Tether (USDT) is worth less than $1 at the time of writing. The Tether rate is $0.9988 and at times even fell to just under $0.96. Which actually shouldn’t be. Because the promise behind the stablecoin is that it is worth one US dollar at any point in time.
This guarantees, among other things, that you can switch between fiat currencies and US dollars faster when trading. However, if the USDT cannot keep up – this is referred to as depegging – this can lead to distortions in the crypto market.
What happened?
Since Binance boss Changpeng Zhao announced on November 7th that all FTT tokens would be liquidated, events have come and gone. The rumor that the crypto exchange FTX is bankrupt is not only persistent, but seems to be becoming more and more a reality. In the meantime, Zhao has even announced that Binance wants to swallow the FTX competition.
In the wake of the events, the entire crypto market has taken a beating. In short: If you don’t have a red portfolio today, you’ve been there for quite a while. The bitcoin price has dropped more than 10 percent in the last 24 hours, while ether is almost 20 percent. And the FTT course is so down at over 70 percent that it seems like it’s trying to dig all the way to Australia.
What does Tether (USDT) have to do with Sam Bankman-Fried?
Rumors have long been circulating online that FTX boss Sam Bankman-Fried is affiliated with both crypto exchange BitFinex and stablecoin Tether (USDT). one believes such as the crypto watcher Bitfinex’ed, Bankman-Fried is not only one of the largest Tether customers. Rather, he is said to have been one of the largest shareholders of BitFinex.
However, when the crypto exchange ran into trouble with the law (one of the allegations was market manipulation), Sam Bankman-Fried reportedly decided to seek an alternative. He is said to have founded FTX thereupon.
As does the crypto magazine Scoop reportedAlameda Research, Sam Bankman-Fried’s crypto hedge fund, was at least at times responsible for a third of all USDT printed.
As of today, however, Tether boss Paolo Ardoino denies any connection to FTX and Alameda:
The truthfulness of such statements can, however, be doubted with a clear conscience. If the connections between Tether, FTX and Sam Bankman-Fried are still intact, some events of the last few days can be explained.
Tether, FTX and Sam Bankman Fried
Looking at the Tether market cap since what happened on November 7th, you can quickly see that a lot of USDT has been printed since then. The Tether market cap has increased by almost half a billion US dollars, while the entire crypto market has been wiped out. Again, since the market dislocation started, there have been plenty of new USDT units.
Should – here you are moving in highly speculative territory – Sam Bankman-Fried, contrary to all statements, is still connected to tether, the strong increase in new tether units could serve to accomplish a bailout. Finally, FTX has experienced a massive bank run over the last few days: customers urgently wanted to withdraw their funds. A few freshly printed tethers would come in handy. But where do these new tethers come from?
Tether (USDT): How stable is the stablecoin?
As we explain in detail here, the feet on which Tether stands are not particularly stable. The coverage of the printed coins is repeatedly questioned, so that the possibility of de-pegging has been in the air for a long time.
If USDT price breaks further from its $1 target, it could be devastating. If Tether were under pressure to pay out funds, for example due to a glut of investors wanting their money back, it is questionable whether Tether could meet these demands. They would have to sell their USDT at a loss, which could lead to further dislocation. Ultimately, the entire crypto market would suffer as a result. After all, Tether is the cryptocurrency with the third largest market capitalization ($69 billion).
Crafty as the company is though, it has an emergency exit in the Terms of Use built-in. They are not obliged to meet any claims directly. This means that just because someone could potentially ask for real money for their USDT doesn’t mean they will get it.
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