A run on Tether would create absolute, utter panic across the crypto space. The first immediate problem would be that most, if not all major exchanges would become paralyzed as they'd be forced to suspend withdrawals and trading of certain coins (or trading entirely). Prices would go crazy as exchange IT systems and trading engines seized up and failed under the load; verification of transactions on the chains could be hours behind the exchanges. The market would splinter as some venues freeze up, some go dark, and desperate traders flood the remaining live ones to cash out whatever they can by any possible means. Liquidity (at least on the bid side, lol) would vanish entirely as pro crypto trading firms and MMs are suddenly confronted with a shattered market unable to process trades, and where winning derivatives bets won't be paid out because the counterparties are bankrupt - exactly like 2008 but sans government intervention. BTC spreads would explode out to several thousand dollars, and the volatility would be insane, with a single-day $20k range easily in the cards. Most secondary coins would fall by 90%+ in one day, or in effect cease trading. On those venues where a more or less continuous market did remain functioning, my guess is we'd see BTC initially stabilize around $10k. However, this wouldn't be the end of the bear market; with the crypto ecosystem in ruins and the narrative busted, the HODLers would start limping home and the space would be staring down years of brutal bankruptcy proceedings and lawsuits. Ongoing BK cases would result in periodic mass coin dumps into whatever market remained, crushing the price over and over. Many leading figures in the crypto space will be facing criminal indictments in more than one country. Institutional and investor revulsion would put an end to talk of "institutional adoption", or an American crypto ETF. In the next 2-3 years, Bitcoin would definitely fall below the 2018 levels of ~$3k and I wouldn't be surprised to see it back below $1k. That's if Tether fails. If not, the bear market will be nasty but not so cataclysmic as described here.
If Tether fails, and it should, the above scenario is exactly what would have happen. The good thing, is that from the ashes of current BS a real Crypto market will be born, and it will be great in the long run for the space.
“It’s not a stablecoin, it’s a high-risk offshore hedge fund,” said John Betts, who ran a bank in Puerto Rico Tether used. “Even their own banking partners don’t know the extent of their holdings, or if they exist.” https://www.bloomberg.com/news/feat...-the-69-billion-backing-the-stablecoin-tether "The chief financial officer is Giancarlo Devasini, a former plastic surgeon from Italy who was once described on Tether’s website as the founder of a successful electronics business. "
This contradicts Johnarb's notion that very few tethers are on exchanges: "Sam Bankman-Fried, a 29-year-old billionaire who was in town to rename Miami’s basketball arena after his cryptocurrency exchange, FTX, told me he’d bought billions of Tethers, using them to facilitate trading other coins."
It is not up to date, but Tether has since grown More buyers of Tethers using fiat means more Tethers are printed There were redemptions recently but that is due to the fear of a collapse like what happened with UST UST is algorithmic stablecoin tied to value of Luna and treasury reserve (i.e. BTC) as those crypto assets went down in value, it started a death spiral on Luna and UST That death spiral process will not happen on Tether USDT since it's tied to the USD I think Tether USDT is a safe stablecoin that will not collapse and will not mind owning when I need to
The earlier linked Bloomberg article is really good, I suggest to anyone to read it before they make assumptions about the company. "I like the part where a child actor pedarest forms a shady Chucky Cheese token company with an Italian plastic surgeon / pornography copy protection magnate. All funded by a bank owned by the guy who made Inspector Gadget. You can’t make this shit up."
Tether has been lying about its reserves and is a ticking time bomb. Tether is essentially operating as an unaudited bank. Its massive size is now attracting the concern of the Treasury Department because of the potential impact on the financial system when it blows up.
Seems like Tether is a systemic risk to the whole crypto industry. I'm surprised more large players don't backstop it with their own money. If the scenario laid out by Specterx does transpire I wonder if the US Treasury will step in since cryto is heavily ensconced into the Millennium & GenZ culture.