There is a lot of debate in the media around Tether, the transparency around this stablecoin, as well as its ability to influence market valuations. Many crypto critics believe USDT is actually a fiat currency in the world of cryptocurrencies and if that could be true, the massive bull run we’ve seen thus far may have been artificially inflated, on top of the massive institutional investments.
Is Tether really pegged to the USD?
As some of you already know, Tether is a stablecoin launched by Bitfinex several years ago, having a value pegged to the US dollar. Basically, people and companies sell dollars and buy USDT at a 1:1 ratio, meaning the exchange needs to hold dollar reserves equal to the amount of Tether in circulation.
However, because the mother company is headquartered in the British Virgin Islands and a reliable audit had yet to be released, there are concerns the amount of USDT far exceeds the dollar deposits. If true, this could have massive implications, because prices can be pumped up by flooding the market with USDT.
What can happen to BTC and altcoins if this is a pump-and-dump?
We don’t know if we’re in a new large pump-and-dump scheme, even though Bitcoin already dropped more than 20% from the highs. Such corrective moves are normal in the crypto market and there needs to be more aggressive follow-through selling to have a better confirmation for a large bear market.
Bitcoin and multiple large altcoins still hold a large share of the gains banked since mid-2020, so thus far, that shouldn’t be a concern for market participants. In case this is a new pump-and-dump, the ramifications will be profound and could lead to massive losses over the course of the next few months. Tether transactions currently account for more than $82 billion each day, twice than Bitcoin and almost three times the ETH volumes.
The bottom line
Since transparency is limited in terms of USDT, the debate remains open if it can be used as a price-manipulation tool. Traders and investors need to be prepared with proper hedging methods until the industry will continue to develop and more data will be available on the open market. The truth may be somewhere in between, given there is reliable data a lot of companies invested a lot of money into crypto last year. What do you think about all this Tether controversy? Can it be used to influence prices, given how big the crypto market currently is?
