Tether has been surrounded by controversy almost from the beginning, with concerns about its relationship with the cryptocurrency exchange Bitfinex, questions about its reserves, and allegations of market manipulation. In this article, we will explore the controversial history of Tether and investigate the allegations of market manipulation. Crypto market has been associated with controversies since the start, but the world knows its potential. Start investing using the BitGPTApp and get fully automated trading features.
Tether’s Controversial History
Tether was created in 2014 by a company called Tether Limited with the goal of providing a stablecoin that would be pegged to the US dollar. The idea was to create a cryptocurrency that could be used as a digital representation of dollars, making it easier to use cryptocurrencies for everyday transactions.
However, Tether has been surrounded by controversy almost from the beginning. One of the main sources of controversy is Tether’s relationship with the cryptocurrency exchange Bitfinex. Both Tether and Bitfinex are owned by the same parent company, iFinex. This has led to concerns that Tether is being used to prop up the price of Bitcoin and other cryptocurrencies on Bitfinex, by buying up large amounts of those cryptocurrencies with newly issued Tether.
Another source of controversy is the question of whether Tether actually has the reserves to back up the tokens it issues. Tether claims that each Tether token is backed by one US dollar held in reserve, but critics have raised questions about whether those reserves actually exist. Tether has never provided a full audit of its reserves, leading to suspicions that it may be operating a fractional reserve system.
In addition to these concerns, Tether has also faced challenges in finding banking partners. Several banks have cut ties with Tether and Bitfinex over the years, citing concerns about money laundering and other issues.
Despite these controversies, Tether has become a major player in the cryptocurrency market. It is currently the largest stablecoin by market capitalization, with a market cap of over $60 billion as of April 2023. Its influence on the cryptocurrency market is significant, as many traders use Tether to move funds between different exchanges and to take advantage of arbitrage opportunities.
Allegations of Market Manipulation
In recent years, Tether has faced allegations of market manipulation, specifically that it has been used to artificially inflate the price of Bitcoin and other cryptocurrencies. The basic allegation is that Tether has been used to create “fake” demand for cryptocurrencies by issuing large amounts of Tether that are then used to buy up cryptocurrencies on exchanges.
One of the key pieces of evidence cited by critics is the timing of Tether issuances and the subsequent movements of Bitcoin prices. For example, a study published in 2018 by researchers at the University of Texas found that Tether issuances were strongly correlated with increases in Bitcoin prices. The researchers suggested that this was evidence of market manipulation, with Tether being used to prop up the price of Bitcoin.
Another piece of evidence cited by critics is the fact that Tether has been used to purchase large amounts of Bitcoin during periods of market turbulence. For example, in March 2020, when the cryptocurrency market crashed due to the COVID-19 pandemic, Tether issued $1 billion worth of new tokens, which were then used to buy up large amounts of Bitcoin.
Critics have also pointed to the fact that Tether has never provided a full audit of its reserves, which has led to suspicions that it may be operating a fractional reserve system. If Tether does not have the reserves to back up all the tokens it has issued, then it could be creating new tokens out of thin air, which could be used to manipulate the market.
Tether has denied all allegations of market manipulation and has argued that its tokens are fully backed by reserves. It has also pointed out that its role in the cryptocurrency market is simply to provide a stablecoin that can be used for transactions and that it does not have the power to manipulate the market.
Despite Tether’s denials, the allegations of market manipulation have continued to dog the company. Regulators and law enforcement agencies have launched investigations into Tether’s activities, and some have called for Tether to be banned or heavily regulated.
Conclusion
The controversy surrounding Tether highlights the challenges and risks inherent in the cryptocurrency market. While the market offers exciting opportunities for innovation and investment, it is also subject to manipulation and other forms of misconduct. The allegations of market manipulation involving Tether are a reminder that the market needs greater transparency, regulation, and oversight in order to protect investors and ensure the long-term stability of the market.
