Tie issues and why they are important to KUCOIN: BTCUSDT By Nutty_Trader

CONTEXT

Tether was launched in 2014 and quickly grew to become the largest stablecoin in the world, with a current market value of almost $ 70 billion.

In order to assure buyers that Tether is legitimate, Tether has claimed that it has cash reserves equal in value to the stablecoins it has issued. This means that 1 Tether is backed by 1 US dollar. The US government discovered that this was not true at all. During a period from 2016 to 2018, the CFTC found that Tether held 27.6% of the value of stablecoins issued in fiat currency reserves. The Commission filed and settled charges with Tether that the company made “false or misleading statements and omissions of material facts.”

The company insisted it always had enough cash in reserve, saying in response to the CFTC fine that “there is no conclusion that the tether tokens were not fully guaranteed at all times, just that not all reserves were in cash and all in a bank account. titled on behalf of Tether, at all times. Tether has also invested part of its reserves in Chinese commercial paper. A document detailing Tether Holdings Ltd’s reserves reveals that Tether has provided billions of dollars in short-term loans to major Chinese companies.

Tether has also offered billions of dollars in cryptocurrency-backed loans. Some of these loans have Bitcoin as a guarantee. However, lawyers for Tether claim that these secured loans are low risk since borrowers have agreed bitcoins it is worth more than their loans. Recently, Alexis Mashinsky, CEO of Celsius Network, was the latest person to say that Tether’s stable tokens are not fully backed by dollar reserves. “If you give them enough guarantees, liquid guarantees, bitcoins , ethereum etc. . . they will oppose it, ”Mashinsky told the Financial Times. He explained that the new USDT is issued directly for the loan and then subsequently destroyed so that it does not permanently increase the amount of Tether in circulation. If this happened as Mashinsky describes, it would be in contradiction with Tether’s own terms of service: “Tether will not issue Tether tokens for consideration consisting of digital tokens (for example, bitcoins ); only money will be accepted upon issuance. Short seller Hindenburg has just set a “premium” of $ 1,000,000 for more details on Tether’s reserves.

SO WHY IS IT IMPORTANT?

In May, Tether published details of its reserves in a pie chart. The breakdown showed that he had 75.9% “cash and cash equivalents”. However, looking at this in more detail, only a small proportion of the 75.9% is held in cash:

* 65.4% are in commercial paper. This equates to almost half of Tether’s total reserves.

* 3.9% is in cash. This equates to 2.9% of its total reserves.

Commercial paper is a type of short-term loan that is typically given to corporations. The problem is, Tether hasn’t released information on the types of loans it has made. We do not know who the borrowers are or what type of debt it is. More importantly, we don’t know how easy it would be for Tether to access this money. Bitcoin as well as Altcoins are often paired in USDT. This means that it is not real US dollars that are used to buy cryptos, but rather Tether Dollars. Sure, you might have used your hard earned dollars to get Tether dollars, but that money goes to Tether, you get tether dollars in return which are then used to buy crypto.

USDT volume Often ranges from 50% to 80% which is higher than any other crypto on the market. The forex data clearly shows that the USDT is primarily fueling Bitcoin’s price valuation, which is of deep concern. Bitcoin mostly increases during times when Tether is seen injecting hundreds of millions into Bitcoin . And during the times they’ve stopped, we’ve seen significant market corrections. When Tether published his questionable pie chart showing the breakdown of his reserves, Bitcoin fell 53% and lost more than $ 520 billion in market capitalization. It was also during a period when Tether stopped printing.

SO WHY IS THIS REALLY IMPORTANT?

It is evident that Tether is the glue that holds the crypto markets together. With its potential insolvency, we could witness a crypto-liquidity crisis that will create extreme levels of panic and fear among investors. Since Tether only has 2.9% of its actual cash supply, this means that if enough investors decided to convert Tether back to US dollars simultaneously, Tether simply wouldn’t have enough money for everything. world. This means that Tether’s value could actually drop well below $ 1.

No one can be sure what will happen in the future, but it’s just something to be aware of. I love crypto and believe in technology. I am simply not convinced of the legitimacy of the current reviews of the best projects. If Tether went down, that wouldn’t mean the end of crypto. It would only be a catastrophic event and would be considered the biggest fraud case in history.

Thanks for the reading. I attach all sources below.

https://www.coindesk.com/markets/2021/07…

https://www.fool.com/the-ascent/cryptocu…

https://cryptowhale.medium.com/the-tethe…

https://www.ft.com/content/5b62d83d-c5f0…

https://blockworks.co/celsius-ceo-reveal…

https://qz.com/2076079/us-fines-company-…

https://www.coinspeaker.com/tether-alleg…

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