[hmcdona1]

I'm so confused why everyone just blindly believes Tether is this whole big conspiracy. I am by no means defending the organization but let's just take a step back here:

> Where does the funding come from to print tether?

When they mint 1 Tether they sell it on an exchange for $1. They don't need anyone to upfront lock up $1 and then also sell it for $1...

Are stablecoins not just essentially an interest free loan to the minter? That's why hundreds of them are popping up all over the place. Minters can go invest that money however conservatively they want and just rack up free interest on billions. Why the hell would they NOT print more if there is demand. Consequently, why the hell would they need to participate in any illegal activity when the can print interest free loans whenever they want?

Yes, ideally you'd prefer someone with this position to be overcollatorized and not simply ensure $1 = 1 tether. But that is the risk you take holding that stablecoin. Pick up DAI if you want an overcollatorized asset.

I just don't see the incentive for some of the other arguments out there - many imply they are just printing it and selling it for $0 I guess? Or is the argument they just siphon the money to another organization? Because that would be a more valid concern. There just seems to be this assumption that somehow someone is fronting or magically creating value from nothing. No, the market is by buying newly minted Tether on exchanges. That's where the funding comes from. How is this not obvious?

There is probably a lot more depth to this topic than I am aware of, but some of the top upvoted comments here just seem to be spewing nonsense.

tldr; If a stablecoin minter sells a newly minted coin for $1...then by definition there is now $1 available to back that coin. Stop conspiring where the funds are coming from. The worry should be how they are investing said collateral backing the coins from there.

[eightysixfour]

> When they mint 1 Tether they sell it on an exchange for $1. They don't need anyone to upfront lock up $1 and then also sell it for $1...

According to the argument against Tether, your first principal here is wrong. In this argument, Tether mints a USDT and trades with someone who has bitcoin or other crypto and wants a stablecoin. What the trader believes they are getting is a coin which is 1:1 backed by USD. In this situation, it is not.

Tether gets bitcoin. Tether can then print more USDT which they trade for bitcoin at a higher price. They would then have an infinite money cheat for buying crypto assets (as long as people believe a USDT = $1) which enables them to drive the price of crypto upward.

Tether claims that the pattern is "Someone gives us USD, we give them Tether, they trade for whatever they want", this was provably false at some points in time.

[hmcdona1]

I think that does help clarify, but I'd say it also aligns with the point I was trying to make in some important ways. They are trading one USDT for $1 of value. If they keep that capitol invested in BTC and do hold only 1:1 in collatoral...no shit, that's is pretty damn reckless BUT they are making the promise that they have the capitol to back it. Given the exponential rise in BTC again this last year I'd be inclined to agree with them for now.

Claims that this process inflates the process of BTC seem far to exaggerated. It's reallocating value that was already there. Firstly, someone has to sell the BTC in order to buy the Tether with it so that argument is somewhat of a moot point. And if they are selling the BTC for USD or other fiat it's actually increasing the sell pressure of BTC against said fiat. It might open the opportunity for trades/swaps which could drive the price either direction faster...but it doesn't make value out of thin air.

I'm not saying Tether is not responsible for poorly investing or protecting the collateral that backs their coin. I'm just saying I can't compute the claims that this is some sort of manipulation scheme. The concept is exactly the same as decentralized stable coins like DAI except the backer is a centralized entity and not a contract. Does me minting DAI magically pump the value of ETH because that is the coin I put up as collateral? No that's a ridiculous claim. I can however feel comfortable holding DAI knowing that the contract will enforce the value of the token no matter the price of the ETH backing it.

[eightysixfour]

> but it doesn't make value out of thin air

You are right, but it can drive the price. Imagine you have an infinite supply of USDT and are deeply in debt, people currently believe the USDT are backed by $1. You are incentivized to create USDT, trade for Bitcoin/crypto and then, since you are also an exchange, create fake trading volume with yourself to drive the price up (it costs you nothing, just some fake $0 USDT!), which drives people to get in with real money.

Do you not see how the incentives here are for Bitfinex and Tether to behave terribly?

I think it is worth noting that I am pro-cryptocurrency and want alternatives to government backed fiat to exist, but to do that the whole industry needs to operate on solid, transparent foundations. People choosing to trust companies that have lied to them repeatedly is an enabling behavior that will result in more scammers and, eventually, regulators.