If you are one of the cryptocurrency investors who has been skeptical or critical of Tether (USDT) in the past, then this week you are probably getting more worried. The Tether coin has certainly been attracting a lot of bad attention lately, but there have been two major events in the past few days that are making us start to feel a little uneasy about the role this coin plays in the cryptocurrency marketplace.
Why is the Tether coin so scandalous?
Before we get into the recent news that have been shaking up the cryptocurrency community about Tether, let’s go through what this coin is all about – and why it attracts so much controversy. This currency has been accused of artificially supporting the entire crypto market, mostly Bitcoin (BTC) with a false 1-to-1 USD “tether” per coin.
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You see, each USDT is pegged to the dollar, and they are supposed to be generated independently of Bitcoin (BTC). Tether, which is actually owned by Bitfinex, has been accused of only printing its coins when BTC is falling, artificially propping up the entire crypto market.
Not only that, but this company has always claimed that it has real, physical money to back up its USDT tokens. Somewhere in a vault somewhere are billions of dollars, we have all been believing, and that has been what makes USDT feel like such a secure investment.
Here’s the problem with Tether (USDT) this week
Some prominent enthusiasts and analysts don’t think that this company is actually keeping its USD reserves in the way that it says it is – and even worse than that. This is what top crypto expert Tony Arcieri says about it:
I, and many others, suspect Tether is being used to effectively counterfeit hundreds of millions of dollars of perceived value, which are being immediately reinvested into Bitcoin to keep it from collapsing.
That’s a pretty big claim. But this company prints hundreds of millions of new USDT coins in just the span of a week sometimes – where is that value coming from?
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They haven’t actually released proof of where they are storing that money, or under whose name the USD inventory is registered. The company calls the claims that they don’t actually have that money “baseless.” Okay.
Oh, and they just bailed from an audit
Saturday, Tether and Bitfinex released a statement regarding the story that they had just parted ways with their auditor, Friedman LLP. And that was while we were already waiting for an audit, so what happened?
This is what Tether said about the situation:
“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”
Yeah, that’s believable. C’mon guys – your investors want and deserve to see a fully fleshed-out audit.
So, what happens if they don’t have the billions?
A lot of cryptocurrency experts think that this may cause the next cryptocurrency crash. The impact could be huge if Tether topples, especially for Bitcoin (BTC). What is bad for BTC is bad for the whole market. If Tether is found out to be overly inflated we could all lose a lot of money – across a great number of coins.
Honestly, Bitfinex and Tether have been exceptionally shady and irresponsible about this whole venture. And through this whole thing, they have been silent on Twitter.