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Tether scandal could crash the cryptocurrency market

by admin

Crypto News

Tether pioneered the topic of stablecoins, issuing USDT tokens 7 years ago in exchange for fiat.

Almost from the first years, the company constantly found itself in scandalous situations, initially hiding a direct connection with the Bitfinex exchange, a little later without notifying investors about the loss of $ 850 million. The funds were seized by the authorities on the accounts of third parties during the anti-money laundering investigation.

Tether lost access to 30% of the security fund, but did not cut the supply of tokens. When the information was revealed at the end of 2018, the cryptocurrency market lost 50% of its capitalization.

This case became the subject of a judicial investigation initiated by the New York attorney’s office. The court ordered Tether to pay a $ 18.5 million fine and was sentenced to a mandatory, quarterly audit.

The company is focusing its attention on this fact of independent confirmation of the USDT collateral, denying all accusations by Bloomberg journalists. However, the business publication managed to gain recognition from the Celsius Network, which received $ 1 billion from Tether secured by Bitcoin. The CeFi protocol pays the company 5-6% per annum in interest.

The transaction is not controlled by a smart contract, if the cryptocurrency falls heavily, there will be a threat of default. Bloomberg hints that the Tether fund may no longer cover its obligations by 100%. Part of the investors’ funds were spent on buying Chinese bonds.

The PRC corporate debt market is threatened by a series of company bankruptcies due to the default of the developer Evergrande Group, which is not able to “pull” obligations for $ 300 billion. Tether denies the presence of the developer’s securities in its portfolio, but hundreds of Chinese firms and even banks will “go to the bottom” of it.

70% of cryptocurrency pairs are denominated in USDT, but with a hole in the fiat backing fund, the token will lose its 1 to 1 peg with the US dollar. The launched coin sales will lead to a general panic sale in the cryptocurrency market.

In this regard, Tether will have to sell off the fund’s collateral, which contains 20% of US corporate bonds. Dumping such a number of securities will bring down the securities market, further accelerating the fall of cryptocurrencies and “catching” the stock market.

The US Federal Reserve pointed out a similar scenario a few months ago. Obviously, the department will pay attention to the publication of Bloomberg.


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