A look at the shady aspects of Tether, the stablecoin being probed by SDNY for over a year, widely used to buy BTC and other cryptocurrencies on many exchanges
This is the story of a Bitcoin trade — the most financially impactful trade I've ever made in my life.
Medium
Context & Ripple Effects
This piece lands early in what became a multi-year scrutiny arc around Tether. Doubts about the issuer were already public by late 2017, when the New York Times flagged Bitfinex's inadequate disclosures of its 2016 hack and the unclear ownership ties between the exchange and the stablecoin, while the SDNY probe had been running for over a year by publication.
Traders using Tether as the dominant on-ramp to buy BTC and other cryptocurrencies across many exchanges are holding counterparty risk in an asset whose reserves and organizational structure regulators themselves cannot verify.
Second-order effects
Exchanges whose liquidity depends on Tether pairs face forced contingency planning if the SDNY probe or a redemption run disrupts issuance — the dynamic behind the redemption runs Tether has already survived, per Forbes.
Third-order effects
If opaque reserve structures keep surviving crises, stablecoin risk migrates from issuers to the broader market until regulation forces disclosure standards — the crypto legitimacy gap made concrete in the system's de facto settlement layer.
The trend: Stablecoins are becoming crypto's core financial plumbing faster than regulators can verify what backs them, leaving Tether's opacity as the sector's standing systemic question.
This article is making the rounds. It's well-written and makes a good case. And I should say up front that I have zero info about whether Tether really has 100% backing of every USDT. However, a few thoughts. 🧵 https://crypto-anonymous-2021.medium.co m/ ...
We are aware of recent statements by Deltec Bank & Trust Limited about the purchase of digital tokens for and on behalf of their customers. @Tether_to does not outsource decisions about its reserves. Deltec does not purchase digital tokens for and on Tether's behalf.
Fifth, the amount of USDT printed by Tether is dwarfed by the amount of USD printed by the state. Even if USDT fails or is subject to haircut (eg 70 cents on the Tether), I think the abundance of printed USD will drive up the price of BTC in USD terms. https://www.bloomberg.com/.…
There are various reasons to believe tether has printed money out of thin air including predominantly a massive hack bitfinex had awhile back. The shady shit with the company is extensive. Here's a good article encompassing all the concerns. https://crypto-anonymous-2021.medium.c…
FWIW, my opinion: - We know USDT is not backed 100% by USD. It's also backed by a ~$250M loan to Bitfinex, and some BTC, and maybe other stuff. As balancesheet has grown & BTC mooned, unbacked USDT has shrunk proportionally & they have largely grown out of the problem ...
I am with @balajis here, when zooming out and looking at the fundamental infrastructure being created, we will all look back at some point and see this question as a blip. https://twitter.com/...
A Must Read on Why Tether is the Mother of All Crypto/ Bitcoin Scams/Manipulations: The Bit Short: Inside Crypto's Doomsday Machine https://crypto-anonymous-2021.medium.co m/ ...
This isn't just a compelling short thesis on Tether — that's a dog-bites-man story at this point. It's also a short thesis on Bitcoin. If Mt Gox wasn't big enough to take down Bitcoin then mayyyyybe Tether isn't either? But it's clearly a significant risk. https://crypto-anonymou…
7. Article points to change in issuance as evidence of fraud. USDT will mint new USDT periodically in order to maintain a float they can service creation requests from (e.g. on a weekend, when banks are closed). This is why they create round number blocks...
My guess is that Tether is NOT 100% backed 1:1. If Tether is found out and loses its peg, that's not good for Bitcoin, and we'll see a dip. However, I don't think it much matters at this point. If the Tether training wheels are taken off, we wobble a bit then keep on going. https…
- Bitfinex is absolutely shitting cash, as are all the exchanges. It's not a terrible credit, if you're a related party. So that loan shouldn't be marked at zero. Maybe 50-70% of face. ...
First, the crypto ecosystem has survived Silk Road, Mt Gox, the DAO hack, the Bitcoin civil war, the Chinese crypto crackdown of 2017, and countless BTC obituaries. From 2017: https://www.bbc.com/...
11. Looking at Bahamian FX reserves was a really nice idea, and would be very strong evidence of fuckery if it weren't for the fact that Deltec is not Bitfinex's sole banking partner. Deltec themselves might also (v likely) have depo accounts abroad, with a BNY Mellon or similar.
Some thoughts on this super inaccurate piece. tl;dr: this is not a defence of Tether/ iFinex, who I would like nothing more than to see disappear into irrelevance. However, most of the conclusions here show zero understanding of crypto market structure. https://crypto-anonymous-2…
@dfauchier If assets can include receivables, what's to stop them simply issuing loans to their sister companies that never have to be paid back, then using those loans as ‘assets’ and printing tether to match? Result: $1B becomes $2B instantly. https://twitter.com/...
9. As for USDT issuance and BTC correlating... of course they do. Given supply is largely fixed (a 'small float'), BTC rises and falls with demand. When people want to buy BTC using fiat, the default route is via a stablecoin. More demand → more issuance & higher BTC prices...
8. The recent rapid increase in USDT issuance since March and then since Oct are entirely explained by (1) post 03/20 there was a sustained mass move away from BitMEX (which margins their deriv contracts in BTC) towards Binance (which margins mostly in USDT)...