from Hacker News

The Tether Conundrum: a look into a suspicious cryptocurrency

by bascule on 1/19/18, 5:35 PM with 70 comments

• by chollida1 on 1/19/18, 8:38 PM

  4 statements of fact that are not in dispute.

  1) Tether is supposed to be backed 1:1 by USD.

  2) There are now $1.7 Billion in tehters outstanding

  3) They were turned down by all reputable banks they approached.

  4) They have printed $450 million of tethers in the past week

  https://coinmarketcap.com/currencies/tether/historical-data/...

  Just ask yourself honestly..... do you really believe that there is a reputable bank anywhere in the world that would allow them to hold $1.7 Billion in an account and additionally make a deposit of $450 million in a single week?

  Ocams razor says this can't possibly be true.

• by ve55 on 1/19/18, 8:40 PM

  There's alternative explanations for a lot of the very strong accusations made against Tether.

  People always refer to Tether 'printing money out of thin air', but they never consider the prospect that investors are wiring money to exchanges, having Tether printed for their use, and then using that USDT to purchase cryptocurrencies.

  Bitfinex is huge. Bitfinex also has an OTC counter, which has been known to broker trades in excess of 10-50M USD. USDT is often the medium for which these trades are executed, so it makes sense that a lot of Tether needs to be printed when BTC is crashing, as that's when the larger players decide to buy in the most.

  There is a lack of transparency, and I wouldn't be surprised if things don't look perfect behind the scenes, but that doesn't mean the entire thing is a billion dollar scam conspiracy that the largest exchanges are all in on. Not all transparency is in the users' advantage in this area either. Do you know why Bitfinex doesn't tell you exactly where their servers and wallets are located? Probably because they hold over a billion USD in BTC in a single address.

  Keep in mind that the market clearly values Tether at around $1USD, almost always. That's a good sign that the market as a whole does not think Tether is going to suddenly collapse and take the entire ecosystem into it at any point in time.

  It's important to read criticism like this and consider it, but not believe it blindly. There are a lot of feasible middleground scenarios between "is a complete fraud and scam" and the exact opposite.

• by jonknee on 1/19/18, 8:22 PM

  This is a pretty good primer of what looks to be the most obvious scam in cryptocurrencies (of which there is plenty of competition!). It seems to be the glue holding the market together and has rapidly gained scale. When the scam crumbles it is going to be epic and tons of exchanges are going to go with it.

  In the meantime (if you like gambling), wait for another big down day and watch for Tether issues. The market will start to climb shortly afterwards. Just make sure you're playing with USD and not USDT!

• by granfalloon on 1/19/18, 8:55 PM

  Why did this get flagged as a dupe? This particular article hasn't been linked yet, and it seems to have more substance and analysis than the other two posts today.

• by hedonistbot on 1/19/18, 9:48 PM

  How about this theory: I can print USDT (by fiat) and buy BTC with it. Now I have a large amount of BTC and propped up price. Then CME starts trading BTC futures against real USD, coincidentally the trading starts at the very top of BTC price. Then I start selling both BTC for dollars AND BTC futures again for dollars (cash settled on expiry). I am making real USD and only started with USDT (supposedly backed by nothing, best case by my BTC wallet). Now that prices are 50% lower and I have tons of USD (or just print more USDT) I can start buying again keeping the price acceptable and ready for another pump before I start selling the next BTC futures contract.

  Is this possible. Am I missing something?

• by aqme28 on 1/19/18, 8:50 PM

  I'm a believer that Tether is incredibly sketchy, but there's one thing I don't quite understand.

  Can anyone explain why Tether's price never drops significantly below a dollar?

• by codespunky on 1/19/18, 8:41 PM

  Some relevant info for those of you looking into it. I heard that back in 2016 tether ran out of capital and basically the assets and IP sold to a bunch of folks under some pretty bad circumstances, and most of the core team and early investors got screwed. The buyers seemed pretty shifty.

• by mkirklions on 1/19/18, 8:09 PM

  I've seriously considered making a cryptocurrency backed by something.

  The problem is when it changes value and fees are taken. The math can get pretty insane when taxes between the crypto organization are taken and users realize their gains.

  I did some math, looked alright. But I'm worried about the unknowns, unexpected fees that MUST be taken by the users, and mostly taxes.

• by unknown_apostle on 1/19/18, 8:46 PM

  I'm very curious to understand this. Who is buying this? What is the real purpose? Who benefits in the end? Why is the daily volume 5 times market cap?

  I wonder if it would be possible just through statistical or network analysis of all tether transactions on omni layer, without knowing the full narrative of Tether, to get some idea of the game.

• by Hates_ on 1/20/18, 2:30 PM

  I'm having a really hard time trying to understand how Tether can be used to buy Bitcoin if they are being made of thin air? Does anyone have a link to a good explination of how this works?

• by blhack on 1/19/18, 8:20 PM

  This is the THIRD tether FUD article to make it to the front page today. What's the deal?