Tether prints worth $400 Million- suspicions rises about relationship with Bitfinex
Jan 20, 2018 Posted / 1491 Views
Around $100mln worth of tethers were released in one day and everybody thought it to be a one-time thing. However, for next three days in a row, similar things followed sparking a new set of controversy as to what is happening. When all the cryptocurrency market was in a bloodbath, this currency was minimally affected making many bitcoin lovers want to ask why?
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One article in the DIgital Journal explains- tether (USDT) is pegged to the US dollar and also said to be supported by holdings of one US dollar for each tether its price was only modestly affected by the cryptocoin drippings. Bitcoin had a dramatic week and at its lowest point, the cryptocurrency dropped to $9,200 before scurrying back into the protection of five figures. Undeniably, many potentially traded for tethers to utilize as a steady store of value equivalent to the US dollar and the price of tether amplified a little.
The Bitcoiners currently have different reactions toward Tether, as they are not sure how to believe in this currency. It seems a fake fiat currency to some have been instrumental in raising the prices and if the supply were stopped now, the digital currency market would stoop further low. There are growing suspicions that tether is not backed by one US dollar for each tether. There are mounting suspicions about growing relationship with Bitfinex as the number of tethers in circulation has immeasurably increased with no fresh audits in print. While Bitfinex, which administers Tether, is in charge of issuing these dollar-pegged tokens, other exchanges like Kraken and Bittrex are also dependent on them.
The worth of new bitcoins created every day is roughly around $18 million and the miners sell off most of the coins to recover their cost of utility. If we evaluate the situation, it means that $18 million of new money is introduced in the market just to stabilize the current prices. And, now if we analyse that $400 million worth tethers were released into the market in just four days and yet the prices were dropping, this raises a question.
You might find believers publicizing that the issuance of tethers operates as a mechanism, which would maintain quantitative ease facilitating markets to tick over, even amidst unconstructive updates and regulatory dilemma. Even one commenter expressed, “Tethers aren’t really ‘backed’ by USD fiat, but rather by confidence in Bitfinex itself. Similarly, the USD isn’t ‘backed’ by hard assets, but rather confidence in the US economy. What happens to USD if the Fed shuts off the insane volume of their printing press?”
The Paradise papers leaked to the public in 2017 that Tether and Bitfinex are essentially sister companies with overlapping ownership. Disparate to some crypto-coins that already have huge amounts of coins issued or some like bitcoin that must be mined, tethers are simply issued by Tether Holdings just as a central bank would do. Nonetheless, the tethers are not supported by a government and are not a legal tender (contrary to the popular belief). However, it is assumed that each tether is backed by a US dollar.
Again the problem lies that there is no confirmation of this statement as there has been no published audit, other than a memo for internal use. The last audit of tether was in March 2017. Many critics thus believe that there is surely a discrepancy of nearly a million dollars between Tether's US dollar holdings and the number of tethers (USDT) in circulation.
A recent tweet by a critic remarks about this-
"Two billion Tethers, an increase of 1 Billion or so since December. Zero audits. Imagine how bad crypto-crash would have been without them doubling their counterfeiting."
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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