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Tether’s Credibility And Its Impact On Bitcoin (Cryptocurrency:BTC-USD)

Tether represents a risk to cryptocurrency prices as there are serious concerns about its reputability and it is one of the primary means of buying Bitcoin (BTC-USD) globally. Tether and the Bitfinex exchange are both controlled by iFinex and have a well documented history of problems but it is not clear whether these issues have been due to mismanagement, a lack of access to the traditional financial system or are more nefarious. The questions surrounding Tether are likely to come to a head in coming months as the New York Attorney General (NYAG) investigates claims of losses.


Tether is a stablecoin (a cryptocurrency designed to maintain a constant exchange rate with a fiat currency) which was first introduced as RealCoin in 2014. RealCoin was later renamed Tether and began trading on the Bitfinex exchange in 2015. Stablecoins have seen fairly widespread adoption in the cryptocurrency industry as they are easier to transfer between exchanges and help circumvent the traditional financial system. Tether aims to maintain a peg against the USD by using cash and cash equivalent reserves equal in value to the total amount of Tether issued. Concerns have persisted over the legitimacy of this process for a number of years, although these concerns have not resulted in Tether trading at a discount for a significant length of time.

Figure 1: Tether price

(source: Created by author using data from coingecko)

These concerns were at least partially validated in March 2019 when the claim of each Tether being backed by 1 USD was modified to include loans to affiliate companies. Then in April 2019 Tether’s lawyer claimed that each Tether was backed by only 0.74 USD in cash and cash equivalents. Speculation about the credibility of Tether’s reserves has been further exacerbated by a lack of transparency and

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