Why the Tether FUD doesn't make sense and we are getting manipulated
The Tether FUD is overblown and doesn't make much sense. The entire basis of the Tether FUD comes from a random anonymous Twitter account, Bitfinexed, that seemed to have a personal vendetta on Bitfinex. They original claimed Bitfinex or some entity on Bitfinex manipulated prices through spoofing. They called the entity "spoofy".
When that didn't catch on too well, Bitfinex pivoted and started focusing on Tether. The account claimed that Bitfinex (which essentially was the same company as Tether) didn't have the reserves to back the Tether they've issued. The Tether strategy worked really well, partly because Tether economics is complicated and partly because the idea of "printing money" has a huge stigma in society, and especially so in the cryptocurrency community.
But I don't believe the Tether FUD makes any sense at all. Here are some things to think about:
- Of all the places to commit fraud, why would Bitfinex commit fraud ON THE BLOCKCHAIN
- The only reason we're even talking about this is because Tether is a completely transparent system
- For Bitfinex to "print money" and do so so openly on the blockchain is just asking for unwanted scrutiny. If they were actually commiting fraud, it'd be incredibly stupid to do so.
- If Bitfinex wanted to commit fraud, they can simply manipulate their database if they wanted, why go to all the trouble and issue highly visible transactions on the blockchain?
- Tether is being used and held in several of the largest and top exchanges in the world, including Binance, Bittrex, OKex, Poloniex, and Kraken. Why would all these companies forsake the incredibly profitable business of facilitating crypto trading and participate in a fraud?
- The amount of Tether issued at a time (usually $100 million) is miniscule compared to daily Bitcoin volume alone. Daily Bitcoin volume is around $5 - 10 billion. $100 million is 1% of $10 billion. That's not going to move the market significantly. The total market cap of Tether is only $3.6 billion, less than daily Bitcoin volume alone.
- When the market falls, investors seek to hide in Tether, this naturally increases Tether's price. In order to keep Tether's peg to USDT, Bitfinex needs to print Tether to keep up with demand. When prices start rising, people leave Tether. Bitfinex keeps Tether's price stable by being on the other side of the trade and buying Tether.
The market is also being heavily manipulated by the media. Bloomberg released an article claiming that Tether/Bitfinex was subpoenaed "last week". Then after it has induced enough panic, the author makes a correction to the article, changing the subpoena date to EARLY DECEMBER. Why would Bitfinex continue to print Tether open after a subpoena 2 months ago? This is blatant and irresponsible market manipulation and no doubt hurts a lot of people as they panic sell near the bottom. Before edit vs after edit.
Finally, on the topic of Bitfinex not having the reserves to back Tether. I find it very skeptical that one of the largest and most liquid exchanges in the world doesn't have the cryptocurrency and fiat assets to back Tether. Not to mention the risk is spread out over other exchanges, since many large exchanges own and operate Tether markets. If I was a betting man, I wouldn't bet on Bitfinex not having enough assets to cover a mere $3 billion in Tether.