[panarky]

If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether.

Conceivably, a crisis with Tether could affect confidence in the entire cryptocurrency ecosystem, which would put downward pressure on the Bitcoin exchange rate.

It's not clear which of these factors would dominate, so it's not clear what would happen to exchange rates.

But currently Tethers trade 1:1 for USD on multiple exchanges, so markets aren't showing evidence of lost confidence.

[tobltobs]

> If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether.

That might be the outcome, however:

- If there would be the slightest bit of panic btc transactions would be congested for days.

- If people would loose money by Tether their btc margin positions would be getting closed.

- Because they loose faith in one crypto they would by another?

[mplewis]

If Tether is garbage, the only way to get your money out is by converting Tether to something worth real money.

We saw this in Mt. Gox. When USD withdrawals failed and people suspected Mt. Gox was insolvent, the only way to get money out was to buy BTC and withdraw that. The Mt. Gox exchange rate inflated because everyone knew dollar balances on Mt. Gox were worthless.

If Bitfinex is insolvent and Tether fails, we'll probably see panic selling across the market as people start fearing Bitcoin is a giant tulip scam.

[kharms]

>If traders lose faith in Tether, they would sell Tether and buy Bitcoin in a flight to safety. Bitcoin prices would rise as traders try to get out of Tether.

The Tether:Bitcoin rate would rise, but I’m not sure that the Bitcoin:USD price would follow suit.