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Tethers story is fairly well known around the Crypto-sphere. What is less known, or in some cases just plain ignored, is the fragile state of Tethers current "stability". But no amount of will-full ignorance can protect Crypto from the clear and present danger Tether poses now.
What we can do is look at the facts as they stand, the actions and people involved that created this position and finally we can extrapolate and guesstimate the damage of a sudden and totally crash of Tether in order to shield ourselves where we can and warn those we know to do the same.
You might have been told that Tether is minting coins the same way the Fed is printing US dollars.
In a nutshell this is true and is the reason for Tethers un-stable current situation.
34billion in circulation, but now just backed by worthless and un-redeemable 'paper' debt.
Over 65%+ of Tethers reserves are made up of this 'paper iou debt'.
Tether Printer goes Brrrrrr........
It was not always so.
At inception 2014 Tether was backed 1 to 1 with every Tether coin minted having a USD $ held in reserve. While this balance of 1 for 1 was done Tether had stability and could assure its liquidity going so far as to say that Tethers would be burnt if needed to keep the amount in circulation the same as the amount in Reserve, new coins only being minted when actually USD $ were exchanged and placed in the Reserve.
The days of security and trust were to be short lived, it turned out.
The dubious relationship with Bitfinex and the mass movement of coins between Tether Ltd and Bitfinex has generated much speculation about possible market manipulation. Tether Ltd resistance to being audited was another loud warning siren.
Paradise papers revealed Bitfinex and Tether Ltd was incorporated (owned) by the same people.
It should be noted that while the calls for Tether Ltd to open its books and vaults to auditors in orders to show actual reserves held were growing, Tether in 2017 had quietly removed the '1 for 1' claim that was initially a cornerstone of it 'stability'.
Hmmm.
Does not bode well.
Its current hard line with difficult to withdraw process, high min amts and onerous KYC
- certainly has my spidey sense tingaling.
In april 2020 Tether were forced to admit they only held 75% in reserves of the total coin circulating.
But still no audit..
Just an attestation (a peek at a specific account balance on a set date) which is worthless as it ceases to have authenticity a day after its issued, but to date its being accepted by the finance world.
As of Jun 2021 no full audit had been done. Over 5yrs, no audit.
hmmm
Then the NY Attorney General stepped in, demanding large amounts of documents.
By dec 2020 a 900 million coverup had been identified with Bitfinex using these tether reserves to cover losses they has been covering up.
The AG will prosecute this case but the justice wheels are grinding slowly.
This is not FUD. I am very pro crypto in every way. But I'm not blind, and this issue puts ALL coins on thin ice.
Very disturbing facts.
While Tether is still functioning, we have time to limit damage if the crash does happen.
Good tokens BTC etc, will survive even a crisis like this.
But many tokens and ecosystems reliant on tether liquidity will get obliterated if the stable coin crashes.
So limiting your Tether exposure is probably a wise move, because if a crash happens, it will be without warning.
sourced Info: see below links
