If the United States government wanted to kill crypto forever they could sanction tether and make all of the coin useless.

They're going to worry really hard about rule of law eventually

Wouldn’t people just buy BTC and ETH with the banned Tether and pump them to the stratosphere as they tried to leave the sinking ship? I remember something similar happening in 2019 or so when there was some extreme Tether worry and the price of BTC started going up and up.

There’s a lot of money in stablecoins at the moment.

No, because someone would have to trade / buy the Tether, and no one would, so the price of Tether would drop like a stone - not the other way around.

Somebody would! (Or rather, some thing.) There are a lot of smartcontract liquidity pools in Ethereum that facilitate trade between two tokens. The set an exchange rate by a formula that only looks at how much of each token is currently in the pool, not at prevailing market price[1].

So if and when it's apparent that Tether will be worthless, there will be a mad dash to dump it in those LPs in exchange for the other tokens, which was what happened to TerraUSD [2].

Here's a list of the LPs that have Tether as one token, just on Uniswap:

https://info.uniswap.org/#/tokens/0xdac17f958d2ee523a2206206...

[1] This dynamic has the effect of writing a persistent ITM option with intrinsic value equal to LP's price divergence from the market exchange rate.

[2] Here's Curve's infamous 4pool, which has TerraUSD (UST) and three other non-defunct stablecoins -- it's 97% UST now: https://curve.fi/4pool

Both would happen simultaneously. Think of crypto like a balloon with only a narrow exit at one end going out into fiat: if you push down on Tether, BTC/ETH will inflate in Tether terms (because everybody who can moves into other cryptos) but deflate in USD terms (because there will be a run for the exits and a lack of buyers).

So both BTC/ETH and Tether would deflate in USD terms...

There are two sides to every trade. Who would be willing to give up their BTC and ETH for banned Tether?

If the crash is bad enough: Tether itself. Or Bitfinex, its parent.

If they buy up their own debt at $0.01 on the dollar then they got away with their fractional reserving scheme, and their executives walk free. Free and very wealthy.

There is always a clearing price. The question is simply "how low"?

My experience in crypto tells me that there is usually always someone willing to be on the other side of the trade. People exiting Tether would still be exiting through a smaller and smaller door of BTC and ETH going up and up. More and more desperate to pay any price to exit Tether.

> there is usually always someone willing to be on the other side of the trade

This is usually true in financial markets. When it's not, we call it a crisis.

But at what price? Will tethers be sold to debt collectors for pennies?

It went up _in USDT terms_

If Tether was sanctioned crypto would nuke in USD terms

Suppose you owned clean ETH and someone offered you a 10% premium over the going rate if you were willing to accept sanctioned Tether in exchange. Would you really accept that deal?

According to the article, Tether is in direct and daily contact with US government institutions. So I guess, for whatever reason, the US gov is perfectly fine with Tether, probably because it's a great tool to spy on international transfers. This probably means Tether is here to stay.

There is not a single rule of law. This is not an statement in favor or against Tether.

What do the first few letters of USDT stand for?

3 characters purely selected for marketing reasons. It could also be named WHCRST or any other name.

It's extremely relevant that it tries to maintain a 1:1 peg with USD, not whatever currency WHCRS is. The US controls law around the US dollar.

The naming of the coin itself is for sure not relevant of its functionality, or what am I missing here?

The pegging is not achieved within the name itself.