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Can someone please explain to me how Tether is "injected" into Bitcoin? The entire argument seems to hinge on this but it is not (as far as I can see) explained

Can someone please explain to me how Tether is "injected" into Bitcoin? The entire argument seems to hinge on this but it is not (as far as I can see) explained. Are people accepting Tether in trade for BTC under the assumption that Tether will always be exchanged 1:1 for USD when this is not actually the case? EDIT: The answer seems to be yes Tether is 1-to-1 with "I O U $1" and enough people are accepting these IOUs in exchange for BTC that the market is moving because of this. That last part ("the market is moving because of this") seems so unbelievably stupid to me that I don't actually believe it.

danivaz 6y ago
Yes, if the company Thether has full control of its tokens they can print them and don't back them with anything (as the author says their reserves are not public)
raesene9 6y ago
Yep, AFAIK Tether is used by several exchanges that have problems getting direct banking relationships, as a on-ramp for funds. Tether originally promised that they were 1-2-1 backed with actual currency reserves, but had to abandon that statement when it became apparent they'd lost a load of money to Crypto Capital. Tether still claim to be 1-2-1 backed with "investments" but there has never been a completed 3rd party audit of that claim, so it literally has to be taken on trust.
- mmastrac 6y ago
  Minor point, but seeing "1-2-1" in your comment is strange to me. I've only ever seen it as "1:1" or "1-to-1".
  - panopticon 6y ago
    Thanks for pointing that out. I thought "1-2-1" was some jargon I was missing.
jcpham2 6y ago
Tether is the liquidity solution to the lank of United States Dollar withdrawal ie, a bank account. No bank, no problem! Tether on Wayne,Tether on Garth. But seriously, this old news. All of these stable coins and alt coins are just big pools of liquidity to swim in.
c-fe 6y ago
So far the explanation I’ve come across goes as follows: someone creates tether. They use this tether to buy bitcoin, which drives up the prices of bitcoin. The more they buy, the more value their purchased bitcoin has. The trick seems to be that generating this tether should decrease the value of tether, however since everyone thinks its a stablecoin that is backed by usd 1:1, its value remains the same. The worst is that the purchased bitcoin increases in value, so technically they could sell that bitcoin for usd, then use that usd to temporarily back their printed tether... (This is my understanding of the situation and from the reading the explanations of other people, but please take this with a grain of salt, im not sure if everything is true)
- shuntress 6y ago
  I've gathered basically this same explanation but it still makes no sense. Are people trading BTC for "Land for sale on the moon" too? This sounds like exchanges handing out IOUs instead of money when their patrons try to cash out.
  - 40four 6y ago
    It’s not individuals buying Tether from Bitfinex and then buying Bitcoin that causes this. It is Bitfinex as an organization ‘printing’ free money and using it to pump the market.
    - shuntress 6y ago
      >Bitfinex as an organization ‘printing’ free money and using it to pump the market. How?
      - c-fe 6y ago
        like I mentioned above, it is speculated that they are the ones who are printing the tether, then use that to buy bitcoin. They are then probably hoping that whoever receives tether for selling their bitcoin does not immediately want usd, but instead is happy with the tether as it is 'backed 1:1'. (Again, I have to stress that this is a theory i read somewhere on the internet, while lots of things add up, it may also be completely off.) They 'pump the market' because buying bitcoin increases its scarcity, thus raising the price.
tim333 6y ago
Yeah that sort of language annoys me and is often a sign the writer doesn't really understand what's going on. There are two possible phenomena: Legit: US$ are sent to tether, tethers are issued in exchange 1:1 and then used to buy bitcoin. This will tend to raise the price of bitcoin but only as long as people are sending real US$ Illegit: tether insiders just issue tethers without US$ backing, use them to buy bitcoin and probably try to sell the bitcoins at a profit becoming million/billionaires in the process. Sky's the limit really - you can issue crypto tokens in any amount though it could all collapse if people want to swap their tethers back to US$ and there aren't enough there. >They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump. Means use the tether to buy BTC etc in exchange for tethers which will tend to raise prices if there are more buyers than sellers and people seeing the price rising will cause them to buy more.
- Traster 6y ago
  The thing I don't understand about the "Illegit" method is that it relies on people accepting USDT for BTC and then not cashing them out to real USD. Because if the company is printing USDT it wouldn't have the cash to pay the people trying to cash out USDT. So to allow this to happen you would need a people to be holding a huge amount of USDT.
  - vegannet 6y ago
    You can’t redeem Tether — that’s a core part of the fraud, they have “banking issues” and had them for years. You can sell it on an exchange but the Tether organisation have prevented any redemption of USD from USDT for years. Anybody turning USDT into USD is selling their USDT.
    - tim333 6y ago
      Though when you sell your USDT for euro or whatever on Kraken say, the tether org must step in and buy to keep the price at US$1. So they effectively redem if not directly.
      - 6y ago
Triv888 6y ago
They can buy BTC with the newly minted coins.
- shuntress 6y ago
  This makes zero sense. Why not just use USD? The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?
  - deleted 6y ago
    [deleted]
  - nebulous1 6y ago
    Some exchanges have no traditional banking ties at all, so you have to send them some for of crypto in order to use them. It's also easier and quicker to move tether from one exchange to another than it is to receive a USD transfer and resend it to another, and that's ignoring regulatory issues.
    - shuntress 6y ago
      This does nothing to explain the purpose of Tether. If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
      - briatx 6y ago
        Maybe you do buy BTC on Exchange B. Then you transfer to Exchange A and sell, and what do you get when you sell? Tether. The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require. Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets. The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.

danivaz 6y ago

Yes, if the company Thether has full control of its tokens they can print them and don't back them with anything (as the author says their reserves are not public)

raesene9 6y ago

Yep, AFAIK Tether is used by several exchanges that have problems getting direct banking relationships, as a on-ramp for funds. Tether originally promised that they were 1-2-1 backed with actual currency reserves, but had to abandon that statement when it became apparent they'd lost a load of money to Crypto Capital. Tether still claim to be 1-2-1 backed with "investments" but there has never been a completed 3rd party audit of that claim, so it literally has to be taken on trust.

mmastrac 6y ago
Minor point, but seeing "1-2-1" in your comment is strange to me. I've only ever seen it as "1:1" or "1-to-1".
- panopticon 6y ago
  Thanks for pointing that out. I thought "1-2-1" was some jargon I was missing.

jcpham2 6y ago

Tether is the liquidity solution to the lank of United States Dollar withdrawal ie, a bank account. No bank, no problem! Tether on Wayne,Tether on Garth. But seriously, this old news. All of these stable coins and alt coins are just big pools of liquidity to swim in.

c-fe 6y ago

So far the explanation I’ve come across goes as follows: someone creates tether. They use this tether to buy bitcoin, which drives up the prices of bitcoin. The more they buy, the more value their purchased bitcoin has. The trick seems to be that generating this tether should decrease the value of tether, however since everyone thinks its a stablecoin that is backed by usd 1:1, its value remains the same. The worst is that the purchased bitcoin increases in value, so technically they could sell that bitcoin for usd, then use that usd to temporarily back their printed tether... (This is my understanding of the situation and from the reading the explanations of other people, but please take this with a grain of salt, im not sure if everything is true)

shuntress 6y ago
I've gathered basically this same explanation but it still makes no sense. Are people trading BTC for "Land for sale on the moon" too? This sounds like exchanges handing out IOUs instead of money when their patrons try to cash out.
- 40four 6y ago
  It’s not individuals buying Tether from Bitfinex and then buying Bitcoin that causes this. It is Bitfinex as an organization ‘printing’ free money and using it to pump the market.
  - shuntress 6y ago
    >Bitfinex as an organization ‘printing’ free money and using it to pump the market. How?
    - c-fe 6y ago
      like I mentioned above, it is speculated that they are the ones who are printing the tether, then use that to buy bitcoin. They are then probably hoping that whoever receives tether for selling their bitcoin does not immediately want usd, but instead is happy with the tether as it is 'backed 1:1'. (Again, I have to stress that this is a theory i read somewhere on the internet, while lots of things add up, it may also be completely off.) They 'pump the market' because buying bitcoin increases its scarcity, thus raising the price.

tim333 6y ago

Yeah that sort of language annoys me and is often a sign the writer doesn't really understand what's going on. There are two possible phenomena: Legit: US$ are sent to tether, tethers are issued in exchange 1:1 and then used to buy bitcoin. This will tend to raise the price of bitcoin but only as long as people are sending real US$ Illegit: tether insiders just issue tethers without US$ backing, use them to buy bitcoin and probably try to sell the bitcoins at a profit becoming million/billionaires in the process. Sky's the limit really - you can issue crypto tokens in any amount though it could all collapse if people want to swap their tethers back to US$ and there aren't enough there. >They then inject this into BTC, ETH, LTC, (and others) to cause prices to pump. Means use the tether to buy BTC etc in exchange for tethers which will tend to raise prices if there are more buyers than sellers and people seeing the price rising will cause them to buy more.

Traster 6y ago
The thing I don't understand about the "Illegit" method is that it relies on people accepting USDT for BTC and then not cashing them out to real USD. Because if the company is printing USDT it wouldn't have the cash to pay the people trying to cash out USDT. So to allow this to happen you would need a people to be holding a huge amount of USDT.
- vegannet 6y ago
  You can’t redeem Tether — that’s a core part of the fraud, they have “banking issues” and had them for years. You can sell it on an exchange but the Tether organisation have prevented any redemption of USD from USDT for years. Anybody turning USDT into USD is selling their USDT.
  - tim333 6y ago
    Though when you sell your USDT for euro or whatever on Kraken say, the tether org must step in and buy to keep the price at US$1. So they effectively redem if not directly.
    - 6y ago

Triv888 6y ago

They can buy BTC with the newly minted coins.

shuntress 6y ago
This makes zero sense. Why not just use USD? The entire point of Tether seems to be that it is always valued to be exactly 1:1 with USD. And that seems to somehow convince people that entities who cannot obtain a loan of USD can obtain a loan of Tether?
- deleted 6y ago
  [deleted]
- nebulous1 6y ago
  Some exchanges have no traditional banking ties at all, so you have to send them some for of crypto in order to use them. It's also easier and quicker to move tether from one exchange to another than it is to receive a USD transfer and resend it to another, and that's ignoring regulatory issues.
  - shuntress 6y ago
    This does nothing to explain the purpose of Tether. If Exchange A has no "traditional banking ties" but is where I want to trade so I need to buy crypto through Exchange B first in order to trade that crypto on Exchange A why would I buy Tether instead of BTC through Exchange B?
    - briatx 6y ago
      Maybe you do buy BTC on Exchange B. Then you transfer to Exchange A and sell, and what do you get when you sell? Tether. The point of Tether initially is regulatory arbitrage for Tether based exchanges. It gives them a fiat substitute without having regulatory baggage that trading in actual money would require. Tether then turned into a lifeline for a Bitfinex bailout and now acts as a (almost assuredly illicit) liquidity provider to Tether based markets. The only reason Tether is worth a dollar at this point is because the Tether denominated Exchanges say it is worth a dollar. They are really what backstop Tether now and are fully complicit.