bitcoin - how the scam works (tether)


  • SpontaneousOrderSpontaneousOrder Posts: 302 Bronze ✭✭✭
    @paddy10tellys fascinating article, great find. Here's a quote:
    I believe that Tether Limited issues Tether at will, transfers Tether to Bitfinex, buys Bitcoin with Tether, then sells Bitcoin for USD.
    If true, and the author provides very convincing supporting evidence, a tremendous scandal will result, and soon. Free registration needed to read the article.
  • SecretsSecrets Posts: 59 Bronze ✭✭✭
    Most companies involved in Bitcoin have a lot of trouble getting banks to process wires and accepting customer funds opens them up to a lot of regulatory issues. What tethers do is allow some exchanges to trade without having a bank involved, removing the largest impediment to Crypto exchanges operating. The Tether replaces the USD for the purpose of the trades and they are supposed to be backed 1:1 by cash in a bank (Somewhere).

    The theory that tethers are being created rather than purchased was originally promoted by a Twitter user called and compounded by an extremely poor defence of the accusations from Bitfinex and Tether.

    It boils down to Tether potentially issuing tethers to the markets, using them to buy Bitcoins in which case the people will be left holding what they think are USD but in reality are a worthless IOU with no backing behind it. There have been nearly $850m of these tethers issued so far. If it does turn out to be a scam then there will be a calamitous collapse in the Bitcoin price.

    The claims have been going around for over a year without sparking that collapse or without impacting Bitfinex's position as the largest exchange. You would hope that some of the people with billions tied to the exchange would have done some research to validate or dispute these claims rather than blindly hoping they were legitimate. I think its unlikely, but i'm no expert in the space either.
  • RocketDogRocketDog Posts: 761 Silver ✭✭✭✭
    @Secrets thanks for your thoughts on this issue. It seems so difficult to identify objective reality in the financial world, even with all the information on the interweb. These sure are interesting times.
  • paddy10tellyspaddy10tellys Posts: 249 Bronze ✭✭✭
    edited December 2017
    Also, because transaction times are so slow the exchanges become silos making for an inefficient market structure forming liquidity pools, ripe for arbitrage dodges, exploiting the varying prices which are amplified by wash trading: Whales buy and sell to themselves, collectively, as co-ordinated crypto-cartels. Big players buy on cheaper exchanges, sell on Coinbase, trouser the premium (recurrently).

    Those liquidity pools will be quicksand when the crash happens. No one will want to buy BTC. The exchanges will not change them into dollars...

    Tether is dog s**t that smells as bad as credit default swaps did in 2008

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