If that trust is ever lost, or there are questions about solvency, I'd expect the price of Tether to drop very quickly.
That person might be an insider (they know tether is legit, so any deviation from $1 is a moneymaking opportunity), or it could be an outsider who believes the hype.
This happens all the time in the stock market. Look at the SPY stock which tracks the S&P 500 index. At everypoint in time, anyone can compute exactly what value this stock should have. Any deviation from this consistent and known price point is immediately traded away by arbitrators.
Does Tether actually hold one real United States Dollar for every USDT they issue? If so, they sure haven't convincingly demonstrated it by continually lying about being regularly audited (they have never published a real audit) and refusing to allow anyone to redeem their USDT with Tether to get back a USD.
> Kraken is among very few markets worldwide that let investors trade U.S. dollars for Tether and vice versa.
Same goes for buying it. In my experience, it only rises above $1.03 when liquidity is low and the BTC/USDT price diverges from BTC/USD enough to make arbitrage possible.
This has not been the case for a long time.
Consider, why do some bonds trade at negative interest rates?
There is just not enough liquidity on Tether for it to follow the USD so closely. It has been very difficult to sell Tether for USD to Bitfinex AKA Tether over the past year. For awhile, any normal user had no option to withdraw USD from the platform at all. Their banks were completely shut off from the system.
You can argue there were people who were on the inside with Tether / Bitfinex and were able to sell Tether to them. I think there may have been some individuals / organizations that had the ability to send and receive fiat to Bitfinex, but I highly doubt they do enough volume to fully stabilize Tether 1:1 to the USD.
Look at Bitcoin over the past 1-2 years. It is completely common for it to trade at a 3-5% spread between USD exchanges. Don't get me started on exchanges in other fiat currencies. The spreads have been known to reach 10%+. These spreads can also be arbitraged by anybody, but they still appear. So I strongly doubt that Tether is a special case.
If Tether was trading on a real market, it would certainly not follow the price of USD 1:1.