Tether (USDT) is the third largest cryptocurrency in the overall market after Bitcoin (BTC) and Ethereum (ETH). The “stablecoin” is linked to the value of the US dollar to make it easier to change from US dollars to Bitcoin and Co. With a market cap of $71.5 billion, Tether (USDT) is an important backbone in the crypto industry. But it’s not particularly stable.
Tether (USDT): Unstable support for the crypto sector
As we reported on March 6th, it became known that Tether is said to have gained access to the international banking system through fraud. Using forged documents and shell companies, middlemen are said to have opened bank accounts for the company. Tether (USDT) is also said to have used millions of dollars in confiscated funds and ties to terrorist groups. The US Department of Justice is said to be investigating. It’s not the first time Tether has made negative headlines.
Bitcoin price manipulation and coverage issues
The scientists John M. Griffin and Amin Shams had already become aware of Tether in 2017. They gave one study out, which revealed that Tether, together with the affiliated Bitcoin exchange BitFinex, is said to have manipulated the Bitcoin course with freshly printed and uncovered Tether units. Both Tether and BitFinex denied the allegations. To date, however, the suspicion has not been completely dispelled.
There were also repeated ambiguities about the coverage of the tether units. The company originally claimed that each Tether unit was backed by physical US dollars. In 2019, however, it became known that this was not true. Inconsistencies in this regard ultimately led to a fine of 18.5 million US dollars and a ban from New York. US Attorney Letitia James was quoted at the time:
Bitfinex and Tether have recklessly and unlawfully covered up massive financial losses to keep their systems running and protect their profits. Tether’s claim that its virtual currency is fully backed by US dollars at all times was a lie. These companies obscured the real risk investors faced and were run by unlicensed and unregulated individuals and entities operating in the darkest corners of the financial system.
What does this mean for Bitcoin and the crypto sector?
The current upheavals with the judiciary do not come as a surprise. Should there be criminal consequences here again, a bank run – but we are talking about an extreme case here – would be conceivable. The could also affect the Bitcoin price, at least in the short term. The reason would be image damage for the crypto sector and uncertainty on the part of investors. However, that is not a reason for panic. Because even if Bitcoin and Tether are currently closely linked, neither Bitcoin nor the crypto sector are dependent on companies like Tether.
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