Is Hindenburg Research’s $ 1 million Dirt on Tether (USDT) bounty reward about to break the proverbial back of the ongoing crypto rally?
Tether (USDT), a stablecoin with a price pegged to USD 1, has long been considered the soft underworld of the cryptosphere. However, now that prolific short seller Hindenburg Research searches for Tether’s proverbial blood, chickens might finally come home to look for the stablecoin.
To freshen up, Tether is currently the fifth largest cryptocurrency by market capitalization according to a list by CoinMarketCap. Tether tokens – which were developed by the BitFinex crypto exchange and are traded under the symbol USDT – were originally backed by a corresponding number of US dollars. This meant that each USDT should always be equal to 1 USD. In February 2019, however, Tether changed this policy (retrieved from archive.org) so that the Tether coins are now “100%” covered by their “reserves”. For reference, these reserves include cash, cash equivalents (such as US Treasuries), and other assets and receivables from the company’s loans to third parties. It is evident that the formulation of this crucial policy is rather vague and forms the basis of the abundance of criticism that has since accumulated against Tether.
On top of that, Tether hasn’t been a shining example of corporate governance lately. To illustrate this, a 2019 New York attorney general investigation found the company was hiding “a loss of $ 850 million in mixed client and corporate funds.” In the subsequent settlement agreement, it became known that the tether coins in circulation remained practically unsecured for certain periods of time. Tether was also prevented from doing business in New York.
In August 2021, Tether released a confirmation of its reserves as of June 30, 2021. According to the document, of its total assets of $ 62.773 billion, only $ 6.282 billion, or only about 10 percent of Tether’s total assets in cash and Bank deposits. On the flip side, nearly 50 percent of the assets were in commercial papers. Of course, that revelation did little to allay the concerns of Tether’s critics.
On October 15, 2021, the CFTC ordered Tether and BitFinex to pay fines totaling $ 42.5 million for falsely claiming that the stablecoin was fully backed by US dollars.
Readers should note that stablecoins like Tether perform an important role in the crypto market. Since their values are not intended to move from their specified ties, stablecoins often act as a medium of exchange, allowing crypto investors to conveniently convert one cryptocurrency to another.
Hindenburg Research has now offered a $ 1 million bounty for digging dirt on Tether
The successful short seller Hindenburg Research has now published a new blog on its website. Crucially, the company is now offering a $ 1 million bounty to anyone who is able to “provide information leading to previously undisclosed details about support for the stablecoin” Tether “cryptocurrency.
Remember that stablecoins are under the jurisdiction of the SEC. However, the regulatory authority has so far refrained from plunging into the fray.
That brings us to the heart of the matter. Tether plays a vital role in the smooth functioning of the entire crypto market, which is now worth well over $ 1 trillion. For years, the cryptosphere was subject to the whims of Chinese regulators, with the market going through a series of up and down cycles depending on whether the Chinese had accommodating or prohibitive policies on cryptocurrencies. That paradigm finally ended at the beginning of summer when China completely banned crypto mining, leading to a mass exodus of mining activities from China to the US and other countries. Since the US SEC had declared that a Chinese-style crypto ban was not in sight in the world’s leading economy, many analysts also expected the entire crypto sphere to run smoothly.
With that in mind, Bitcoin’s ongoing violent rally, fueled in part by the launch of the first futures-based Bitcoin ETF, has only helped to improve general sentiment. According to a Bloomberg report, the ETF could attract over $ 50 billion in funds in its first year, driving Bitcoin’s spot price well over $ 100,000.
Still, a new threat to that bright prospect has now emerged in the form of the Hindenburg Research Bounty. Should this attempt expose Tether as a glorified Ponzi scheme, as the critics of stablecoin claim, it would seriously shake confidence in the entire cryptosphere and perhaps even stimulate a new bear market.
Update: Tether has now issued a statement
Tether has now sent us the following statement by email:
“This Hindenburg Research stunt is a pathetic attempt to get attention while others are making real change and building wealth and results. You are trying to discredit not just Tether, but an entire movement. Fortunately, everyone sees through their opportunism as Bitcoin approaches another all-time high.
This is not the first time Hindenburg Research has staged an ostensible scheme to make a profit. It won’t be the last either. Tether detests and condemns their actions and transparent motives. Tether’s history of always serving our customers’ needs while navigating the evolution of regulations and industry standards shows our primary commitment to our stakeholders through trust and innovation.
Tether is a pioneer, a special kind in business, and we have great visions for the future. Like those who came before us and those who come after us, we will be scrutinized more than others and especially our colleagues and competitors, but we understand our roles and responsibilities and will continue to focus on the demands of our customers and the defense of the crypto markets focus .”
Do you think Hindenburg Research will be able to dig up dirt on Tether? Let us know what you think in the comments below.
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