Unbound? Bitcoin USDT Premium hits 9-month high as investors price in tether risks

The price of Tether’s USDT stablecoin, which is said to be backed 1: 1 by US dollars, has recently fallen on major cryptocurrency exchanges. Market analysts discuss whether the price difference is just a coincidence, a product of inefficient markets or traders who factor in risks – also known as “risk premiums”.

If you have any input / evidence or information on the most recent Tether FUD, please post it below ⬇️

Curious why everyone is talking about it again … seems to pop up every few months.

– Luke Martin (@VentureCoinist) October 3, 2018

According to CryptoCompare data, Tether’s price recently dropped to $ 0.955 and is trading at $ 0.993 at press time, having apparently lost its peg to the USD. While the current difference may seem small, it means that BTC / USDT is trading $ 55 higher than BTC / USD and that gap has just hit a 9 month high, but is there any real risk?

When USDTUSD is trading lower, BTCUSDT needs to trade higher than BTCUSD to keep the markets in line. Otherwise there would be risk-free money for arbitrageurs. #Tether pic.twitter.com/TTAUJrl1l4

– Alex Krüger (@Crypto_Macro) October 3, 2018

Controversy over tether

Some critics argue that the company does not publish transparent or timely audits, it is impossible to tell if they have a 1: 1 reserve of USD. Meanwhile, the circulating supply of USDT tokens has grown to 2.8 billion. As a result, Tether has been on trial for months, with some critics even believing that its USDT tokens were printed out of nowhere and used to raise the price of Bitcoin, according to a study by University of Texas professor John Griffin, suggested.

As reported by CryptoGlobe, an analysis published by Bloomberg revealed seemingly unusual trading patterns in Kraken’s USDT / USD trading pair. The exchange resisted the results of the analysis. Tether was summoned by the US Commodity Futures Trading Commission (CFTC) late last year when regulators decided to look into whether the stablecoin was actually backed by USD.

A look at Tether’s website itself reveals that redeeming USD for USDT is seemingly impossible for new investors as “registrations are temporarily offline”. Critics claim that those who have accounts cannot redeem the tokens because they have to go through endless steps.

Tether is Krypto’s Hotel California: you can check out anytime, but you can never leave.
You can’t redeem the damn tokens. What does it matter whether they are supported or not? There is no mechanism to redeem your Tether FFS. You can’t get more stupid.

– Trolly McTrollface (@ Tr0llyTr0llFace) August 19, 2018

To top it all off, Nobel Bank, a financial institution in Puerto Rico that offers Tether and Bitfinex banking services, is now trying to sell itself after losing both of them as customers.

Reportedly, as an international financial firm, it should have reported suspicious activity to help US government agencies prevent money laundering. With Tether and Bitfinex registered in the British Virgin Islands, their accounts were likely protected as “Americans can remain anonymous when assets are held through offshore companies or trusts”.

Shortly after news of Nobel Bank’s plans circulated, Bitfinex announced “infrastructure maintenance,” which some claimed the exchange was preparing to conduct an exit scam. Investors reacted with fear, which caused the share price to decline. However, the maintenance upgrade went smoothly, which could reduce premiums in the coming days.

The mission statement shows that while it is more expensive today to buy BTC with USDT above USD (% Premium), the difference is only 0.801% or around $ 55. When it was revealed that Wells Fargo was turning its back on Bitfinex, the premium soared up to 8%, Crypto News Review points out. The premium briefly rose to 2% when Bloomberg announced that the CFTC had sent subpoenas for Bitfinex and Tether on Jan. 30.

A digital fiat currency

To answer the related controversy, Tether released an analysis of his bank accounts in June, made by the law firm of a former FBI director. While the report claimed there was one US dollar to cover every USDT in circulation, it remained with a proper public audit.

Although some have claimed the USDT token supply increase seems unreasonable, Kraken announced that it is plausible after analyzing its own fiat deposits. In a blog post, the cryptocurrency exchange revealed:

While our accumulated deposits are multiples of the USDT spent, we found a positive correlation of 0.78x with R ^ 2 of 61%. Given that USDT has been sold across multiple high volume exchanges during this period, we have no reason to believe that the token supply is artificially inflated.

Competitors are welcome

At the end of the day, Tether’s USDT appears to be the digital equivalent of a fiat currency on a whole new level. The company claims it is pegged to the USD, so it believes it is worth a certain amount, but it is only there as long as investors believe that promise. As recent events have shown, the USDT will fall as soon as investor confidence fades.

Various USDT alternatives have popped up recently. As CryptoGlobe recently reported, Circle launched a USDC stablecoin, and the Winklevoss Twins Gemini exchange introduced the Gemini dollar (GUSD), which along with the Paxos Standard (PAX) from the New York State Department of Financial Services (NYDFS) is regulated.

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