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The theory is that Bitfinex creates these out of thin air and buys other cryptos with them, thus raising the prices across the board (the prices quickly bleeds

The theory is that Bitfinex creates these out of thin air and buys other cryptos with them, thus raising the prices across the board (the prices quickly bleeds into all the other exchanges because arb). Crypto holders buy tethers when they want to short crypto against "USD" since tethers are supposedly equal to usd. Often times the entire market swings at once and lots of it dumps into usdt during downturns ("tether up!"), and back again into crypto on an upswing. Anyway, if you look at Bitfinex, you'll notice they have pairs like BTC/USD... except that USD is really USDT. It's basically counterfeit usd and it seems like all exchanges that can't trade actual usd use it Right now its almost like tether is like the central bank of crypto, constantly bailing out the market during downturns and pumping the price up. They've really upped their printing the past few days due to the massive downturn.

ghthor 9y ago
Alternatively, You could make the argument that what Bitfinex has done here is really smart. It's really expensive, engineering & risk wise, to setup payout links at consumer scale. There really is no difference between me holding Tether's and holding a USD balance on Coinbase. But in actuality Coinbase is in more danger here than Bitfinex. If all the Coinbase users cashed out, they'd be unable to payout, but Bitfinex is secure from this. This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.
- banderman 9y ago
  Those are extremely bold assertions with no evidence provided to back them up. How is Bitfinex secured from an inability to pay out? To my knowledge, they have never published an independent 3rd party audit showing that they actually have the reserves that would be required.

ghthor 9y ago

Alternatively, You could make the argument that what Bitfinex has done here is really smart. It's really expensive, engineering & risk wise, to setup payout links at consumer scale. There really is no difference between me holding Tether's and holding a USD balance on Coinbase. But in actuality Coinbase is in more danger here than Bitfinex. If all the Coinbase users cashed out, they'd be unable to payout, but Bitfinex is secure from this. This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.

banderman 9y ago
Those are extremely bold assertions with no evidence provided to back them up. How is Bitfinex secured from an inability to pay out? To my knowledge, they have never published an independent 3rd party audit showing that they actually have the reserves that would be required.