Did they, or did they just claim to while minting stablecoin in order to pump the price of Bitcoin? Which these guys (Tether) would want to do because the owners of Tether are a massive exchange, and they depend on Bitcoin being high to attract customers to the market, and the first thing news customers so is bring the real objective with them: actual cash.
USDT, Tether, is a completely different coin. the one we're discussing today.
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UST + Luna had substantial reserves. They proved it with their actions this past week. They weren't *enough* reserves mind you, but they were posting their BTC-wallets on Twitter and showing the movements.
Of course, that means if UST is below $1 there is an arbitrage loop. buy UST at a discount, redeem it for Luna, sell Luna for USDC, repeat
This causes downward pressure on Luna's price. As Luna drops so does the faith in UST recovering, you end up with.... Luna dropping from $100 to $0.01, there's nothing backing UST effectively and it's still trading below peg (around $0.40)
Why for sure?
Their "audits" and other information provided that they have the reserves were rather unsubstantial, if not outright dodgy.
I'm not saying USDT was 100% backed. They probably could have accomplished all of this with just 20% backing, maybe even less. But in the short term, only 20% of people would ever "test" the reserves so to speak.
Now I don't know how much USDT was fraudulent... I do believe a lot of it was fraud. But there's clearly a nugget of truth, a nugget of backing that kept the price steady last year and the year before.
Once that "nugget" of stability runs out, its all over.
They aren't even audited by a credible firm.
This alone suggests you don't know what you are talking about.
Compare to reserves backing Dai, or the reserves USDC claims to have. UST/Luna had nothing and they were also highly correlated. It was a stupid stablecoin to hold in, which is why I never did - despite having holdings in Dai & USDC.
That's a reserve for sure. Is it enough for this current storm that the cryptocoin community is having? Obviously not, it all collapsed. But it was substantial enough to perpetuate its own myth for over a year.
That's the thing. You have to admit that these things can last months, or years even if you want to be honest about discussing the nature of these cryptocoins.
From another not so stable coin. Fixed that for you.
In the short term, this is more of a classic bank-run. The Terra-coin + Luna scared a lot of cryptocoin holders, and now they're running away from another stablecoin.
Even if Bitfinex had the money, the amount of traders leaving USDT has to be a colossal amount. The amount of money Bitfinex can transfer at any given time is limited, so the peg will bend and buckle.
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The big question is: does Bitfinex have enough reserves to weather the storm? Not just this short-term storm, but the whole shebang that's about to happen? We will find out... eventually.
UST / Luna had substantial reserves. But it clearly wasn't enough. Probably because Anchor promised 20% gains and there was simply more UST in existence than the amount of USD put into that system.