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Comment by Avalaxy | Hacker News Reader

As a noob who owns some bitcoin and ethereum (both stored on an exchange), how does tether being a scam (which I do believe in) affect me? I don't hold any tether myself.

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It affects you directly because: 1 - many exchanges hold Tether as a reserve and use it extensively for various transactions between the exchanges, which means that if Tether collapses they could have huge holes in their balance sheets. Some exchanges (Binance especially) could become insolvent overnight. No money in, no money out. Read up on Mt. Gox if you want to see what happened the last time an exchange went belly up.

2 - If you believe the worst allegations, then Tether is artificially propping up the value of Bitcoin. In the event of a run on Tether, Tether may be forced to sell thousands of Bitcoins abruptly onto the market to get cash.

3 - The fallout of a true worst case scenario for Tether could lead to crypto being reclassified in order to fall under all the relevant financial regulations that banks and the traditional finance sector are subject to.

As someone who lost a LOT of bitcoin in the Gox hack, please for the love of god, don't store your coins on an exchange.

The theory is that the market cap of BTC/Eth/Shitcoins have been pumped by Tether buying power that isn’t actually backed by USD. People think Tether is printing fake money and buying crypto with it. If/when the world realizes this, the market cap of these different assets will return to their (possibly much lower) “real” values. This slide could cause another crash.

OMG don't store your coins on an exchange long-term. During a real crash, the exchanges have a tendency to be down just when you want to get your coins out. The less reputable exchanges (i.e., everyone but Coinbase) have a history of absconding with the coins during a crisis (see: "exit scams"). I would put your wallet on a hardware wallet, or at least an encrypted removable drive (this might not apply if you're in a dangerous area where break-ins are common).

Tether is used for the purchase of other cryptocurrency (i.e. creates demand). If more Tether has been created then dollars burned, then there has been artificial demand generated for cryptocurrency. Artificial demand, artificial prices. I think sometimes Tether's affect on the market is blown out of proportion, but it could have cooling effect on the trustworthiness of cryptocurrency and then exchanges used to facilitate trades.

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