Tether, a Crypto Supposedly Pegged to the US Dollar, Moves Into Crypto 4th Spot

Tether is extremely controversial. Many doubt if the money is really there. It hasn't been audited, but it's now #4

[Tether](https://en.wikipedia.org/wiki/Tether_(cryptocurrency%29) is a controversial cryptocurrency with tokens issued by Tether Limited, which claims that each token issued is backed by one United States dollar though they may not necessarily be redeemed through the Tether platform. Tether is called a stablecoin because it is designed to always be worth $1.00.

Tether Price

Tether is supposedly pegged to the US dollar. In practice, it seldom trades there.

Is the Money There?

Ticking Time Bomb

Consider a few snips from the March CoinDesk article Tether Might Still Be Crypto’s Ticking Time Bomb.

Trading data shows tether has generally hovered around $1, occasionally dipping as low as $0.80 or jumping as high as $1.10.

But the company’s online critics have long alleged that Tether, which has close ties to the crypto exchange Bitfinex, has been issuing more USDT than it has dollars in the bank, in order to drive up the price of bitcoin.

That’s a problem for investors because tether is rare among cryptocurrencies in that it carries counterparty risk – in other words, the possibility one party to a contract may not fulfill its end of the bargain. In Tether’s case, the “obligation” is redeeming USDT tokens for dollars.

An audit by the firm Friedman LLP was supposed to prove that USDT was fully backed. But recently Tether abruptly announced that its its relationship with Friedman had ended. It remains unclear who dumped whom and why.

Now, with no audit forthcoming, the doubts are as pervasive as ever. When contacted for this column, a spokesperson for Tether would say only, “Regarding the audit, we have no further comment.”

The Mystery Behind Tether, the Crypto World’s Digital Dollar

In August, the Wall Street Journal investigated the Mystery Behind Tether.

In June, Tether hired law firm Freeh Sporkin & Sullivan LLP, co-founded by former Federal Bureau of Investigation Director Louis J. Freeh, which issued a report stating that it believed tether had full dollar backing. But the report, critics noted, wasn’t an audit and the law firm wouldn’t identify the banks it contacted to verify the reserves. Eugene R. Sullivan, a senior partner in the law firm, declined to comment, saying the report speaks for itself.

At times this summer, tether has represented as much as 80% of bitcoin trading volume, according to research site CryptoCompare. When the year began, it accounted for about 10% of bitcoin trading volume.

Chainalysis also found tether trading is increasingly concentrated among smaller, more speculative digital currencies, a sign it is being used as a tool of “pump-and-dump” schemes, in which traders hype an asset, causing its price to rise, before dumping it for a profit.

Tether trading in newer tokens such as EOS and NEO has risen to about 20% of overall tether volume, according to the report.

The Securities and Exchange Commission recently singled out tether in its rejection of a proposed bitcoin-based ETF, citing studies that raised the possibility that the digital currency is being used to manipulate the bitcoin market.

Synopsis

A company that the SEC has its eyes on, that is likely at the core of crypto pump-and-dump schemes, a company that has not released an audit despite repeatedly saying that it would, is now the 4th largest cypto market cap, up from number 10.

William Entriken, my Ethereum developer contact offered these thoughts.

"Tether has no business address other than 'incorporated in Hong Kong'. It has no phone number. It supposedly holds approximately $2 billion in US Dollars in assets. People hope that these funds will be available if they want to cash out. But there is no contract that actually entitles you to take out your share of the $2 billion if everyone tried to do so at once."

About William Entriken

William Entriken is the lead author of the "token standard" for tracking physical assets using blockchain (ERC-721). He actively advises blockchain companies for projects he believes in and organizes Chain 76, a conference for applying blockchain to supply chain problems in the pharmaceutical industry.

Number Four

Tether is now the 4th leading crypto by market cap despite having no business address, no phone number, no audit of assets, etc., and not even a verifiable bank!

Tether achieved the 4th spot, not by growing assets, but rather because everything else plunged as much as 90%.

Future of Blockchain

For more discussion by William Entriken, and his thoughts on where it's all headed, please see Beyond Bitcoin and ICOs: The Future of Blockchain.

Mike "Mish" Shedlock

Comments (5)
No. 1-5
tz1
tz1

It is not that Tether moved up.

It is like the scene in a military comedy where they ask for volunteers to step forward, and all but one or two soldiers simultaneously step back.

Bitcoin has been dropping, so has Etherium, and the twin forks of BTC Cash and Satoshi's Vision have been crashing.

Tether can hold the peg in the same way the fractional reserve banks can - you only need enough to meet redemptions.

2banana
2banana

At least with the tulip bubble - there were actually some nice flowers grown/cross breeding...

gregggg
gregggg

So... it's counterfeit too?

Bam_Man
Bam_Man

Just another way for the greediest and dumbest of the sheep to gamble away their wealth.

Christian dk
Christian dk

funny, how people don't trust fiat money/governments etc, really trust just about every thing in Cyberspace.Yet they hate gold and silver in their hands, and instead buy fractional gold futures geared 100 times +. It is a mathematical fact that bit coin ledger keeps growing and will slow down/suffocate the entire "block chain" from with in. No address, no phone nr. should wake people up to shut of netflix for just 1 day and research the INTERNET on monetary history. I think they will wake up, when brexit lands hard, Us government shutdown and a default on LMBA cascading into everything and waking up after a bank holiday/xmas to blocked accounts needed to stabilize the gamblers on Wall street. Teether is basically counterfeiting us dollars, yet are not stopped, maybe because it is just another black ops/cy ops scam from the deep state to keep things going for a while longer.