Concerns regarding Tether (USDT)

Tether, a 2014 rebranding of Realcoin, is a “stablecoin” on the Omni network (overlaid by the Bitcoin network) seeking to maintain a stable value against the US dollar, essentially taking USD deposits and exchanging them for equal amounts of USD, thus pricing digital assets without the need for USD denominated bank accounts. Attractive and convenient as this may sound, it has raised quite a few red flags throughout 2017, beginning with April when they revealed their severed banking relationships with Taiwan and the suspension of deposits/withdrawals for customers, following an explosion of Tethers on the market.

It’s noteworthy to also mention this part of their Terms & Conditions:

“However, 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. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.”

It seems highly unlikely that Tether is growing through any organic process, but rather printing Tethers in response to market conditions. A nearly 50% rise in Bitcoin’s price was observed in two hour periods, following arrivals of Tethers to Bitfinex (which also misleadingly lists USDT as USD). Tether denied accusations they were undercapitalized and there is an still incomplete, ongoing audit which should be released by the end of March. There’s much fear they won’t be able to prove solvency due to observing unusual activities in withdrawal/deposit statistics on Bitfinex which would arise suspicion and further scrutiny in any other accounting environment. If questionable activity is proven the forecasts are 30-80% reduction in BTC price and unknown domino/ripple effecs affecting the whole market.

In late September Tether produced documents showing USD balances backing an amount of ~440M USDT — a figure which had increased ten-fold in five months. The correlation of Tether issuance and Bitcoin price growth raises the question whether Tether is artificially pumping the price of Bitcoin. Based on pre-April trends the market price of BTC should be more in the neighborhood of $2000.

To add to this, Tether is registered on the British Virgin islands which are well known for this sort of fraud.

USDT, some have compared to scrip.

Meanwhile, and in contrast, hedge-fund sentiments seem to have suddenly shifted regarding BTC futures, Wall Street Journal Reports.

Martin Banov8 Posts

Martin previously studied Biology and Chemistry, but then ended up in the IT industry (things Infosec and cryptography related, often) and then a whole lot of other kinds of work across a number of different countries throughout the last decade (Czech, Israel, Taiwan..). As of the past 2 years or so have gotten increasingly obsessed with the cyclical/rhythmic behaviors of the markets, historical processes, and media studies/technology in a kind of Marshall McLuhan/Bruno Latour gist of looking at things.

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