TETHER (USDT)--Tether, the controversial coin that purports having a 1:1 relationship with US Dollar reserves, has been busy over the past week.
On Wednesday June 20th, the company published a comprehensive review of their currency and holdings, conducted by the firm of former FBI Directive Louis Freeh. While the review did not amount to an actual audit (with some included language that sounded dubiously like a scapegoat), the company did provide solid relief to investors hesitant over the impact USDT has had on crypto markets.
The allegations against Tether date as far back as last October, when it was revealed that the company shared similar ownership with cryptocurrency exchange Bitfinex. Given the implications of an exchange operating a stand-in currency for U.S. Dollars, many pointed out that Bitfinex had an improper incentive for pumping the price of Bitcoin using USDT. If Tether proved to not have the 1:1 backing that the parent company claimed, then Bitfinex was essentially using an empty currency to purchase BTC (thereby pumping the price with relentless buy volume), and then selling at the elevated price for hard currency. The combined force of this speculation was enough to lead to a subpoena by the Commodity Futures Trading Commission (CFTC) for both Bitfinex and Tether last December.
In January, the negative press surrounding Tether deepened when it was announced the company had severed ties with Friedman LLP, a firm hired to perform an official audit on the company’s holding. In addition to driving down the confidence investors held in the USDT coin, it also gave the appearance that the company had something to hide–thereby contributing to the historic amount of FUD that precipitated the market collapse throughout the first half of this year.
Two weeks ago, Coindesk published the findings in a letter that confirmed a relationship between Bitfinex, Tether and the pumping price of BTC during the final quarter of last year. While Tether responded to the criticism by releasing the details of its own review, providing support that the company was fully backed by U.S. Dollars, it still failed to inspire investor confidence and the market subsequently plunged to its lowest point since last October.
On Monday June 25th, Tether followed up on the reports of last week by printing an additional 250 million USDT tokens. The effect has caused many investors to speculate over a looming pump in BTC pricing. While the influx of Tether into the market has previously been met with climbing crypto prices, it has yet to establish a market turn-around throughout the first half of this year. In effect, the gains provided from USDT influx have been short-lived, in particular when compared to the near year-long bull run experienced in 2017.
Charlie Lee, creator of Litecoin, weighed in on the situation by comparing the printing of USDT as an influx of capital by a depositor on an exchange: the funds are there, but how and when they are distributed could range in impact upon the market.
Generally, this has been a precursor of price going up. Tether gets printed when people deposit USD and get USDT back. This USDT will then be used to buy crypto. This is similar to someone depositing $250MM to exchanges. Of course, that doesn’t mean they will buy right away. DYOR https://t.co/zg2PEjGohv
— Charlie Lee [LTC⚡] (@SatoshiLite) June 25, 2018
While investors wait patiently for the impact of USDT entering the market, Bitcoin is up nearly 2% as of writing.