The USDT Controversies

When we talk about Stablecoins, there will be one particular Stablecoin that will always stand out: Tether or better known as its symbol, USDT.

Tether(USDT) is a Stablecoin famous because of its value and purpose. Its value is closely pegged to the US Dollar and its purpose is clear, to be a US Dollar counterpart inside the blockchain. It is an ambitious cryptocurrency that aims to offer investors and the public the best of both worlds. The US Dollar's buying power and overall usability and the anonymity and fluidity of a cryptocurrency.

This Stablecoin is issued by a company in Hong Kong called Tether Limited. USDT is a fiat-collateralized Stablecoin which means that it is backed by a real-world currency, US Dollar. The coin was released back in 2014 with Realcoin as its initial name. It can be dubbed as the most successful Stablecoin to date, according to some reports, almost 80% of the Stablecoins released alongside Realcoin or USDT, have failed, meaning, they're out of circulation or their value is ZERO.

In theory, every Tether in the cryptoverse shall have a real-world counterpart in a reserve somewhere. And there lies one of the famous issues and controversies surrounding the Stablecoin.

Looking at the information on Coinmarketcap currently, USDT has a total circulating supply of 83.15B with a total supply of over 86B. Yes, we are talking about billions of dollars here. Since it's fiat-backed Stablecoin, Tether Limited should have a US Dollar reserve of over $86,000,000,000.00. That's a lot of zeroes, am I right?

I mean, I am not a financially-inclined person but I do know that the company which is offering USDTs should have an asset even bigger than that, I am also not sure how it works, but if they have that kind of money, wouldn't they be included in the fortune 500 companies? Well, that's just a wild guess out of nowhere.

Is USDT a Scam?

At first glance, one can easily arrive at the conclusion that Tether is indeed a scam, heck, the company even settled a lawsuit back in 2019. Of course, that comes without admittance or denial of the claims against them. You may read further into it but they may also be simply avoiding the unnecessary legal feuds. And the settlement amount wasn't a joke either.

Personally, I think that it is a well-coordinated scam. And as far as I am concerned, it is a scam that works and will continue to work unless a force greater than the supreme court comes into play and stop it.

And let's go back to their claim that every Tether is backed by a US Dollar. According to a report back in March 2021, I know it's pretty outdated but I think that it still holds a bit of truth in it, only a percentage of USDT supply is back by cash or cash equivalents.

I am not sure about the figures but it was just a small percentage of the entire USDT supply. It means that if everyone holding USDT cashes out, they wouldn't be able to pay everyone a dollar for every USDT. And here's the thing, I don't think that they need to, it may sound controversial but I think that they still hold the majority of the USDT supply circulating in the cryptoverse. And I am just speculating wildly.

USDT and BTC

There was a rumor that USDT was used to pump up the price of Bitcoin. Apparently, the company printed/minted a lot of USDT which were unbacked by dollar-reserve and they used those minted Tether to infuse into several exchanges to buy Bitcoin, hence the buying pressure of BTC grew higher and in effect, its price skyrocketed.

Of course, I do not know if it's real or not, but personally, I think that it is possible. If you really think about it, everything is possible, does anybody really knows what happens behind the doors of the blockchain?

Conclusion

This may still be a silly conjecture but I say that USDT as a stablecoin isn't as stable as they claim to be. But that doesn't change the fact that it is still the leading Stablecoin out there. And in all honesty, I think that it will continue to be the top Stablecoin as it is widespread across the cryptoverse and it is used to park huge assets of investors. That is true of course unless USDC doubles its supply and its following.

And again, there is no such thing as risk-free in cryptoverse, even if you aren't trading you are always prone to profit as you are prone to losses.

Hey!!

Another crypto-related banter from my side. I'm sorry to bore you but I really am not that technical with this stuff, as you know. Anyway, I tried, I just wanted to impart what I recently learned.

Anyhow, I really appreciate you sticking around and until we read again...

Cheers!!!

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Series    : All About Crypto
Title     : The USDT Controversies
Published : 14-May-2022
Author :  © RB

References:

Image1: https://exbase.io/en/wiki/what-is-usdt

GOBankingRates. (2022, January 19). What Is Tether and Is It a Good Investment? Retrieved May 13, 2022, from https://www.gobankingrates.com/investing/crypto/what-is-tether/

Lopatto, E. (2021, August 16). The Tether controversy, explained. The Verge. Retrieved May 13, 2022, from https://www.theverge.com/22620464/tether-backing-cryptocurrency-stablecoin

McKenzie, B. J. S. (2021, October 19). Untethered. Slate Magazine. Retrieved May 13, 2022, from https://slate.com/technology/2021/10/tether-crypto-danger-ben-mckenzie.html

Kharpal, A. (2022, April 13). Crypto firm Tether to further reduce holdings of commercial debt in stablecoin reserves. CNBC. Retrieved May 13, 2022, from https://www.cnbc.com/2022/04/13/tether-to-reduce-commercial-paper-holdings-in-usdt-reserves.html