Tether's "market price" is manipulated. People cannot exchange tether for dollars without jumping to another exchange.
There are billions of tethers in circulation.
For the average user, there is no direct way to cash out your Tether for 1:1 USD. I imagine that big clients do have the ability to trade Tether for USD. Because of that, they will buy up discounted Tethers on exchanges and redeem them to Tether Company for 1 USD each.
HOWEVER, this clearly relies on Tether Company providing that exchange. If Tether Company STOPS allowing the big guys to do this arbitrage, then suddenly the house of cards would collapse very quickly. The longer Tether stays below 1 USD, the more pressure is being put on their company by arbitrageurs.
Furthermore, we know that Tether has made a loan to Bitfinex for $900M. The Tether Company therefore only has cash on hand for about 2/3 of the outstanding Tether, assuming they had 1:1 reserves prior to lending cash to Bitfinex.
Even without stat, all you have to do is go USDT <> USD <> BTC or similar and take the arb across multiple pairs. It's a game of musical chairs until someone with enough cash decides to break the peg
- buy BTC with your USD on Coinbase Pro.
- sell your BTC into USDT on Binance.
- Sell your USDT back into USD on Kraken.
It really doesn't matter if the last step is 1:1 or another rate. If the price between Coinbase and Binance is big enough you can profitably arb this.
So it would appear Tether has lost at least 30% of its assets (cash converted to Crypto Capital debt, which = toilet paper). I am shocked that people aren't taking this more seriously.