I own a bunch of crypto and often people ask me questions.
I endlessly have to warn then to never hold tether. The problem is people don't understand what tether is, they assume it is just USD and use it because it is the most popular in many platforms or the outright default settings.
Tether crash will be very, very ugly when a lot of people leaving money on their "default" account realise the money all went poof.
Thank you for your perspective. Are there any U.S. services which default balances into Tether this way? Trying to get a sense for whether the shockwaves will be principally offshore or not.
IIRC, until recent demand triggered by use of tether in ethereum "defi" I believe the only US exchange which even had access to tether at all was Kraken and it didn't see much trade.
Basically the main reason for tether existing outside of acting as USD in bitfinex is for people to trade altcoins at sketchy offshore altcoin exchanges that have no access to actual USD by virtue of being sketchy and/or offshore. I believe there is essentially no reason for US residents to use these exchanges except for access to more obscure altcoins (as they require much smaller bribes to list things than larger exchanges).
It's extremely hard to estimate the aggregate impact because the very same exchanges that use tether as their primary/only form of "USD" are the ones which have volumes which are dubious (zero fee trading) to outright obviously fake (e.g. showing volume when the exchange is off the internet).
It's also hard to estimate the impact because its possible that as tether comes untethered people will trade out of it (e.g. into Bitcoin) thus driving _up_ the price of the things they're trading into.
If hypothetically Tether ever crashes, then a lot of big accounts will need to cover their losses. Meaning they will exchange USDT to BTC (also a big IF), and then will immediately sell those BTC, and primary points of sale would be USA exchanges specifically because they don't list USDT and are reputable. Tether flash crash will bring down all crypto prices a lot.
I endlessly have to warn then to never hold tether. The problem is people don't understand what tether is, they assume it is just USD and use it because it is the most popular in many platforms or the outright default settings.
Tether crash will be very, very ugly when a lot of people leaving money on their "default" account realise the money all went poof.