to eventually redeem for USD.
At some point someone will try to cash out on the tether. And that's when we'll find out if Bitfinex really has the USD reserves to back that as they say they have.
But it's getting harder and harder to believe that money really exists.
Tether keeps getting printed by the millions specially when bitcoin is on a downtrend (just today 200M was printed). For some reason I doubt someone wrote them a check for 200M USD today.
Also Bitfinex never completed or released audits they promised.
The more you dig the more it looks like Bitfinex is printing fake money to pump cryptocoins.
I keep trying to wrap my head around the economics of this and maybe give Tether the benefit of doubt. I think the most damning technical detail is that there is no client-side wallet. We can't trade Tether amongst ourselves or engage in any trades that Tether doesn't have at least indirect control of.
The most damning thing for me is that none of the many exchanges trading tethers allow you to trade them for US dollars. The only way to cash out of tether now is to buy cryptocoins and transfer them to a non-tether exchange.
Basically I think the tether are fraudulent. I do not have proof but they likely are. What is the best way to make money on them? Can one short tether?
They say it's their "institutional investors", they never release who these are (some people say it's Bitfinex themselves), they never release what bank they use or which country is the money deposited in.
It's rotten to the core... The consensus is that they either don't have that money at all (most likely scenario) or that if they do it's all dirty money and they are operating a money laundry scheme....
Unless they would prove to the public and/or competent regulatory authorities that they definitely have done that, they should be considered as "printing" this money.
Proven reserves count, claimed reserves don't. If USDT is "covered" by reserves that are claimed but not verified, then USDT is not covered.
Bitfinex buys cryptos with them on their own exchange. They get free cryptos, and everybody else gets monopoly money in exchange. Tether is such a scam it's unbelievable.
Bitfinex should then sell that crypto for real USD on other exchanges. They could make a killing and then somehow launder the money so that when the Tether scam is exposed, they are safe with real hard USDs.
That's what I'm saying. If they are actually able to always trade at very close to USD every day for over a year, does not that show stability in the coin? If it is, in fact, printed money, then it keeps working so far. Just like USD.
