Bitfinex manipulates cryptocurrency prices by minting USDT

USDT in a nutshell

USDT is a stable cryptocurrency that is pegged to the US dollar, created to facilitate the transfer of money between exchanges and to create a common value among cryptocurrency ecosystems. Currently circulating USDTs are issued by Hong Kong-based company Tether Limited. It is owned by Bitfinex, known to many traders at Tether Limited.

It wouldn't be wrong to say that Bitfinex is the only institution that has the authority to print dollars after the US central bank.

When there are sudden price changes in the crypto money markets, the eyes are always turned to the amount of USDT printed because the amount of tether in circulation among investors is thought to have an effect on the current price. Actually, this idea is not so wrong, after all, the fact that more USDT is transferred to the market means $$$ inflows into the cryptocurrency markets from outside. Of course, this only applies if $1 is kept in exchange for USDTs. The problems start right at this point.

Does Tether really keep $1 in the bank for 1USDT it mints?

Short answer; no, but before you judge Tether, read my explanation. Tether does not hold $1 for every 1USDT it produces, but it claims to be equivalent; It holds cryptocurrencies, precious metals, treasury bills and secured loans. Of course, it should be said that he kept a tiny 12% cash on the side. In other words, Tether costs only 12 cents for every 1USDT it produces.

Photo from Tether's offical website

But before I get alarmed, let me give a few details. This is not as bad as you might think. At the end of the day, Tether is also a company and it needs to make a profit. In order to achieve this, he needs to lend the USD he holds to large corporations or the government and to maintain the company by earning interest income from these debts.

This shouldn't be a problem unless all USDT holders want to suddenly exchange all their USDT overnight.

But that doesn't change the fact that USDT is a growing bubble. Tether is the largest stable cryptocurrency with a market capitalization of $ 79.5 Billion today. In addition, the largest market volume belongs to USDT, as a result, almost all trading transactions are carried out on USDT parities today.

Photo from Coinmarketcap

Although its closest competitor, USDC, has a market capitalization of $53 Billion, it cannot even come close to USDT in terms of volume(24hours). This is what makes USDT what will bring the end of crypto. Almost all trading revolves around Tether, and even a few minutes' absence of USDT could bring any cryptocurrency market to an irreversible end.

The biggest problem of competitors such as USDC, BUSD and USDP(PAX) is that they cannot exceed Tether's trading volume. While users use USDT during trading, they use USDC and BUSD, which they think are more reliable in applications such as borrowing and lending.

Photo by DrawKit Illustrations

What can we do?

Trading volumes need to be shifted to other stable cryptocurrencies in order to reduce the dependency on Tether as investors, so that in case of a possible Tether crisis, the cryptocurrency markets can survive with minimal damage.

If you are trading on Binance, you can choose BUSD, if you are trading on Coinbase, you can choose USDC, if you are trading on Huobi, you can choose HUSD. If you do not trust any central stable cryptocurrency, you can use the decentralized alternatives DAI USDN FEI and UST as stable crypto money in your buy-sell transactions.

In this way, the trading volume of Tether in the market will decrease and the crypto money markets will no longer be Bitfinex's toys that control the price by printing Tether.