(1/2) This will be a two part post. First will explain the Current Situation of Tether and market while the Second one will explain the Downsides of Tether and its Future Impact on the Crypto Market.
Impending Tether Collapse Rumors are not new if you have been in the crypto space for a while. But, today was a little different. The crypto market and Bitcoin investors went in for a shock today, as Tether, a self-proclaimed “stablecoin,” fell 6% below its U.S. Dollar (USD) peg touching its ATL at $0.86 while shooting its competitor coins above $1.10. A USD-peg stable-coin touching that mark was both funny and disturbing situation.
These are the few things that escalated the situation further:
- FUD - Tether bank insolvency (https://www.bitcoinforbeginners.io/cryptocurrency-news/usd-tether-noble-bank-insolvency-news/).
- FUD - Bitfinex stopping USD deposits and withdrawals. Same goes for Kucoin USDT pair.
- Fake Rumour - Binance delisting USDT. (https://ethereumworldnews.com/reports-of-binance-delisting-tether-usdt-turns-out-to-be-fake-news/)
- Bandwagon Effect - A Belief that everybody thought all USDT pairs are pumping because everyone wants to get out of USDT. Thus, I should also do the same.
FUD related to Bitfinex and Kucoin got cleared after Bitfinex released the statement that they will open the deposits in next 24HRS (http://twitter.com/bitfinex/status/1051750465782906880
), or in case of Kucoin, already opened (https://news.kucoin.com/en/usdt-deposits-and-withdrawals-are-now-enabled-2/
). That Binance delisting FUD was fake though. We even saw someone circulating fake Binance USDT delisting notice. And last but not the least the typical Bandwagon effect we can always see in trading markets.
Thus, Against the background of Tether fall, BTC and ETH were growing. But there is a significant difference in the rates between USD and USDT. At one point, the price spread between the value of Ethereum on Bitfinex and Coinbase surpassed 10%, which is nearly unheard of in the nascent crypto market. While USDT is one of the most liquid crypto assets in this market, the order books of the BTC/USDT trading pair couldn’t handle this unprecedented liquidation, resulting in Bitcoin’s unrelenting move above $7,500 on Tether-enabled exchanges. However, it is unlikely that this irrational price action will be sustained for an extended period of time. All you need to do, is the math behind 'premium' value of USDT supporting exchanges, against ones with real US dollars. (2/2) The UnTethering: Tether and its Impact on Future Crypto Market Collapse.
Now, even though we have cleared the FUD regarding Tether, we don't mean that Tether won't eventually collapse. There is a strong likelihood of that happening. You can count the situation today as a cautionary bell for future Tether implosions. We highly recommend you use other stablecoins as much as possible for stability requirements. The next scandal is brewing as we speak. The only thing we don't know is when. So, Better safe than sorry. Here is a simple explanation for the same. Note: The idea behind this post isn't to create FUD, but to create awareness among the masses. Q. If tether's value goes to zero, but I have alt coins on binance, how would I lose some of my alt coins?
A - The idea is that on first sight Tether doesn't seem like a very big coin. Sure, it's top 8, but there are bigger coins on Binance. However with a lot of coins their market cap on paper is not their "real" market cap, it's not a real value invested in those coins, so a $1 billion market cap coin might only have a $5 million of value that was actually invested in it. So if somebody sold $5 million worth of that coin, it would basically drop to zero and have no market cap (some people would obviously buy it up at that point just due to the opportunity but that's a different thing).
So you have hundreds of coins on Binance, which combined on paper have a market cap of hundreds of billions of dollars, but the real value in them is maybe 5% of that. But with Tether every 1 USDT is actually 1 real dollar of value invested
(obviously this is debatable, but that's the premise of tether). So you have $2.4 BILLION of REAL value against maybe $10 billion of real value with other coins (if we exclude BTC). So if Tether collapses and goes to zero, Binance suddenly doesn't have the money that it "technically" owes its users, because Tether is never supposed to be under $1, it's not treated as a traditional coin where if it goes down it's your fault.
Meaning, If tether is trading at 97.5, it means that people think there is a 2,5% chance they will not be able pay you the $1 when you ask. That’s the risk you take with your strategy. So, Binance will likely halt all trading and moving of tether, and that will create bunch other problems. There will be massive outrage and there will be thousands of lawsuits. Simply put Binance will suddenly find itself in a position where they owe people $10 billion dollars, but they only hold coins worth $8 billion dollars, so they might be forced (either willingly or by law) to pay up and bail out the tether holders.
But that might be debatable based on whatever the courts would decide at that point. Not to mention Binance (and just about every exchange out there) uses Tether for trading with other exchanges, and that could create a range of other issues.
Tether claims that every Tether they print is backed by real US Dollar, but although their website claims that they are subject to frequent professional audit, this has never happened. There has been one incomplete audit (and some conflict of interest) back in June. So basically nobody knows if Tether is backed or if they are printing it from thin air. Thus, If tether collapses the entire market will break for YEARS.
It might even be worse than Mt. Gox. Not to mention basically every exchange out there uses Tether and many people that have funds on these exchanges may lose portions of their funds or even all of it, even if they never touched tether. Thus, We need better stable coins, we can't rely upon a really shady currency propping up the market. There's starting to come better alternatives like Gemini, DAI and Paxos but they don't have enough circulation or volume to cater the needs of the crypto market. So, we need to carefully revisit our strategy and deliberate what's good of us in a long run.
Content by (@) whatsoncrypto (What's On Crypto) and Cointify
A years-old $75 million lawsuit against Mt Gox by US company CoinLab is delaying payouts to creditors, the Japanese bankruptcy trustee revealed today. Jed McCaleb, the founder of Mt. Gox, faces a lawsuit over his handling of the now-defunct bitcoin exchange.. The two plaintiffs, former Mt. Gox traders Joseph Jones and Peter Steinmetz, filed a complaint with a court in California on May 19, accusing McCaleb of “fraudulent” and “negligent” misrepresentation of the exchange, which partially led to their loss of bitcoin when Mt. Gox ... Mark Karpeles, the chief executive of now-defunct cryptocurrency exchange Mt. Gox, is fighting back against his accusers, in what is a dew development on one of the most dragged out legal battles ... A civil lawsuit has been filed against the firm HDR Global Trading Limited, the parent company of the exchange Bitmex, alongside the three cofounders Arthur Hayes, Ben Delo, and Samuel Reed ... Mark Karpeles, the disgraced former head of Mt. Gox, has called on a U.S. district court to dismiss the last remaining fraud charge against him, asserting that the plaintiff has changed the facts underlying his claim. This is the latest move in the long legal battle over the mismanagement and failure of Bitcoin’s first major exchange. Mt.Gox, once the biggest crypto exchange globally, came crashing down in 2014 after suffering a massive hack. Following the incident, a class action lawsuit was initiated, accusing the company of mismanaging clients’ funds, while victims are yet to get back their funds. Ex-Bitcoin Exchange CEO Wants Fraud Charges Dismissed
Well, I don't want to say it but I was right. The Mt. Gox trustee is selling BTC again on exchanges. No, it isn't speculation- I confirmed it through wallet address transfers of the Bitcoin we ... This is my response to all the cryptocurrency FUD that has been coming out the last few days. Take everything you see online with a level head and dont let your emotions guide your crypto trading ... Hi Friends I Show You in This Video Some Important Updates About SiaCoin, TokenPay, LiteCoin, MT Gox, BuyBitcoin Exchange, Binance Exchange, Wazirx Exchange,... #Bitcoin ETF leaked documents, Bakkt SCAM Website, “fake death mafia,” Mt. Gox Coin, Coinbase Earn: $BAT, $BEAM x $LTC Foundation, $UFR dApp live, $BLOCK man... The SEC came out with a very negative tone on digital asset exchanges, Binance dealt with a phishing/hack/pumping issue and the Mount Gox trustees announced a major Bitcoin liquidation. SEC ... Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collecti... The crypto market went tumbling downwards today as a load of bad news came along- Binance hack rumor, Mt Gox Trustee Sells off all Bitcoin, SEC wants to regulate all crypto exchanges, and Bittrex ...