(1) Tether is largely orthogonal to bitcoin. It's a way to trade USD more quickly over the internet, which isn't really related to bitcoin, besides the underlying technology is similar.
(2) I don't know much about the 2017 run-up in terms of price manipulation. I think Ethereum was more impacted than bitcoin, but of course both experienced price surges and crashes. Is there any public info available on this?
It is common for Coiners to remain willfully ignorant about the price manipulation, because y'all don't want to admit how small, fragile, and wildly corrupt your ecosystem is.
1. Tether was announced as a "USD equivalent" - i.e. 1 tether == 1 USD which would be deposited somewhere in a bank accouont
2. Billions of dollars worth of tether were created with no USD backing, injecting fake value into the system
3 These tethers were used to buy BTC, thereby giving an artificial value to BTC since it was assumed thes BTC/Tether transactions could be treated as BTC/USD transactions.
Essentially a lot of fake demand was created for BTC, thereby inflating the price massively, and luring retail investors to spend real money for BTC since they saw it as a rapidly appreciating asset.
I think for this chain of logic to be true, there would have to be cases of people attempting to convert Tether into USD, and failing. That did happen with Mt Gox, so it’s certainly possible.
But your condition does not have to hold for this manipulation to work. Assuming Bitfinex made billions of real dollars in this scheme, they could easily cover the liquidity of cashing out anyone who wants to exchange Tether for USD.
[0]: https://www.wsj.com/articles/large-bitcoin-player-manipulate...