What Happens If Tether Crashes ☠️💣🔥

5년 전

Steemit post: https://steemit.com/cryptocurrency/@davidhay/tether-usdt-cryptocurrency-risk-vs-reward

The crypto community has been concerned about Tether, so lets take a look at what happens if it crashes. In this video, we separate the FUD from legitimate concerns. I also explain what I'm personally doing to mitigate my own risk.

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@davidhay thanks for the opinion piece.


A good run up should either eliminate Tether, or prove that it is the real deal. I am ancxiously awaiting.

@davidhay. I’m curious but I found you on steemit from YouTube. I typically check out the people I follow here by looking at their blog, comments, followers and wallet. I’m very confused with your wallet. Are you letting you rewards pile up? Your transaction history is limited to say the least. You’re not declining payouts on your posts so it stands to reason you’d have some form of account balance or a transaction history showing you sending money out. Either way is fine by me, I’m just confused with how this is possible. As an investor in steem power, can you please help me understand why your account doesn’t look right. It’s the only account I’ve seen that doesn’t add up. If you’re letting rewards pile up, will you lose them at some point? Nothing against you, (I’ve learned a lot from your YT channel) just looking for some clarity. Thanks for your understanding! :-)


There's a difference between transaction history, curation rewards, and author rewards. Take a look at [Rewards] > [Author Rewards] to get a better idea. Looks like it's mostly in SBD, which would make sense considering he typical invests long-term.


Yes, I see he’s making some good rewards but he’s not collecting them. This is the confusing part. If you don’t want to collect, then why not decline payment and let the rewards go to someone else? I say hit the collect rewards button in your wallet! 💰💰💰


Hmm, you're right. New tokens are created at yearly inflation rate of 9.5% - maybe the return for claiming your rewards sometime in the future is greater than the amount you receive yearly in interest holding SP? I'm guessing at this point.


Personally I don't think Tether is much of a risk anymore than Bitconnect was. USDT has a similar market cap now to where BCC was before it blew up.

The difference between inflow and market cap and how it relates to Tethers.

One thing I often see on the crypto forums and sub reddits among newer investors is the confusing of market cap with the amount of money invested in crypto. It seems most people think that if the crypto market cap is $700 billion, that means that $700 billion has been invested in crypto, but this is incorrect, and in fact the real numbers are very far apart. So confusing these two figures really distorts your perception of the market and the impact of certain factors around the marketplace.

For example, let’s look at the Tether scam and how Tethers were used to artificially inflate the price of BTC. Most people look at the market cap and say Tethers are such a small percentage of that so it should have no real impact. However, when we look at net inflow, the actual money invested into crypto, the total is only $10 billion as we estimated earlier. This means that Tethers could be responsible for as much as 20% of the current market cap! The implications of this would be catastrophic for the overall markets if this were true.


Ari Paul on Twitter

1/ The big tether tweetstorm: I get asked about tether constantly by reporters, investors, fellow fund managers, etc. I've avoided saying anything direct in public because I have no clear information.

2/ First the caveats. I have no clear information. I bring nothing new to the table in the discussion, all I can provide is how I've tried to make sense of the info I have. I also have a conflict of interest in that BlockTower is investor/adviser to Trust Token, a competitor.

3/ What questions are we trying to answer: Is tether collateralized, and if so, is it fully backed by USD or by other assets? Is the printing of tether always in direct response to new USD inflows or is it a 'slush fund' of some sort?

4/ Has tether printing pushed up the price of Bitcoin or other assets? What are any risks of tether not covered by the above? And lastly, is tether a systemic risk to cryptocurrency markets or prices more broadly?

5/ What do we know? Very little for sure. We have very good reason to believe that Bitfinex (and the other exchanges that make use of USDT) have been insanely profitable over the past year. Ponzis don't usually occur in those scenarios.

6/ There is no available audit, and no way to confirm that assets backing it exist, and if they exist, that they are in a bank account that backs tether (as opposed to a more general purpose slush fund.)

7/ Mitigating this slightly is that some individuals report having seen tether representatives log in to bank web portals and show billions in USD in bank accounts.

8/ Detailed statistical analysis has been published showing that shortly after tether is printed, BTC tends to rise. This is used by some as evidence that tether is pushing up crypto prices. The simpler explanation is this:

9/ When people wire USD to various exchanges, they are credited with USDT, and they then purchase BTC and other cryptocurrencies. Thus the relationship of USDT printing followed by BTC rallies is not inherently suspicious in my eyes.

10/ The CFTC has subpoenaed Bitfinex and tether. This isn't evidence of anything in my eyes, since many large financial institutions are routinely subpoenaed. Simply having rumors published in the NYT about the situation could be enough to trigger an inquiry.

11/ I have heard from a half dozen individuals that have redeemed meaningful amounts of tether in the past couple months. Ponzis often allow some redemptions, so this is weak evidence in and of itself.

12/ The tiny number of market participants who have created or redeemed tether (or who have reported being unable to do so) seems strange at face value. I think it is because the redemption process is very unwieldy and involves creating managed accounts.

13/ We're half way through. To summarize the analysis so far: we don't know if tether is collateralized, but have little reason to suspect it's not: it's probably fully collateralized. The printing of tether is probably not artificially pushing up crypto prices.

14/ One source of concern is that the printing of tether seems unnatural - it occurs in very large discreet blocks. The simple explanation is that tether management (or bitfinex) is batching incoming USD to simplify things. We lack clarity on this process.

15/ What other concerns are there? Criminals use USD, EUR, prepaid debit cards, USDT, Bitcoin, and just about everything else to launder money. Most big banks have settled money laundering charges with the government.

16/ So it's likely that, like anything that can be used as money, USDT has been used for money laundering by someone at some point. When processing huge numbers of large monetary transfers, it's almost impossible to follow every regulation perfectly (as banks routinely learn).

17/ So one risk is that tether could be targeted by law enforcement or regulatory authorities for something related to fraud or money laundering, despite the best intentions of tether management.

18/ If only tether was targeted, the outcome might be confiscation of funds, legal or civil penalties. Fall-out may be very limited if, say, the penalty was a small fine, or larger if tether itself was shut down and assets seized or frozen.

19/ How might this become a systemic risk? The enforcement action could spread beyond tether to bitfinex, or possibly to other exchanges that list USDT on their platforms. I view the latter as very unlikely given the current regulatory climate.

20/ In conclusion, based on the limited information that I have, I think that: tether is probably fully collateralized by USD. Tether has probably not been artificially pushing up crypto prices. Tether probably does face a meaningful risk of adverse regulatory action. And -

21/ that regulatory action could be very minor (small fine), or more serious (shutting down of tether), with smaller risks of contagion to bitfinex broadly and other exchanges. I think the odds of tether meaningfully hurting the ecosystem is low.


AriDavidPaul Ari Paul tweeted @ 02 Feb 2018 - 23:39 UTC

1/ The big tether tweetstorm: I get asked about tether constantly by reporters, investors, fellow fund managers, e… twitter.com/i/web/status/9…

Disclaimer: I am just a bot trying to be helpful.

Great info, thanks for adding this.


+1. I just watched the video and was going to add this information! :) Thanks for adding! :)

The more we weed out the bad ones and make room for the stronger platforms and cryptos out there, the better our environment! Thanks David!

Tether needs to simply go away. Any entity that has over $2 billion in assets has ABSOLUTELY NOTHING to hide. I don't think they anticipated this would grow this large.


You'd be surprised re: "nothing to hide" about that large value of a company, but I agree, Tether just cannot leave a good impression right now if it's life depended on it....

Dave, just watched this on you-tube, decent "out of the box" thinking video, and will open some eyes to the unknowing about the practice of fractional reserve banking. Will give you all your credit due for this mate.

@davidhay, thanks for the video! I think it is ok if Tether is using a fractional reserve system, since its main purpose is to provide liquidity. But they will need to be transparent with it and should not claim that it is 100% backed. I think if it does collapse, not only their market cap will be wiped out, there is going to be a strong possibility of panic selling at exchanges that use USDT.

Personally, I try not to hold USDT as well on exchanges.

Thank you very much for your video. I agree with your reflexions. Tether together with Bitfinex definitely is a structural problem to the markets.

I'm a bit suss on tether... then again i'm a bit suss on crypto in general lately!

If tether collapse, certainly may cause the collapse of the virtual currency, at least for Chinese investors is that the price of the currency will be drastically revised, because rumours tether and exchange cooperation greatly too high a price for the COINS, it's really scary, I hope this is not true.

Thanks useful update

I have seen quite a few videos about Tether and I think this was a valid point of view. I think you are right about someone taking its spot if Tether collapse, but it would still do some damage to the whole market like people would be scared again. Thank you for the amazing content!!

Fractional reserve is the kind of thing that works until it doesn't, bank runs have happened before and will again. That being said, i agree that this is just a minor pebble in the road for cryptos.

Thanks for sharing...

This is a big risk to the whole ecosystem if we really think of what USDT does. I hope we get a definitive answer around USDT soon

Thanks for the great content! I am surprised that Tether hasn't come out denying allegations that they do not have the 1:1 ratio of fiat. That, to me, says that something internal is going on (likely theft of some sort).

Thanks! for being watchful and giving us infos and updates...

I'm just rely on those Steemians like you that has concern for what is happening...

Have na nice day!

Great job explaining this, I've been trying to get some help understanding this whole tether deal...Your right if it goes down something will replace it fast! Thanks.

Thanks for the videos David I always enjoy them. I've thought about using tether in the past for the fact there's not many safe places to take profit unless you go back to fiat.

A cryptocurrency whose idea is great but has disappointed us. They should either clean up the mess and be more open or should just get out

Without Tether and India FUD the scale of the current crypto dip would have been greatly diminished.

Great videos David Hay. Good Stuff!