You can't redeem tether for dollars from Tether themselves, yes, but when you swap tether for dollars at a third party exchange then Tether has to pump some dollars into the trade to support the peg.

Do they? Anyone who believes in the peg could provide that liquidity.

Reduces pressure to withdraw USDT for fiat on exchanges. Tether has to support those pegs or they break. Same difference

Do they? Genuine question. How much does bitfinex support the price at $1 on exchanges?

I’m not sure if they do, but if there was sell pressure they would have to or peg would break. Possible there is not sufficient sell pressure at moment.

When you sell USDT for USD on exchange, someone is providing that dollar. If no private market participant willing, then peg slips. You would expect fiat withdrawals in downturns and peg slippage absent support.

>How much does bitfinex support the price at $1 on exchanges?

An open question. Several attorneys general have ongoing investigations regarding the tether peg.

A really grim and cynical person might make the case that exchanges want something like tether to exist, and are incentivized to fudge the public-facing numbers regarding tether trade volume and its order book.

I think what you're saying here is that if there was a run on tether, bitfinex might stop supporting it. And sure, I think that's probably true. But I'm asking how much of a role do they play in actively supporting it day to day. Are they the principle buyer of the currency when people want to liquidate? Or is it other people?

If you asked Bernie Madoff on December 10th 2008 how well his investment fund was doing, he would say "Excellent, thank you."

The set of people who have inside information on how tether functions and the set of people who would actually tell the truth about it are entirely disjoint.

Ask the Bank of England about their desire to maintain Breton Woods

Kraken.com smelled the bad fish years ago. They made tether a normal exchange rate. If there is a "rush out of the door". The value would just drop :)

Theoretically, what is stopping BitFinex from supporting the peg predominately on BitFinex and letting arbitrage traders take care of the rest?

Who's "they" here? Remember, Bitfinex == Tether

Well, they officially don't guarantee that they will redeem Tethers, but in practice they do, at least for the time being. So any withdrawal pressure would be de facto rather than de jure

In practice they do?

Last time I checked, there were significant "limitations" (to be charitable... that you could only redeem holdings above $100K, only if you were a non-US person, and subject to 90-180 day holding periods.

People have also offered bounties for proof of people having redeemed Tether, and those bounties are still outstanding.

My suspicion is that if anyone has actually redeemed Tether, they are either institutional (and Bitfinex doesn't want to piss them off) or an insider/"friend".

Institutions are happy to provide arbitrage on tether -> any other crypto since they can redeem. Sure there's an extra step involved, but there's essentially no difference between selling to an institution for $1 of crypto and redeeming for $1.

The founders of CMS holdings talk about redeeming tether all the time. It's literally just the same as redeeming USDC or any other stable coin. And before you say they're insiders, Dan (one of the founders) used to work with the creators of USDC.

So they're an institutional investor. Like I said.

An institutional investor with ties to their biggest competitor, bit different.

Yes and no.

Yes, USDC and USDT are different "securities".

But that's like saying that in the regular market that because Charles Schwab and Fidelity are competitors, they don't have a whole lot of cooperation - they do, because at that scale (and with the amount of arbitrage and speculation in crypto), you need to cooperate with your competitors, or you will be iced out.