[SwellJoe]

I think the idea is that when Tether turns up the printing press, they are using it to buy Bitcoin, which they can then use to buy USD, which can then be used to buy back some of the USDT on Kraken. The assumption is that there isn't enough USD cash in reserve to actually buy back the Tethers on Kraken (and anywhere else it may be flagging). Since they have no banks (as far as anyone can tell), and it's very difficult to imagine how hundreds of millions of USD is flowing into Tether from institutional investors, I can't figure out how they'd have $2+ billion USD just hanging around.

As with any great Ponzi scheme, you have to pay some of your early investors to keep the thing going. But, at some point, you risk eating into your profits, so you just stop and everything collapses while you disappear to the island you bought with your stolen money.

If they want to keep going, they have to buy some USDT on Kraken to prop up the price. But, if they're done with the con and want to cash out...now might be when they do it. A few hundred million worth of various crypto assets is not a bad take.

[hedonistbot]

They should already own a ton of bitcoin and someone speculated in a previous thread that their reserves are actually in bitcoin, which would make a lot of sense. The problem here is that every time someone redeems their tether for real dollars, Tether (the company) have to sell part of their reserves and this brings bitcoin price down, in effect dwindling their reserve pool. If there are enough bitcoin buyers or there aren't many people redeeming their tethers for dollars, they should be fine. However, if people lose faith in tether (the coin) then mass redemption will crash bitcoin prices (judging by the daily volumes of tether trading) and there won't be enough reserves to cover everyone at par with the dollar. Hence the pyramid scheme allegations. This is all assuming they don't hold $2+ bn cash in reserves.

[profuse99]

very plausible vector for contagion! do u remember what thread that was your are referencing?

[hedonistbot]

I can't recall the hn thread (there have been tons of crypto currency threads recently), but the comment was referencing this reddit discussion where a bitfinex representative made the same conjecture:

https://archive.fo/R6sku

> Isn't it more plausible that this is not someone writing a check for tethers (money coming in from outside the crypto ecosystem) but more likely it is coming from converting other cryptos into USDT?...