If you have ever dabbled in crypto a bit you probably heard about Tether (USDT). Unlike most other cryptocurrencies, USDT is something that is called a stable coin. This means that its value is always the same, no matter what. Tether is tied to, or “tethered” to the US dollar. This means that 1 USDT should always be worth $1.
This in theory sounds great and in reality, it has worked fine so far, but in light of some recent events, it might not be as great as it seemed at first. The issues with it go deep down to the core of crypto and it is a serious threat for the whole industry.
While Tether claims that it produces new coins depending on demand, there is some proof that they don’t do it that way, and that it’s all a ploy to artificially increase the price of BTC to astronomic heights.
Several US law enforcement agencies have expressed their concern with Tether and here are a couple of reasons why.
Tether always claimed that printing USDT won’t go rampant because they are limiting supply based on demand. They also claim that for every Tether they sell to people, they will have one US dollar in a bank account stashed away so that they have financial backing in reality.
But soon after launching their claims were put in question when the company denied multiple requests to release an audit of their finances. This all culminated with their lawyer admitting that only around 74% is backed by real USD.
Some further investigation provided evidence that USDT has been rampantly printing and selling coins to patch up their balance sheet and massively investing into Bitcoin on every market downturn, increasing its price artificially.
As said, Tether should only have a fixed amount of coins printed at any given time so that its value stays the same. What experts think is happening is that USDT is printing way more coins than they let on to. And then use that excess of coins to purchase various things on the market, effectively turning their coins into investments.
If they did this transparently, their coin would lose a lot of value and trust in it, so they are trying to hide it as best as they can. In short, for Tether this is like a free money printing machine that works against the interest of all of its backers, and the backers in crypto.
If Tether is proven to be a scam and gets regarded as not the stable and secure currency it portrays itself as it will surely collapse. Its collapse might be so big in the crypto industry that it takes down Bitcoin, Ethereum, and the rest with it. Causing massive damage to the value and worth of all of these crypto coins.