Will Tether Collapse? Tether Controversy Explained.

today we’re gonna talk about tether this is obviously a hot topic in the crypto world right now and probably if you’re searching for and finding this video you have already some kind of basis of knowledge of this controversy that’s going on and you’re looking for more information so this is a thread I want to follow on this channel because it’s really interesting and could have huge implications in the blockchain world so go ahead and subscribe to the video if you want to follow this there’s gonna be many more update videos about this in the future but I want to start by just going back to the basics and saying what is tether because it’s a really unique cryptocurrency and it’s worth at least this one time going over the basics of what it is what’s the point what does it do and then we’ll get into the controversy around it so tether is a really interesting cryptocurrency it’s kind of different than other cryptocurrencies in that you know most Kryptos they exist just in the crypto space and there’s this separation between fiat currencies u.s. dollars and euros and all that and crypto dollars and there there’s not really a bridge between the two what tethers trying to be in what they’re more or less successful in doing is being that kind of bridge currency so the idea behind a tether is that for every one tether that exists in the crypto world there is one u.s. dollar to back up that tether sitting and reserves in tethers bank account ready to be redeemed one to one at any point and this has some interesting uses both for just a user of cryptocurrencies and for exchanges so for a user it means that if you want to move what is essentially a US dollar around you can use it moving USD T tether coins so if you want to go from one exchange to the other you can have USD T to go between it you don’t have to deal with the banking system it can also lend stability to your investment so let’s say you’re bearish on Bitcoin and you want to get out of Bitcoin rather than having to convert to USD get transactions into your bank account and then go back if you want to sometime you can put your money in tether and that one dollar is supposed to always stay worth one dollar since there’s always this backup here that if you ever say hey I don’t want these tethers anymore give me my US Dollars you can go do that and you have your US dollars so it acts as something that’s called a stable coin and that’s the whole point is to be stable other coins have tried to do this none of them have been successful except for tether what tether can offer to exchanges is it can be kind of that on-ramp into the crypto world so if you’re in exchange it’s really hard to comply with the laws wherever you are especially in the US the laws around taking people’s government-backed dollars and converting them into crypto and then letting them exchange that however they want on your exchange so now what they can do is they can say ok we’re not dealing in fiat world we’re just gonna be in crypto world and we’ll take your tethers we can transact and move those tethers around and then just like the can user the consumer of tether at whatever point they want they can go back to tether and say hey here’s my tethers give me my US dollars US dollars go into their bank account and everything’s good tether has become quite popular with these exchanges because of this difficulty of working with banks because banks see the crypto universe as very scary full of risk and not a whole lot of upside after all they’re just one account among many accounts so if you’re Wells Fargo for example then you might sever your relationship with BitFenix because you don’t want to get audited you’re scared of the compliance risk and you’re a giant bank why would you put so much risk into one customer account so this is actually what happened with BitFenix they had a Wells Fargo relationship that went away they moved banks they’ve moved banks multiple times and so tether acts as this way that they can kind of have access to banking without going through traditional banks so that’s kind of essentially where we are today tether has ended up acting like a bank for the crypto world in that there promising they SuperDuper promised a pinky promise that when you go and give them US dollars they’re gonna give you tether tokens and if you ever want to come back to them and get your US Dollars back fine they’re there you can have them and this is basically what any other bank would do you know we let’s say you get a direct deposit for your your employment go straight into a bank account the bank is not sitting there on piles of cash they’re lending it out they’re doing lots of things with this money but at the end of the day there is this promise that if you want to come get your money they’re gonna give you your money and this is backed up by the rules and regulations of in this case the United States government and that means a lot there’s a lot of value in that the issue is that tether is doing the same thing but they have no regulations and this is where things get weird okay so on to the controversies which is probably why you found this video the first controversy is that they are printing a lot of tokens and we can see every day for the past I think four days they’ve issued a new hundred million dollars worth of tether tokens which essentially means they’re receiving a hundred million dollars every day in US currency that is supposedly backing up this tether and people are seeing this and they’re saying that seems like a lot is that too much I don’t know and it’s making people nervous if there was some way that tether could prove that they have these u.s. dollars backed up people would be less Knar I think people would still be skeptical about some things but they would be slightly less nervous about it because they do have this huge stockpile of cash and that would make people feel better so tether has said that they want to be transparent and so they’re gonna get some independent third-party auditors to look at their books verify everything and make everyone feel quite a bit better about it the problem is so far they have not done this all they’ve released is what amounts to like a quasi audit they basically say that this is really hard and it’s taking a long time but here’s something in good faith Semmy audit it’s not like fully signed off by auditors but it does show that this audit firm in the United States by the way has looked at their books and things look good so far I guess the issue is that it’s first of all it’s not a full audit it happened over six months ago and they’ve printed hundreds of millions of tethers since then so at the very best it’s grossly outdated if you want to see how many tethers are being printed and when you’re seeing on your screen right now a Twitter account that is a bot that’s hooked up to the network that tells you exactly when more tethers are Unleashed into the system and it’s important to remember every time this happens they’re supposed to be a u.s. dollar going to tether to backup these new tokens all right so controversy number two and actually this should probably be number one because number two caused a lot of the concerns and that is this Twitter user an anonymous Twitter user called BitFenix so hopefully tether has US dollars to backup all these new tokens they’re creating if they don’t and they’re just issuing these just at their own whim then the question is who has the most to gain by committing this fraud and that’s where an anonymous Twitter user called BitFenix comes into this story so BitFenix has been basically a huge critic of tether and BitFenix because what he brought to light and what was also brought to light in a huge leak of documents called the paradise papers is that tether and BitFenix one of the largest exchanges in the world are essentially owned by the same people ooh so what that means is that BitFenix having relationships with tether they have a lot to gain by lying about their u.s. dollar reserves if they can just create tether on their own win send it over to bit FedEx and then BitFenix can use that to buy your Bitcoin or aetherium or whatever then essentially they’re giving you a currency that’s not backed by anything and they’re getting from you your bitcoins which are going to continue to have value in the crypto world if information were to come out that tether was lying about the reserves of US Dollars BitFenix would have the most to gain they would what essentially would happen is the value of the tether would go way down because nobody wants to hold tether anymore because they’re not truly backed by this US dollar that was promised but BitFenix has been dealing with tethers forever and so they’ve been selling you these essentially worthless currencies getting your bitcoins and aetherium and all this other and keeping it and then when tether collapses they still have your Bitcoin in aetherium and you’re left holding the back so this user BitFenix on twitter constantly tweeting constantly putting out blogs I can make entire videos on what’s going on with him so check out the Twitter account do some reading and subscribe here because I’m certainly gonna be talking about it more in the future issue number three is that they’ve already been hacked back in November it was revealed that they lost about thirty million dollars worth of tether tokens supposedly they’ve made everyone whole in this situation nobody really knows because of this lack of transparency so if they were to get hacked again but this time not tell people about it we could have the same situation where they need to print a bunch of tether tokens to make up for the ones that are lost but they’re not telling the general public about it as of this level of tether tokens versus US dollars that’s going like this and then pretty quickly they’re insolvent there is so much more that is shady and weird about tether the very last thing is regarding their Terms of Service so since the hack in November they’ve said hey we need to upgrade our systems we need to make sure everything is airtight before we can start making transactions so the ability to redeem those tether tokens for u.s. dollars is currently shut off so you can’t actually do that through them no one’s sure if it’s just the exchanges that can do this now like maybe they let exchanges do it or and and not regular customers or if it’s no one that can redeem their tether tokens but so far there’s no clear answer on when you’ll actually be able to redeem these again and in recent days there’s been a lot of tether printing and speculation that they’re trying to just prop up the market before everything comes collapsing down okay so that’s kind of the high-level overview of what’s going on with tether it’s a really interesting story with some potentially really big bad complications and problems for the Bitcoin space so this is something I’m gonna get gonna be following a lot like I said this is just the very very basics of what’s going on I could make an entire video on every little point that I talked about before so let me know in the comments below what do you want to learn more about I’ll do the research I’ll start making videos and we’re gonna stay on top of this topic because it could be big anyway this is Seibert space keep watching stay tuned I’ll see you next time

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