A number of exchanges like bitfinex are in on the scam and are just holding the tether in cold storage: https://i.imgur.com/eIKDzJl.png

The exchanges will make money if btc goes up and more people buy it through them. By accepting tether for bitcoin they help pump up the price. Holding useless tether is fine as long as more retail comes in to them for bitcoin with USD.

> A number of exchanges like bitfinex are in on the scam and are just holding the tether in cold storage

But how can that be a scam if they hold the tether? It can only be a scam if someone else now has the tether and they have the real money. I'm trying to understand who is getting scammed here.

Moreover, why are they printing tether if they already have too much?

Bitfinex benefits from the increased business from retail investors that are lured by the bubble mania, that is one solid source of profit from running this scheme. While Tether, the company, makes a killing by buying btc low and selling high, they now have cash to back sufficient tether to cover whomever wants to convert their tether back to usd, such as say, their co-conspirators bitfinex.

Tether is pretend-dollars that allows them (bitfinex and Tether the company) to fraudulently pump btc. As long as enough people believe 1 tether = 1 dollar, the show will go on. Tether has yet to be audited to prove their reserves, and the crypto community believes them even though they talk about trustless systems all the time.

So this is a two party scam, one is Tether, the company, printing money out of thin air, who then the exchange, the second party, accepts and gives btc in return as if tether was backed 1:1 by USD. This transaction is what kicks off the chain reaction that pumps btc's value. Tether, the company, now sells btc for USD at a profit, and can use that money to convert tether back to USD if say, the exchange comes to them looking to trade tether for btc. So both parties win, and tether is just weird monopoly money that they know is useless but they have to continue pretending it's worth 1 USD or else they can't keep rinsing and repeating this cycle.

> But to buy bitcoin for tether, you first need someone to sell bitcoin for tether. And this guy then has tether. What is he going to do with the tether?

He may not have an off-ramp (which means he can only sell the Tether to someone else, either directly or using cryptos as a bridge). He might be a crypto trader or even trader of other kind of merchandise and need the liquidity provided by Tether (which is for all purposes, "real" as long as the entire thing doesn't collapse)

Majority of the USDT volume come from SE Asia where countries often have strict capital control, and in these situations USDT or cryptos do provided utility by allowing people to circumvent the capital control. That's also why there's a crackdown of crypto OTC desks in China reported a few weeks ago.

What, no? Tether is used as collateral for crypto futures positions. No day trader is buying spot, they are buying swaps (perp futures) or regular futures. And it's better to hold the collateral in tether or some other stable coin than in btc so you don't have to hedge as much exposure by writing futures.

I see. And these traders are responsible for the increased demand of tether?

pretty much. the firm I work at has many millions of tether for this reason (to support the market making bots)

So there is no tether printing scam in the first place? (If there was a scam, I'd love to understand how it works)

I think the accurate answer at this point is we don't know for sure. It depends on how plausible you think it is that Tether has received ~$14b inflow in the past 6 months.