That middle step is multiplying the fiat going to BTC because Tether (probably) is only partially backed and (probably) buying crypto to make money. So your on

That middle step is multiplying the fiat going to BTC because Tether (probably) is only partially backed and (probably) buying crypto to make money. So your one dollar that goes to tether gets multiplied. Something like $1 -> 1 Tether -> $1 worth of bitcoin $1 -> $1 worth of bitcoin (as an "investment" for Tether to make money) $1 worth of bitcoin -> Collateral on loan to Tether -> $0.50 -> $0.50 worth of bitcoin We don't know exactly what Tether is doing with their money because they don't open their books. Safe to assume it's some sketchy stuff though.