Edit: the assumption seems to be that they are buying bitcoin and holding it, which would increase the bid and result in not being backed by USD. If they are not holding the bitcoin, then the buys and sells even out, and they are not adding to the bid, and they hold cash equivalent to USDT. I am quite interested to find out which it is.
This is irrelevant, though. You can commit fraud without losing any money - Martin Shkreli was famously convicted of fraud a few months ago even though the victims all came out ahead.
In the USDT -> BTC -> USD trip, there is a point, namely the BTC part, where more USDT has been issued than USD has been accepted. If they claim USDT is backed by USD, but there were points where that was not true, they have committed fraud, regardless of whether they were lucky enough to come out ahead.
So, whether their books line up is irrelevant to whether they committed fraud, perhaps, but VERY relevant to the price of bitcoin.
It's like having a printing press that creates legitimate money. No individual loses, but the prices of everything you can buy will artificially increase (or another way to look at that is the currency deflates) if you print enough of it.
I think the math is fairly straightforward. There is a USD/USDT driven cross. Creating and destroying USDT is straightforward there. There is also a BTC/USDT cross. That creates a drive for USDT. If that demand to sell BTC and buy USDT bids up USDT, then USDT would be created, and the BTC would convert back to USD. I agree that Tether is not forthcoming that this happens, but yes this is exactly what I would expect to happen. Its not mysterious sounding to me, or necessarily nefarious. I dont understand why Im beimg downvoted, its a discussion about generic market mechanics. We can leave bogeyman words out of it.
It's called "lying" and "fraud", your "but what if they did have the cash" is irrelevant, because they don't, and you're getting downvoted because you're aggressively refusing to address that point in favor of hypotheticals.
Could you hypothetically have a legitimate Tether token? Yeah, sure. Is the Tether Foundation on the up and up? Hell no.
There's a reason their auditor bailed before completing the audit.
EDIT: This apparently is no longer a site to ask questions or to challenge assumptions in good faith to get at an understanding. Its a religious conversation. One takes things on faith, or GTFO, apparently.
Going from USDT to USD in a roundabout way through BTC doesn't change anything if USDT themselves are bullshit.
RE your EDIT: it is, but deep downthread like this, it's always luck what you get. Also don't worry about the downvotes, everyone gets their share of them here :).
I dont know the answer to the above, but its critical for the future price of bitcoin and is really really important. Everyone just seems to assume they held the bitcoin, which is a crazy move. If they could have sold for USD, it makes sense to me they would have...thats why I think its an important question. It doesnt seem to interest anyone else tho, which is fine.
The comment above said liquidity dictates they could not have, that they must still be holding bitcoin. But I also say today, bitfinex'ed, the blogger that has been on this story, says they redeemed 330 million in past 24 hrs. Which is far above the 10% of 2 billion number he said of the entire crypto market is backed by USD. So to say the liquidity doesnt exist doesnt seem to make sense, there seem to be a lot of dollars into crypto. 1 million people with $1000 invested is a billion alone. That isnt crazy.
And again, you're missing the point that it doesn't seem like they are selling the USDT for anything, BTC or otherwise. They're just printing it and buying BTC with it.
EDIT:
That may seem like splitting hairs but the point is they aren't issuing them in exchange for value, they're just creating them and then using the value they supposedly have based to purchase BTC.
An analogy if you still don't understand the difference; it's the difference between buying a $50 Gift Certificate to a store with $50 USD or just printing one on my printer. One represents $50 USD that exist and were exchanged to buy it, and the other represents nothing.