What Would Happen If Tether Does Tank?

in LeoFinance2 months ago

Hey Jesstable coin users

If you've spent any amount of time in the crypto space and read the news around it there's always drama going on, it's like the Kardashians but for tech and financial nerds like myself. Some of it is gossip, or what we like to refer to as FUD and some of it is serious accusations that have wider ramifications.

One of the stories gripping the market right now is the trail of Tether, like in all cases, you are innocent until proven guilty, but in the court of public opinion, it doesn't often matter. Many have already made up their minds and begun to ditch Tether, while others either don't care because it works or has no idea what is going on.

Tether continues to work and has already hit a market cap of 25 billion, which is meant to be backed 1 to 1 with the US dollar. The bigger the market cap, the more questions arise around does Tether have the backing for all this capital or are they printing funny money.


What is Tether?

Tether or USDT was originally known as "Realcoin" was founded Brock Pierce in 2014 with the idea of giving traders an asset to quickly enter or leave a position without being subject to the volatility of the crypto market.

In the old days of crypto trading base currency pairs was a pain as you had to fund your wallet with wire transfers and to move to other exchanges with Bitcoin or ETH wasn't always practical.

The stable coin unlocked a range of new markets, and it been copied by several projects, some backed by reserves, like USDC and others backed by crypto-like MakerDAI.

A reserve backed stable coin was meant to be backed 1:1 by real USD, meaning the coin's price would be relatively stable. Around November 2018, the rumours of Tether not being backed 1:1 reached the former state attorney general of New York, Letitia James.

She initiated an investigation in Tether and Bitfinex, but the two companies filed an appeal resulting in the investigation's halt.

Then the approval of the New York Court on the 9th of July 2020 the case finally resumed against Tether and Bitfinex, and the saga caught heat on social media and in the crypto-sphere once again.

What does this case mean?

I am not going to go into all of the details because that's been explained in length on articles and podcasts all over the web. To give you a summary, there are claims that USDT is unbanked, worked with organisations suspected of money laundering and securities fraud and a range of other issues.

I am not here to comment on that; we'll have to wait on the verdict. I don't own any USDT, never have and probably never will, what I am on about is what this could mean for crypto if they are found guilty, since man as crypto holders we always have to prepare for the worst, never think an MT Gox size issue won't arise again.

What could happen if this doesn't fall in tethers favour?

Tether is currently available on ONMI chain, Ethereum, TRON and EOS and has base pairs with so many cryptos on so many exchanges. If they are found to be unbacked, this will cause quite a shit storm, in my opinion.

Naturally, people will want to unroll from their USDT holdings, and 23 billion isn't a small chunk of change. It's going to rip out trading pairs on exchanges; it will rip up DE-FI smart contracts and landing platforms using it to back contracts. It's going rip through CE-FI and derivative platforms that don't have access to bank accounts and rely on USDT to get hard currency into their ecosystems.

USDT is engrained in the ecosystem and for it to blow up will leave more than a 25 billion dollar hole in the market. It also gives governments a sweet piece of ammo to beat crypto and Bitcoin over the head, that we're a bunch of misfits printing our own money out of thin air and just the case to regulate even more.


Have your say

What do you good people of HIVE think?

So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."

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Posted Using LeoFinance Beta


It also gives governments a sweet piece of ammo to beat crypto and Bitcoin over the head, that we're a bunch of misfits printing our own money out of thin air and just the case to regulate even more.

You said it.. Looks like the stage is perfectly set for extra regulation. I think it would also affect the sentiment of people who haven't joined the crypto world yet and are now thinking to get on board - many of them thought of stablecoins as a "trustworthy" way in but might change their mind if this turns into a real incident.

Posted Using LeoFinance Beta

Yeah I think that if this does go south we will see a big knock on all Cryptos I think it would be the one thing to push BTC below 20k again if it were to happen now and I can’t say that would be too much of a bad thing I’d gladly pick up some cheap BTC if it were to happen

I’ve been around long enough to know crypto is super resilient and one failure just means faster innovation or room for others to grow

Posted using Dapplr

i hold some tether not because i belive it will somehow burst the 1-1 analogy but it's easier for me when i am trading. So i am using it when i some pump and dump buys etc etc because it gives me more options regarding the pairs as you said as well.

Now if somehow this will be deemed illegal or i don't know then all the exchanges will need to rework their pairs which isn't something easy

Posted Using LeoFinance Beta

I totally understand the attraction to USDT in terms of tech and being a multi-chain asset its awesome I can't fault it there, no stable coin is coming close. I can imagine the cock p it would be with exchanges having to decide to take the knock and back their pairing themselves and absorb the loss on USDT and for off-chain holders they last to sell will be in the shit

Tether will live a long life as it did thus far. I bet it's not fully baked by USD, and the company has addressed that saying that they have all sort of assets backing it, but if the SEC or other entities would have planned to destroy Tether they could have done that for sure. Luckily there are already plenty of stablecoins and more to come so we have alternatives, but I agree with you, if it collapses the impact will go beyond a $25 billion whole in the market cap.

Posted Using LeoFinance Beta

Even if it is backed it also depends on the quality of the backing, not many people want to use a coin backed by loans, stocks or bonds and would rather want a cash backed coin so even if it can produce a 100% "backing" once this investigation is over and its NOT all cash which could be the case, I think a lot of traders will be cautious and swap to other stable coins.

Tether is one of my most bought coins, it allows me move my crypto to fiat. So if the verdict doesn't go in their favor that bad, not for only me but for the crypto community given its ties to some of the big exchanges and cryptocurrencies

Posted Using LeoFinance Beta

It would surly rock the crypto market short term, but it will also set the new floor for what we accept when we use a backed stable coin so I don't see it as a total loss. Other stable coins will also start to take market share, which is all fine with me, we need more competition

If I'm not mistaken USDT is most widely used stablecoin if found guilty and printing more than the FED it will on big shit to deal with for those of us using it.

Which is your preferred Stablecoin?

Posted Using LeoFinance Beta

Yes, you are correct, it is the biggest stable coin by far, its not that they are printing a lot, thats fine, they need to provide the quality of their backing and where the capital is kept.

I prefer using MakerDAI/DAI which is created by securing ETH into a smart contract, kind of like HBD but it seems to be a lot more stable, USDC is also not a bad option since they pretty option about their reserves, but this is a backed coin issued by coinbase