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My understanding is that tether is printed (by Tether the company) and used to buy btc at just a couple exchanges (one is bitfinex, I forget the others) who are

My understanding is that tether is printed (by Tether the company) and used to buy btc at just a couple exchanges (one is bitfinex, I forget the others) who are in on it. This initial purchase drives btc-usdt up, arbitrage bots then buy btc-usd so that it matches btc-usdt. The media and people notice the price increase and jump into btc-usd because it's going up, narratives are created to justify why the price went up (paypal, fidelity, rich investor), btc-usd further increases, and now Tether (the company) sells its btc for dollars, so that they make a profit, and also to cover whomever else wants to redeem tether for usd, thus maintaining the illusion that tether is fully backed by dollars. Tether then decides to start the cycle again after a certain amount of time. So, if the above is true then yes this is a scam and there's gonna be a lot of bagholders if/when tether is kaput (they are under investigation by NY AG). Note, that since March 2020 Tether has printed $13 billion in tether. Is this really a result of organic growth/demand? (https://imgur.com/i78BTXg https://imgur.com/i78BTXg) Most of the tether is in storage at the exchanges: https://i.imgur.com/eIKDzJl.png https://i.imgur.com/eIKDzJl.png So it looks to me that they know it's worthless.

dannyw 6y ago
Bitfinex is one of the largest exchanges, and Tether is also used by many other exchanges like Binance. It's not implausible to think that there's $13B of inflows to BTC this year. This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges".
- wmf 6y ago
  You could have $13B of inflow to BTC with only $1B of Tethers because they should be reused. Who is holding them and why?
  - amycastor 6y ago
    Who is holding USDT? Likely traders who went onto Bitfinex (Tether's sister company) and sold their BTC there for what they thought was a good price. BTC, in this scenario, is a bridge to USD, because it can be moved to an OTC desk or a banked exchange and sold for cash.
    - wmf 6y ago
      So they're going to hold USDT until the crash, then re-buy BTC and move that out? Plausible, but it sure seems complicated.
- amycastor 6y ago
  If Tether were in fact receiving real USD to support the billions in USDT it keeps issuing, then why hasn't it handed over financial docs to NYAG, which is investigating it for fraud? Why has it not had a third-party audit? Why does it keep printing USDT in larger and larger numbers (a sign that the real $$ may be disappearing from the system)? Why don't we see a similar growth in other regulated stablecoins?
  - darawk 6y ago
    Because their banks keep shutting down their accounts. They've been playing whack-a-mole with regulators for a long time, and they probably view the NYAG's request as a backdoor way to find out where and how they're banking in order to shut them down.
    - 35fbe7d3d5b9 6y ago
      So nobody knows if Tether is backed because: * it isn't and Tether wants to keep people in the dark * it is, but a hammer is ready to fall that probably involves OFAC freezing funds Any other options I'm missing? Because neither of those look good.
      - darawk 6y ago
        People have been saying this for years now. Not only has nothing materialized, but the price has barely ever deviated from the 1:1 peg.
- arcticbull 6y ago
  Danny you have that 100% backwards. > This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges". This whole Tether speculation / hit piece is basically people thinking it's implausible that people are physically capable of redeeming Tether for USD, ever. Not a single audit has ever been conducted - except for one that was started and then the auditor literally quit half way through. If you begin there, the rest all falls into place. Come on, you've got a super shady organization based somewhere between a virtual office in Hong Kong and a corporate entity in the BVI. [0] Who pretended not to be involved with Bitfinex until the Paradise Papers showed it to have the same principals. [1] Who lost banking access repeatedly - being cut off by Wells, before issuing a letter that they were now banked in Nassau, Bahamas with Deltec that Deltec then denied ("The bank previously declined to confirm any relationship with Tether when reached"). [2] For about as long as I can remember they promised to release an audit, but of course, their most recent auditor literally walked out once they got a peek under the covers [3]. Then when Bitfinex (care of Panamanian company CryptoCapital) had $850M seized they just transferred it from whatever mattress is keeping Tether funds and left Tether with an IOU [4]. And are now the subject of 5 or 6 ongoing investigations and lawsuits, most significantly by SDNY [5]. If I didn't have sources for all this you'd think this was the most absurd conspiracy theory ever. It's all true, though, and what sane person could possibly believe $2B of fresh new money is making its way to their big ol' Bahamian mattress? Bitfinex is a massive fraud, and Tether is a massive fraud, it's plain to see for anyone willing to take a quick peek. [0] https://craft.co/tether-holdings https://craft.co/tether-holdings [1] https://www.icij.org/investigations/paradise-papers/paradise-papers-connection-sparks-massive-bitcoin-lawsuit/ https://www.icij.org/investigations/paradise-papers/paradise... [2] https://www.coindesk.com/tether-produces-letter-confirming-dollar-deposits-but-bank-hedges https://www.coindesk.com/tether-produces-letter-confirming-d... [3] https://news.bitcoin.com/tether-severs-ties-with-its-auditor-leaving-its-accounts-shrouded-in-mystery/ https://news.bitcoin.com/tether-severs-ties-with-its-auditor... [4] https://www.wsj.com/articles/bitfinex-used-tether-reserves-to-mask-missing-850-million-probe-finds-11556227031 https://www.wsj.com/articles/bitfinex-used-tether-reserves-t... [5] https://cointelegraph.com/news/new-york-court-rejects-bitfinex-appeal-over-850m-in-lost-funds https://cointelegraph.com/news/new-york-court-rejects-bitfin...
shermanmccoy 6y ago
Thanks, that is very enlightening. So Tether are all about maintaining the apparition of a 1:1 backing of USD to USDT. It's the lynchpin of the whole scam. Otherwise the step above you mention around the arbitrage bots buying btc-usd no longer occurs, and the game is ruined for them.
alethiophile 6y ago
If arbitrage bots try to arbitrage between BTC-USDT and BTC-USD markets, and the USDT markets are the ones pushing the price up, then it's the arbitrage bots that would end up holding huge amounts of USDT. So what are they doing with it? They should mostly be trying to maintain equal holdings to handle arbitrage, so they would have to sell it on USDT-USD markets (or redeem it from Tether, if that's actually possible). If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.
- shermanmccoy 6y ago
  I think the ponzi continues to work for now, the arbitrageurs can cash out, while the illusion that tethers are backed prevails. So indeed if no one does redeem these USDT as I keep reading could the arbitrageurs just slowly buy the cross to USD over a period of time after the trade? Alternatively USDT seems to be a proxy-currency to move across exchanges and networks, so it may indeed be transferred off to other pairs/tokens to fund alternative trades...
  - alethiophile 6y ago
    Arbitrage isn't magic. The only way arbitrage can push BTC-USD prices up to match BTC-USDT is if the arbitrageurs are selling a proportional amount of USDT for USD. Either they're redeeming them with Tether, which some claim isn't actually possible (?), or they're selling them on USDT-USD markets. Since those markets still trade around $1, it's safe to assume there is not some massive imbalance for selling USDT over buying it. Tether might be shady in all kinds of ways -- their operation has a lot of red flags to it. But it basically can't be responsible for massive BTC rises all on its own, because the rises happen even at pure USD markets, and that can only happen when a lot of real USD actually got injected.
    - shermanmccoy 6y ago
      >they're selling them on USDT-USD markets. My hypothesis is they get dripfed onto these markets so as not to spook them. Or just transferred off to collateralize other trades - hey it's free money to them, why not set up another trade elsewhere while they are in? It is not safe to assume anything based off market price action. You seem to be assuming there is some essential relationship between volume traded and price. These are market prices, they can be totally irrational, especially if there is some fake news (Tether is fully backed) behind them.

dannyw 6y ago

Bitfinex is one of the largest exchanges, and Tether is also used by many other exchanges like Binance. It's not implausible to think that there's $13B of inflows to BTC this year. This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges".

wmf 6y ago
You could have $13B of inflow to BTC with only $1B of Tethers because they should be reused. Who is holding them and why?
- amycastor 6y ago
  Who is holding USDT? Likely traders who went onto Bitfinex (Tether's sister company) and sold their BTC there for what they thought was a good price. BTC, in this scenario, is a bridge to USD, because it can be moved to an OTC desk or a banked exchange and sold for cash.
  - wmf 6y ago
    So they're going to hold USDT until the crash, then re-buy BTC and move that out? Plausible, but it sure seems complicated.
amycastor 6y ago
If Tether were in fact receiving real USD to support the billions in USDT it keeps issuing, then why hasn't it handed over financial docs to NYAG, which is investigating it for fraud? Why has it not had a third-party audit? Why does it keep printing USDT in larger and larger numbers (a sign that the real $$ may be disappearing from the system)? Why don't we see a similar growth in other regulated stablecoins?
- darawk 6y ago
  Because their banks keep shutting down their accounts. They've been playing whack-a-mole with regulators for a long time, and they probably view the NYAG's request as a backdoor way to find out where and how they're banking in order to shut them down.
  - 35fbe7d3d5b9 6y ago
    So nobody knows if Tether is backed because: * it isn't and Tether wants to keep people in the dark * it is, but a hammer is ready to fall that probably involves OFAC freezing funds Any other options I'm missing? Because neither of those look good.
    - darawk 6y ago
      People have been saying this for years now. Not only has nothing materialized, but the price has barely ever deviated from the 1:1 peg.
arcticbull 6y ago
Danny you have that 100% backwards. > This whole Tether speculation / hit piece is basically people thinking "It's implausible people want to buy bitcoin on the largest bitcoin exchanges". This whole Tether speculation / hit piece is basically people thinking it's implausible that people are physically capable of redeeming Tether for USD, ever. Not a single audit has ever been conducted - except for one that was started and then the auditor literally quit half way through. If you begin there, the rest all falls into place. Come on, you've got a super shady organization based somewhere between a virtual office in Hong Kong and a corporate entity in the BVI. [0] Who pretended not to be involved with Bitfinex until the Paradise Papers showed it to have the same principals. [1] Who lost banking access repeatedly - being cut off by Wells, before issuing a letter that they were now banked in Nassau, Bahamas with Deltec that Deltec then denied ("The bank previously declined to confirm any relationship with Tether when reached"). [2] For about as long as I can remember they promised to release an audit, but of course, their most recent auditor literally walked out once they got a peek under the covers [3]. Then when Bitfinex (care of Panamanian company CryptoCapital) had $850M seized they just transferred it from whatever mattress is keeping Tether funds and left Tether with an IOU [4]. And are now the subject of 5 or 6 ongoing investigations and lawsuits, most significantly by SDNY [5]. If I didn't have sources for all this you'd think this was the most absurd conspiracy theory ever. It's all true, though, and what sane person could possibly believe $2B of fresh new money is making its way to their big ol' Bahamian mattress? Bitfinex is a massive fraud, and Tether is a massive fraud, it's plain to see for anyone willing to take a quick peek. [0] https://craft.co/tether-holdings https://craft.co/tether-holdings [1] https://www.icij.org/investigations/paradise-papers/paradise-papers-connection-sparks-massive-bitcoin-lawsuit/ https://www.icij.org/investigations/paradise-papers/paradise... [2] https://www.coindesk.com/tether-produces-letter-confirming-dollar-deposits-but-bank-hedges https://www.coindesk.com/tether-produces-letter-confirming-d... [3] https://news.bitcoin.com/tether-severs-ties-with-its-auditor-leaving-its-accounts-shrouded-in-mystery/ https://news.bitcoin.com/tether-severs-ties-with-its-auditor... [4] https://www.wsj.com/articles/bitfinex-used-tether-reserves-to-mask-missing-850-million-probe-finds-11556227031 https://www.wsj.com/articles/bitfinex-used-tether-reserves-t... [5] https://cointelegraph.com/news/new-york-court-rejects-bitfinex-appeal-over-850m-in-lost-funds https://cointelegraph.com/news/new-york-court-rejects-bitfin...

shermanmccoy 6y ago

Thanks, that is very enlightening. So Tether are all about maintaining the apparition of a 1:1 backing of USD to USDT. It's the lynchpin of the whole scam. Otherwise the step above you mention around the arbitrage bots buying btc-usd no longer occurs, and the game is ruined for them.

alethiophile 6y ago

If arbitrage bots try to arbitrage between BTC-USDT and BTC-USD markets, and the USDT markets are the ones pushing the price up, then it's the arbitrage bots that would end up holding huge amounts of USDT. So what are they doing with it? They should mostly be trying to maintain equal holdings to handle arbitrage, so they would have to sell it on USDT-USD markets (or redeem it from Tether, if that's actually possible). If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.

shermanmccoy 6y ago
I think the ponzi continues to work for now, the arbitrageurs can cash out, while the illusion that tethers are backed prevails. So indeed if no one does redeem these USDT as I keep reading could the arbitrageurs just slowly buy the cross to USD over a period of time after the trade? Alternatively USDT seems to be a proxy-currency to move across exchanges and networks, so it may indeed be transferred off to other pairs/tokens to fund alternative trades...
- alethiophile 6y ago
  Arbitrage isn't magic. The only way arbitrage can push BTC-USD prices up to match BTC-USDT is if the arbitrageurs are selling a proportional amount of USDT for USD. Either they're redeeming them with Tether, which some claim isn't actually possible (?), or they're selling them on USDT-USD markets. Since those markets still trade around $1, it's safe to assume there is not some massive imbalance for selling USDT over buying it. Tether might be shady in all kinds of ways -- their operation has a lot of red flags to it. But it basically can't be responsible for massive BTC rises all on its own, because the rises happen even at pure USD markets, and that can only happen when a lot of real USD actually got injected.
  - shermanmccoy 6y ago
    >they're selling them on USDT-USD markets. My hypothesis is they get dripfed onto these markets so as not to spook them. Or just transferred off to collateralize other trades - hey it's free money to them, why not set up another trade elsewhere while they are in? It is not safe to assume anything based off market price action. You seem to be assuming there is some essential relationship between volume traded and price. These are market prices, they can be totally irrational, especially if there is some fake news (Tether is fully backed) behind them.