Tether (USDT) collapse would be a catastrophe. Let’s hope it doesn’t happen
There has been a rumor for quite some time now that Tether (USDT) does not have enough dollars to back the USDT coins in circulation. It is now emerging that the U.S government has subpoenaed tether and Bitfinex to investigate them on the same. If it is indeed true, this would be a catastrophe to the crypto world. It could easily devalue the market by over 80%. Don’t think so? Well, walk with me, I show why this is a catastrophe waiting to happen, if it’s true.
- It would significantly devalue the crypto market
One of the allegations against Tether (USDT) is that it creating value out of nothing, and that value is being used to pump up bitcoin prices. Essentially this means that the unprecedented rise of bitcoin in 2017 was not due to market forces, but unprecedented levels of manipulation. Therefore, the collapse of tether, God forbid it happens, would pull bitcoin down bitcoin to its true value, which some believe is in the $2000 range. In case you think that’s just a FUD, ask yourself, on what rational economic basis did the price of bitcoin rise from $1000 in January 2017 to $20,000 by mid-December?
Was there any mass adoption of bitcoin in that period? Absolutely not! Was there any improvements to the tech to make it any better? The answer is No! It then follows that bitcoin has basically been highly speculative up to this point, and if that speculation was driven by some element of manipulation, then we are about to experience the crash of the century. A drop in bitcoin to sub $5000 levels would hurt lots of investors who started coming with the hype that hit the market at this price level.
- It would attract stifling global regulations against cryptos
In the last few weeks governments have been keen on regulating the crypto market. South Korea has already enacted regulations banning the anonymous trading of cryptos. The same goes for China that is also planning to ban the centralized trading of cryptocurrencies. On its part, India has already declared a complete ban on all crypto activities within its borders. All these have contributed to the recent slump in crypto prices. Now imagine what would happen if it emerged that there is manipulation that threats the very existence of the crypto market, and by extension wipe out billions in people’s savings? That would attract a global crackdown and regulation in the crypto market in such a way that the market would probably never recover its recent vigor. At least not in the short-term. That’s why we should all cross our fingers and hope that the Tether story is not true.
- It would lead to capital flight
Investors in the financial markets hate uncertainty. That’s why any time there is negative news, markets plunge. You can also see the same happening in the crypto markets following a recent string of negative news. Now imagine what would happen if it were to be confirmed that there is indeed something going on with tether, and God forbid, it collapses.
There would be capital flight of unprecedented levels. People would give up on the whole crypto thing, save for the hardcore believers, and the market would see corrections in the 90% range. It would be the end of cryptos. This could be the reason why mainstream investors keep on repeating the same lines that, “they believe in blockchain but not cryptos.” Maybe they had foreseen a scenario where the market completely evaporates, but the anchor tech remains.
But don’t panic, so far nothing seems to have come out of the whole Tether (USDT) thing. However, that doesn’t mean that you let your guard down. This is the time to strictly follow the, “invest what you can afford to lose mantra” otherwise you might end up losing your shirt.