Isn't this an easy opportunity for arbitrage? Assuming it goes back up to $1. I thought that was the whole point of fiat-backed crypto?
It’s been a long standing allegation that tether is a fraud, counterfeited by Bitfinex to manipulate the spot price in a scheme to steal bitcoins (buying BTC with free tether printing).. [1][2]
The telltale sign of a bankrun at Bitfinex seems to be playing out, as you can see the spot price rises on Bitfinex meanwhile on other exchanges BTC spot price drops. Coinciding with the drop in USD:USDT pair losing its peg is a huge red flag.
Bitfinex might attempt a last ditch effort to avoid a MTGOX like collapse, it could be though a large enough drop of the spot price on other exchanges along with Bitfinex purchasing back their customer deposits in a fraudulent version of short selling.
Yet that assumes Bitfinex/Tether has liquid cash reserves to leverage such a trade.
https://i.imgur.com/pBO0nfY.png
https://i.imgur.com/2DkzWWm.png
[1] https://www.nytimes.com/2018/06/13/technology/bitcoin-price-...
As also evidenced by the fact that the price of all other crypto assets is going up, meaning that people are dumping Tether at a loss to buy other stuff at inflated prices.
Pretty much the only major exchange that does USD/USDT trades is Kraken, and the rate is looking distinctly wobbly today: https://www.coingecko.com/en/price_charts/tether/usd
That is a massive assumption, that very few people seem to currently hold.
I thought that was the whole point of fiat-backed crypto?
More and more people are starting to doubt that it actually is backed by anything.
This is actually why it's so hard to tell from this whether or not this is something bad or just "normal" because tether price always reaches lower levels like this when people get out of it to buy cryptocurrencies, too.
Maybe they think the bitcoin price is going to shoot up
3xin the coming months so using their money to buy tether
would be pretty stupid in that case no?
If they have invested the fiat in bitcoins, they aren't backed by US$ any more.
* The tether organisation doesn't have an effective way to buy back tethers. They might not have the processes/infrastructure in place.
* The tether organisation doesn't have the USD in liquid enough form to do said purchasing. For example, it might be in frozen bank accounts or offshore and take many days to transfer.
* The backing USD doesn't exist entirely.
One is that there's an ~8% chance of tether being long-term without value. That seems to be the dominant interpretation among critics of Bitfinex and Tether.
The other is that a short-term liquidity crunch is causing investors to take a haircut in order to obtain liquidity in their desired currency.
Rumors abound, but except for one tangential announcement from Bitfinex [1], I haven't heard much that is definitive about the current state of fiat deposits/withdrawals on Bitfinex. Currently the price differentials themselves are the strongest signal.
[1] https://medium.com/bitfinex/fiat-deposit-update-october-15th...
I deem it worth $1.00! why? because I said so.
I will sell it to you for just 95c
Easiest arbitrage opportunity.
Second point, 1 dollar is not a stable unit of value as viewed by other currencies. This is fine, you're valuing the fed vs currency x's backing resource.
That is a key point of fiat-backed crypto. Whether Tether is an example of fiat-backed crypto is another question entirely. :)