On Tuesday evening, a Bloomberg news article sent a massive ripple through the crypto markets, pointing out that the company behind Tether is being subpoenaed and that the company in question is not co-operating.
One of the biggest questions in the markets right now is "whether there is enough US dollars to back up every Tether there is" and if not, what effects it has on the market.
Who is behind Tether? Many names behind Tether are the same as Bitfinex owners, so it's probably safe to say - same guys are running both.
What is Tether and why it was created
What is Tether? You have probably heard the term or noticed someone using the ticker USDT. USDT is the ticker/symbol for Tether.
While you can trade BTCUSD and many other cryptos against USD on most exchanges, you're not really exchanging against USD, you exchanging against USDT (Tether) and the price is based on the feed of exchanges, that actually support USD (Kraken and some others).
As there were no exchanges to offer exchange from cryptos to USD, Tether was created. Tether is pegged to US dollar value and when you want to sell your oh-so-volatile crypto holdings, you can exchange them to USDT, which, as being pegged to the real US dollar, is much less volatile than most cryptos.
This has many benefits, for example the transaction times - transferring USD might take hours or days, while transferring a cryptocoin Tether takes only minutes. No need for the exchanges to hold USD-denominated bank accounts and cutting down on transaction costs are some of the other benefits.
Via finder.com
What are the risks? Well - looking at the screenshot above, everything is hunky-dory. Unfortunately transparency is the thing it lacks. The peg will stand only as long as there is enough USD in the exchange to back every USDT there is. As there is more than 2 Billion USDT in circulation today, the question, whether Tether guys have those 2+ billion dollars in untouched reserves lying around somewhere in their bank accounts, gets asked louder and louder.
Now yesterday the Bloomberg news, that Bitfinex is subpoenaed shocked the markets, but later it turned out that the subpoena was 2 months old. Apparently Tether, since then, has terminated their relationship with their auditor and we still have no clarity.
There is a proof of funds document on Tether's homepage, dated September 28, 2017, but according to experts, this is worded in a way that doesn't prove the existence of the funds.
Proof of funds on Tether website
You can get a dedicated Tether wallet on their homepage, but just like most exchanges, they have currently locked down registrations for new users.
Homepage http://tether.to/
What can we do instead of using Tether? When/If the shit hits the fan, many market participants will be caught pants down. So if you have larger funds sitting on the markets, consider diversifying your holdings to Bitshares instrument BitUSD as an alternative. BitUSD is also pegged to $1 but every 1 BitUSd is backed by 2x BTS, Bitshares' own instrument and there is no centralized counterparty.
Grab a Bitshares account right here
I will take a look at one potential future stablecoin - DAI, in one of my next posts.
Sources used:
Business Insider
99bitcoins.com
BitUSD is for sure the best alternative, anyone can create them and we will all profit together, the more bitshares we "lock up" as a community... the more they will be worth once we pay back our interest free loan :)
the more i study about day trading in crypto the more i dont like usdt it has always seemed a bit sketchy to me. when the market was running toward 1 trillion cap i was thinking then what if everyone sees the drop coming and puts it in usdt their is no way they have that kind of cap to cover. i am new to this so maybe my thinking is flawed but how i seen it was market it 1trillion everyone braces for the pull back by converting to usdt then market drops to 500billion and everyone want to buy back in but usdt cant cover am i correct in thinking this
I have been in crypto for about a year now and don't trade at all (just HODL) and right now even during this dip I am currently at all time highs against not only fiat but also BTC/ETH as well. Moral of the story is if you pick platforms/projects with substance you don't need to switch your positions constantly to make some major gains... Doing this avoids having to deal with shady stuff like USDT, it avoid the constant tax ramifications for all the various transactions, it avoid having to leave any of your holdings on exchanges ready to be traded... basically it really doesn't have all the negatives of trading, but can get most of the same potential upside if done right but requires a lot of research into the coins/tokens you invest in so that you make the right long term choices at the right opportunity/entry-time. Just my 2 Satoshi's...
OR pick coins with long term substance and just HODL that shit like it's going out of style!
saya setuju dengan @budz82
Tether was sketchy from the start. One alternative might be gold backed cryptos, like Xaurum or the soon to be project of the Perth Mint.
Yeah but probably one of the reasons cryptos have enjoyed such a massive run is that they dont have to be backed by anything really :)
In my opinion there is no "not backed by anything". The current 'free-floating' cryptos are mostly backed by trust in the crypto-space in general, which is wildly volatile, as partially reflected by the market value of BTC (arguably). A crypto backed by a commodity like gold would provide an alternative to a "stable value" crypto that tether wanted to be.
This Tether garbage, whether just FUD (my personal opinion is that it is just that) or something more, has seen bitUSD pop up in a lot of articles as a safer alternative and I wonder how many others are feeling the same way right now. Bullish BTS?
I think the time has come for me to get into Bitshares properly. I have talked about it for so long, but have just avoided learning it. The time is now!
The moment you link a crypto to a dollar like this, the more you let in the corruption we are trying to get away from. Kind of poetic really
Quite the terrifying prospect. It seems that the market can't just have a break. If tether goes down ( hopefully not ). I wonder how this is gonna effect the market? I certainly don't like to see my coins going down in value more that it already have. Thanks for the heads up. Have a nice day.
As the crypto market gets ever bigger and bigger, the velocity of information influencing sentiment will roar in the same amount. Hopefully, we can take the hit from some of the sketchy business practices that got us here and build a solid foundation moving forward.
I understand tether, I did not understand BitUSD at all. How does it work?
I get it, i focused mainly on my thoughts about Tether and should've elaborated on bitUSD more. Well, that would have been a bit too long writeup for me, but if you have time, @xeroc has a nice post on bitUSD (ignore the nubits part)
https://steemit.com/bitshares/@xeroc/what-makes-the-bitusd-than-nubits
Thanks, will go have a look.
the action of Tether could really hurt the coin market at a time we are still trying to recover from the bitconnect shockwave, this is what makes government want to regulate the crypto markets cause of thing like this
You are right that this currency is not backed by actual funds. And some experts I've read and listened to say that more than 99% of crypto currencies are scams.
So this brings me to the question, is Steemit also a scam just waiting to be caught pants down?
Why would it be a scam?
Not sure if you have seen this. Check this Great Steemit Debate. What are your thoughts?
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