Tether (USDT) - was supposed to be a stablecoin, and there is no more controversial cryptocurrency

Tether (USDT) is called stablecoin, or cryptocurrency, which is supposed to reflect the price of the US dollar in a 1: 1 ratio. However, it is stable only by name, because the stories of various irregularities around Tether are so numerous that they can be successfully shared with several, if not more than a dozen other projects.

We continue the Forex Club portal series, in which we describe the largest, most known and the most interesting cryptocurrency projects. Today it's time for one of the most controversial, Tether.

Tether is based on blockchainie Bitcoin. Is a centralized stablecoin, issued by Tether Ltd. The company ensures that every cryptocurrency issue that goes to cryptocurrency exchanges has real coverage in USD in a 1: 1 ratio.

Why was steblecoin created?

Tether was established in mid-2014. Its creator is an entrepreneur known in the cryptocurrency community Brock Piercewhich participated, inter alia, in creation EOS. A price reflecting the value of the US dollar in a 1: 1 ratio for less-oriented cryptocurrencies might seem absurd. However, this is only apparently. Thanks to USDT, it is possible to arbitrage between individual cryptocurrency exchanges, where asset prices can temporarily vary a lot. You also need exchanges themselves, which can easily offer cryptocurrency pairs in relation to the dollar price. As a result, the price is not only more real, but you do not have to adapt to the regulations of international financial institutions that guard the fiat currency market.

At any time, the USDT holder can exchange them for USD. To do this, however, you need to register to prevent money laundering.

Tether - the "stable" aggregator of controversy

Tether was a controversial cryptocurrency from its inception. Commentators did not even like the very assumptions of the project regarding its centralization, which is not well perceived on the cryptocurrency market. Meanwhile, USDT is issued by a private company, in addition registered in a tax haven in the Virgin Islands.

Tether is not completely independent either Internet users tracked its connections with the Bitfinex exchange. There would be nothing unusual about it, if it wasn't for strictly guarded information, and both Tether and Bitfinex denied such rumors until the case came to light, thanks to the famous international publication Paradise Papers, which revealed how billions of dollars end up in tax havens. As a result, it is not possible to exchange USDT directly for US dollars today.

With the possibility of exchanging cryptocurrencies for dollars, not everything is clear either. Coverage in dollars is an invariably repeated company declaration, but no external audit has for a long time. Especially since the capitalization of USDT has already reached a staggering USD 4,5 billion! It wasn't until 2019 that Tether Ltd. unveiled a third-party report which showed that it has more funds in USD than the company's capital in USDT. The suspicions did not end, however, because it is known who paid for this report. Besides, it was not a classic financial audit ...

Tether manipulated the BTC market?

The most controversial, however, is the possible impact of Tether on the huge fluctuations in cryptocurrency prices in recent years. The case is in court after a leading New York law firm - dealing primarily with litigation with financial institutions - Roche Freedman LPP announced that the BitFinex cryptocurrency exchange and stablecoin Tether (USDT) manipulated cryptocurrency prices on a massive scale. Losses are expected to reach USD 1,4 trillion. According to lawyers, during this period, stablecoins were not covered in dollars, while after large emissions of Tether, prices of virtually all cryptocurrencies increased abruptly. Lawyers say it was a massive manipulation that triggered an artificial bull market, quickly turned into cycles "Boom-and-bust", i.e. a rapid rise and fall in the price of cryptocurrencies, among which Bitcoin obviously led the way.

According to preliminary calculations, the BitFinex and Tether cryptocurrency exchange were to earn about USD 450 billion in this process, and the accusation says of causing losses reaching USD 1,4 trillion. The BitFinex exchange has issued a statement in which it states that the accusations are unfounded, which it will prove in court.