Contrarian opinion: I think printing Tethers out of nothing is exactly the right policy right now. The current price of USDT is $1.01 on coinmarketcap. In the

Contrarian opinion: I think printing Tethers out of nothing is exactly the right policy right now. The current price of USDT is $1.01 on coinmarketcap. In the past few days it went as high as $1.03. This is happening because people are using USDT as a safe haven from broadly falling crypto prices increasing demand. However, USDT is supposed to be pegged at a fixed $1 per tether. So if people are willing to sell their bitcoins to Bitfinex at >$1 then Bitfinex should take the deal. If the demand for tether goes away and the price drops <$1/tether, Bitfinex can use all the bitcoin they just acquired from their earlier sale of tether to start buying back tether. In the process of doing this, Bitfinex 1) stabilizes the price of tether at $1 and 2) makes a small arbitrage profit. This arbitrage profit isn't without risk, of course. Ultimately this system works as long as the downside variance on tether isn't much larger than the upside variance. i.e., if tether goes as high as $1.03, it shouldn't go below $0.97. However, if the market loses confidence in tether broadly then everyone might try to dump their tethers at once and Bitfinex will run out of reserve bitcoin/usd to buy back tether. Side note: This is exactly what happened to the British treasury when Soros did his famous run. Soros kept selling Pounds on the market and eventually the British treasury ran out of USD to buy the pounds and the price plummeted. The reason he was able to sell so many Pounds is because he was shorting them (borrowing from others and selling back on the market). So Bitfinex is in fact taking on some risk to run this strategy, but as long as Tethers aren't easily shortable, and the market doesn't completely lose confidence, there shouldn't be too big an issue. All of this is irrelevant if Tether is committing fraud. They could easily be selling Tethers and not holding the Bitcoin they gain in reserve, rather spending it on yachts. If that's happening the price of Tether is bound to fall <$1 and with no one buying them back, the whole thing will crash. But I don't think the blog presents evidence that this is happening.