Tether is a cryptocurrency that must be maintained at a 1:1 ratio with the U.S. dollar. The idea is that the operational capacity of the coin should correspond to the price stability of the dollar.
The cryptocurrency was created in 2015. It was originally called Realcoin. And today, there is $2 billion worth of USDT (Tether) in circulation. (according to CoinMarketCap). Last November, the company’s systems were hacked, resulting in $31 million in stolen coins. Many people think about this before exchanging btc into usdt.
Who is behind this cryptocurrency?
According to the New York Times, Tether tokens are issued by Tether Limited, registered in the British Virgin Islands. However, Tether’s website says that it is written in Hong Kong and has offices in the United States.
The managers of Tether are the same people who work as managers of Bitfinex, one of the world’s largest cryptocurrency exchanges based in Hong Kong. For example, Jan Ludovicus van der Velde is the CEO of both Bitfinex and Tether, and Philippe Potter is the chief strategist of both companies.
Who uses Tether?
There is a perception that anyone who trades on major exchanges has stocks of Tether. Customers’ dollar funds on sales like Bitfinex are held in Tether (USDT). For example, if you need to withdraw funds from an exchange when you have no open positions to trade, you will probably be given USDT.
Many exchanges have problems interacting with traditional banks because the latter are wary of cryptocurrencies. Tether offers a stable alternative with low dollar volatility – both to sales and users.
Keeping client funds in Tether means that exchanges use low transaction costs until users want to withdraw their funds in dollars. That is when Tether is exchanged for real U.S. dollars.
Traders also use USDT to lock in their earnings during periods of volatility and transfer funds from one exchange platform to another.
Why are people worried?
The issuing company that controls Tether must hold reserves in USDT to support all issued coins. In theory, USDT holders can sell their coins at a 1:1 ratio to Tether Limited.
However, there was suspicion in the cryptocurrency community that Tether Limited did not have enough currency reserves to support all the coins in circulation. So now, people have begun to speculate about how many dollars the company has and where they are being held.
What does the company itself say?
Tether Limited has vehemently denied all of the allegations. The company insists that it has dollar reserves to support all the tokens in circulation and that the funds are being used properly.
In December, company officials also said they were aware of “all questions and doubts from the community” but could not disclose many things due to ongoing investigations related to the hack in November.
They called the allegations unfounded but acknowledged that they “cannot, at this time, implement a Tether buyback from any customers in the U.S.” In addition, the company has hired lawyers to file a lawsuit against the man behind the anonymous Twitter account under the pseudonym Bitfinex’ed.
What happens next?
After a massive rise through Dec. 25, the price of bitcoin dropped about 40% in January. Other cryptocurrencies have followed a similar path. While this decline was not related to concerns about Tether, the problem started to manifest itself at a very troubling time for cryptocurrencies. If you plan to invest, you may want to consider hedera hbar price prediction.
Tether’s future moves are not yet precise. Possible scenarios depend on the actions of U.S. regulators. Tether Limited may be required to hire new auditors to establish the truth. There are, of course, rampant optimists among traders. They argue that if this market survived the Chinese government’s tightening of the screws, it could survive anything.
