I've been doing some small-scale arbitrage trading in Uniswap and other Defi exchanges. As part of that I hold a fair bit of Tether, USDC and other stable coins.

The reason being is that I want to keep my capital pegged to the dollar, but need something that's native to the Ethereum blockchain. If there's a trading opportunity, I need the ability to swap Tether for [X] token in a single blockchain transaction. There's no time to route actual dollar deposits from a real bank.

Considering that there's something like $13 billion locked in all the various defi protocols, that's a lot of potential demand for stable coins.

It's likely that most/all of that stablecoin was amassed by selling other crypto, which is zero sum. It's extremely unlikely that people took fiat currencies, and bought USDT directly from Tether, which is what they claim is happening.

No sane person would hold USDT over USD.

Unfortunately there's this story https://www.theblockcrypto.com/post/48857/former-head-of-cir... which says that legit investors wanted to buy on Bitfinex instead of a legit exchange so they had to first buy Tethers.

Totally irrelevant, the man's got a vested interest. Believe nothing short of an independent third-party audit from an auditor who doesn't walk out half way through like the last one did.

The reason I say this should be pretty obvious to anyone whose familiar with the inner working of a Ponzi scheme or other similar investment scam.

Bitfinex and Tether wanted to legitimize the use of Tethers, so they found one guy, Matuszewski, they knew was in a position to help them do so. They actually set aside a relatively tiny slice of capital (a few million out of 3 billion) and treated him the way they should be treating all customers but weren't. Then they let him loose on the talk circuits to tell the world of the sheer upstanding nature and legitimacy of Tether.

This is exactly the kind of stuff Madoff did.

Audit, or gtfo. (To Tether, Inc. not you of course)

One large use for Tether is transferring value either for abitrage or to buy assets on another exchange not available on your current exchange. Sending real USD via the banking system could take weeks whereas sending Tether will take minutes. Also if Tether is trading below $1, Tether (the company) could buy them back and burn them for profit, assuming of course that each token is backed by one real USD.

But they are not backed by real USD, and Tether themselves have admitted as much: their FAQ now states simply that it's backed up by "Tether's reserves", which apparently consist of other cryptocurrencies.

Please link your sources, their reserves as I understand may in some part consist of unspecified collateral, even if they are crypto which I seriously doubt due to its volatility the fact remains that Tether is trusted enough to be supported by the majority of major exchanges. The imminent demise of tether has been predicted for many years now. You can short tether at Kraken or choose to use one of the many other USD stable coins.

> The imminent demise of tether has been predicted for many years now.

One thing that has stuck out at me from a white-collar crime reading spree is the amount of time that passes between something widely being seen as fraud by those who looked closely and when the walls actually start crumbling down. Enron, Madoff, Theranos, etc. all had people ringing the alarms long before the music stopped.

Wirecard was one of Germany’s largest tech companies with a market cap of $25B until recently.

Short sellers first identified suspicious activity at the company around 2006. But it took 13 years for the house of cards to collapse. For over a decade, Wirecard stock just went up.

The company is bankrupt and worth practically nothing today.

If/when shit finally hits the fan at Tether, the crypto bagholders will look back with the same bewilderment as Wirecard investors did: “Wasn’t all this talk about fraud proven false long ago?”

This isn't even new news: Tether changed their terms last year, and admitted/claimed to the NY Attorney General that they only have 74% cash last year.

https://cointelegraph.com/news/changes-to-tethers-terms-of-r...

https://bitcoinmagazine.com/articles/holders-are-not-at-risk...

Note that all of this is over a year before the Tether printer kicked into overdrive around April this year and started inflating from $4B to the current $18B+.

Never short crypto it's a rigged casino, first of all. Second, the fact tether is trusted and used by exchanges is more out of necessity than desire. They would die if they had to ask their so called customers to verify their identities and so both sides look the other way and pretend in a classic emperor has no clothes situation. I'm sure the tether based exchanges are squirming in their pants as tether prints another 2 billion fun bucks per month.

Unless of course you have a theory about where an institution without a banking relationship, let alone an American banking relationship is storing just shy of twenty billion dollars US? And why legitimate investors are plowing two billion dollars per month into this scheme instead of putting it somewhere with audits and regulation like gemini or coinbase.

Kraken has many banking partners and do require KYC. A larger issue is that not everyone is in America but still require USD as is it is the most liquid exchange pair. I guess that this leads to many trusting USDT over American based tokenised dollars that are more subject to US courts. A better option could be DAI . though that is only backed by crypto assets thus far.

(1) Kraken is way more likely to have the money but that's not what I mean by a rigged casino. Arbitrage bots ensure that prices remain in lockstep between the frauds and the more legitimate, so while they may be good for the payouts, the price action remains as rigged as ever. I believe it's this model that Bitfinex relies on when they buy BTC with fake Tether, as they can then move it into legitimate exchanges that arbitrage bots have brought into lockstep and sell for cash.

(2) A larger issue is that not everyone is in America but still require USD as is it is the most liquid exchange pair.

Sounds like what they need is more liquid exchange pairs in global currencies instead of fictitious money.

> Even if the tether is only worth $0.70 it’s still a better deal for some people who can’t exit their BTC position legally.

I don't get this part. What can you buy using tether, even if it is worth only $0.70? (Well, obviously you can buy bitcoin but this doesnt make any sense to buy the bitcoin back that you just sold. What else can you buy?)

You can trade tether for other crypto in some exchanges.

Yes but then someone else has the tether.

Tether's biggest holders presumably are people with cash balances at exchanges without us dollar banking. At such exchanges the account will show USD not tether.