5 ms·

I don't understand why Bitcoin will crash if Tether is indeed a scam. Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will w

I don't understand why Bitcoin will crash if Tether is indeed a scam. Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will want to quickly exchange it for something else... like Bitcoin or some other cryptocurrency. Shouldn't the converse be true: Bitcoin price starts to rise as more and more people start to realize Tether is worthless?

vkou 9y ago
There is speculation that bitcoin's price is propped up by Tether being printed, and sold for BTC.
phpnode 9y ago
If counterfeit Tether has been used to prop up the market the losses of the comparatively few people who actually hold Tether will be a drop in the ocean compared to the affect on BTC price. The bitcoin price is a function of demand, if Tether tuns out to be a scam, and has been used to artificially inflate that demand, then the price can only go down. There is also the problem that if Tether collapses, there will be a run on all exchanges that accept Tether, particularly Bitfinex, and the resulting panic will send BTC through the floor.
qeternity 9y ago
Yes, the price in USDT terms will rise as everyone holding USDT sells it and buys something else to transfer to another exchange. But that's only in USDT terms, not in USD terms. So let's say the BFX price doubles as people come to this realization. You pay $20k BTCUSDT and send to an exchange where it's still trading $10k (or rather, you just start marking it in BTCUSD terms). That's an instant 50% loss. And that's assuming that BTCUSD doesn't sell off as people get spooked.
- empath75 9y ago
  Bitfinex will likely be forced to sell bitcoin on USD markets to get dollars so they can buy tether to prop the price up. So prices on bitfinex will go up as prices elsewhere go down.
  - mentat 9y ago
    They can't though for compliance reasons, that's why they invented Tether.
bhouston 9y ago
> Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will want to quickly exchange it for something else... like Bitcoin or some other cryptocurrency. One could unwind USDT slowly. It needs to in the end be converted to USD to actually unwind. Does Tether.io have $2.4B ready to be cashed out? If you exchange USDT to another cryptocurrency someone is still holding USDT.

vkou 9y ago

There is speculation that bitcoin's price is propped up by Tether being printed, and sold for BTC.

phpnode 9y ago

If counterfeit Tether has been used to prop up the market the losses of the comparatively few people who actually hold Tether will be a drop in the ocean compared to the affect on BTC price. The bitcoin price is a function of demand, if Tether tuns out to be a scam, and has been used to artificially inflate that demand, then the price can only go down. There is also the problem that if Tether collapses, there will be a run on all exchanges that accept Tether, particularly Bitfinex, and the resulting panic will send BTC through the floor.

qeternity 9y ago

Yes, the price in USDT terms will rise as everyone holding USDT sells it and buys something else to transfer to another exchange. But that's only in USDT terms, not in USD terms. So let's say the BFX price doubles as people come to this realization. You pay $20k BTCUSDT and send to an exchange where it's still trading $10k (or rather, you just start marking it in BTCUSD terms). That's an instant 50% loss. And that's assuming that BTCUSD doesn't sell off as people get spooked.

empath75 9y ago
Bitfinex will likely be forced to sell bitcoin on USD markets to get dollars so they can buy tether to prop the price up. So prices on bitfinex will go up as prices elsewhere go down.
- mentat 9y ago
  They can't though for compliance reasons, that's why they invented Tether.

bhouston 9y ago

> Those who exchanged Bitcoin for Tether will be holding worthless Tether tokens and will want to quickly exchange it for something else... like Bitcoin or some other cryptocurrency. One could unwind USDT slowly. It needs to in the end be converted to USD to actually unwind. Does Tether.io have $2.4B ready to be cashed out? If you exchange USDT to another cryptocurrency someone is still holding USDT.