300M Tokens: Is Tether (USDT) Cryptocurrency’s Achilles Heel?
The vital role played by “stable coins” in the crypto market cannot be wished away. Cryptocurrency is so prone to volatility that creating a coin that could temper this down has always been muted. Quite fittingly, a number of them are coming into being, but at the moment, the most common is Tether (USDT).
In the market, it’s represented by USDT due to the fact that its value is pegged on the US dollar in a ratio of 1:1. The idea behind the use of USDT in trading was a novel one before sentiment about it soured.
Quite inevitably, whenever we here of Tether, the cryptocurrency exchange Bitfinex springs up. And more so, this is after both were subpoenaed by the US authorities late last year. For a while ever since, these two have had to face the same criticism. Now, claims of Tether being a scam are intensifying.
The criticism literally gathered venom following the recent 300 million USDT (or Tethers) printed by Tether Limited.
What you need to know about Tether (USDT)
Tether is a blockchain cryptocurrency designed as a stable coin. It was released on Bitcoin’s network using Omni Layer Protocol. The company behind it maintains that every tether coin in circulation corresponds to one US dollar held in their bank account.
If you happen to use Tether, then you should be able to easily transfer, store in a wallet or otherwise spent it just like you would fiat. Though initially created to provide easy access to the purchase of cryptocurrencies, the darkness surrounding its effect on prices has dampened enthusiasm.
To use USDT requires that you access exchanges that support that service. Apart from Bitfinex, other popular exchanges include Poloniex and Bittrex
What is the accusation against Tether (USDT)
For the better part of Q4 2017 and this year, Tether has been criticized for operating under a cloud, literally not being open to independent auditing. The main fear around cryptocurrency revolves around the fact that no one outside of Tether Limited seems to know whether the company holds enough reserves as stated on its website.
Reflecting on why there seems to be a reluctance to have the platform audited, critics say that there are no sufficient reserves to back the one to one ratio claimed by Tether Limited. Bitifinex and Tether Limited refute the claims, stating that their accounts are in the clear.
According to comments made by Abhishek Shah, an American auditor, the situation at Tether can be resolved if the community demanded an audit. Even though Bitfinex, itself in trouble over Tether, may have the money to back up any deficit, the best thing going forward is to have the “stable coin” accounts audited.
If the community were to rally and pressure for the same, then we are likely to know the truth. Shah, speaking to Cointelegraph, said that transparency could only come if
“…the crypto community came together and demanded an independent audit”.
It is feared that a lack of an audit is tantamount to creating uncertainty in an already fragile market. If Tether, for instance, crashes, the big question would be regarding what happens to the rest of cryptocurrency.
But perhaps the biggest headache that Tether may not shake off so soon involves how it is used by some individuals to artificially pump Bitcoin prices. The stated point is that whenever new USDT coins are released, plummeting prices rebound. The latest release, so that you know, also comes at a time when Bitcoin’s price has been plummeting, alongside that of the rest of the market.
The recent release of 300 million worth of USDT tokens has caused an uproar and it could be rightly so. It may even be worse if some in the crypto market were unwittingly made to hold loads of Tether (USDT) in wallets, then it turns out that there are no real dollars to back it. That’s why I ask: Is Tether cryptocurrency’s Achilles heel?