Yesterday, I sold almost all of my cryptocurrencies, securing a decent 20% margin for *checks notes* a net gain of 33 Euros and 78 cents. Time to pad my back for the savvy crypto investor that I am. But I pulled out for the sake of doing the right thing, even if the stakes were not particularly high.
The reason I sold my coins was this article: The Bit Short: Inside Crypto’s Doomsday Machine. The short story is this: A large volume (something like 70%) of what currently goes into Bitcoin and a lot of other cryptocurriences currently enters via Tether. Tether is a stablecoin that has a guaranteed value of 1USD per 1 Tether (USDT). The problem: Tether seems to be a total fraud. They claim that every Tether they issue is backed by exactly one Dollar in real assets. However, all existing evidence points to the contrary. Tether is currently under investigation and has done everything to prolong these investigations. At the same time they are flooding the markets by issuing enormous amounts of Tethers.
Once Tether goes bust
As long as Tether is not shut down and nobody wants to trade all their Tethers back to USD, this is not a problem. Given the evidence the article presents, I find it likely that authorities will shut Tether down in the near future. I also find it likely that they will not be able to show one USD for every Tether they issued.
What happens then? A lot of people trade Bitcoins against Tether, believing that one Tether is worth exactly one USD. You can use Tether to leverage your trades, essentially trading much more than you put in. The availability of Tether drives the price in Bitcoin. At the same time, as Bitcoin is traded for Tether, it is priced against Tether (which should be equal to the USD, but likely isn’t). If Tether goes bust, crypto will take a hit as well.
I am in no way an expert on this and a lot of the details are above me. But to me, this smells fishy and I would recommend to sell any meaningful amounts of cryptocurrencies you have rather sooner than later. I am considering to reinvest at a later point in time, but the current situation doesn’t look good to me. If you’re thinking about how to invest and save money for your retirement, my guide on Getting Rich For Normal People may also be of interest to you.
Edit: Some of the things I still don’t quite understand after reading the article I linked to. Overall, I think, they don’t substantially change the conclusion that something is odd
- How do the shady platforms that offer Tether promotions get the Tether themselves? Does Tether Ltd. just give it to them for free? Even if Tether Ltd. just printed Tethers, they would have to give them away somehow.
- Are the people who run Tether Ltd. not known to the authorities? I mean you can hardly expect to pull off a giant fraud and just walk away afterwards.
- Does anyone know of Tether promotions that are currently still working? Getting free Tether and swapping them for USD still seems like a pretty good deal to me as long as it is still working. Asking for a friend here.