Tether could bring Bitcoin to collapse

The creators of Tether are said to have more than two billion dollars in their bankrolls - as security for their digital currency. This reserve indirectly also keeps the value of Bitcoin stable. But there is considerable doubt that the money really exists.

In the highly volatile universe of cryptocurrencies, Tether should be a stability anchor. Because Tether is a digital currency, which, according to their publishers, is one-to-one covered by reserves in dollars and euros. The virtual coins are thus globally tradable and digitally storable like Bitcoin, Etherium & Co. The value of a tether is always one dollar. Finally, he can be redeemed at the same company - allegedly - for a dollar.

But rumors of tether are causing a panic among Bitcoin investors, which is already breaking the course of the largest and most important cryptocurrency by far. Among other things, the US star economist Nouriel Roubini assumes that the Bitcoin price could fall by 80 percent. Roubini's suspicion: Tether is nothing more than a billion-dollar fraud, which is mainly used to manipulate the Bitcoin price.

Roubini relies on several reports from analysts who doubt that hard currency is actually a pledge behind currently more than two billion tethers. Transactions on the crypto exchange Bitfinex, one of the world's leading trading platforms, suggests that newly created tethers were exchanged directly into Bitcoin in large quantities and have a significant impact on its price. Speculation was further fueled when it was announced on Tuesday that the US regulator was investigating CFTC against Bifinex. However, this is not unusual for players in the traditional financial world and it is not yet known what allegations the supervisors are exactly.

Through their obscure behavior, the tether makers confirm the suspicion rather than refute it. For a long time they kept secret that behind the digital currency are the same people as behind Bitfinex. There is no imprint on the official websites of Tether and the trading platform, neither business addresses nor names of responsible persons can be found. Among other things by the unveiling of the so-called Panama Papers came out that the leaders of Bitfinex and Tether is largely identical. There is hardly any verifiable information about the CEO of both companies, Jan Ludovicus van der Felde.

Bank connections cut

In addition, the makers of Tether, despite multiple announcements have so far provided no evidence that they are indeed sitting on billions of dollar reserves according to the issued tether coins. Critics demand that the mysterious company publish the result of current, independent audits. But most recently, Tether announced instead, have separated from his previous examiner.

Add to that - independently hardly verifiable - reports that tether owners have unsuccessfully tried to exchange their coins in US dollars and pay out. In the small print of the tether business conditions, it also said that customers had "no right" to redeem or exchange "tethers for money". This formulation has since been changed after fierce criticism. But even under the new conditions, many restrictions apply to the possible exchange. For example, only verified Tether customers can claim dollars for their coins. Most owners who have purchased their tethers in exchange for other digital currencies on various crypto exchanges have not achieved this status.

At present, tether owners on many crypto exchanges seem to find enough buyers willing to buy tethers against Bitcoin and currencies at the equivalent of one dollar. The system is based solely on the belief that the huge dollar reserves actually exist. Should that trust be shaken, not only will Tether collapse completely as a currency, but Bitcoin will also be badly affected. The drop in the lead cryptocurrency by a further ten percent since the beginning of this week, many observers especially due to the uncertainty of the allegations against Tether.