There is a particular mystery relating to this “shady” digital token called Tether. People are asking, does the reported $814 million digital token called Tether actually exist? Is it legit or a major scam? What is its connection with BitFinex, the biggest bitcoin exchange in the world? Regarding this issue, Jordan Belfort, Wall Street’s so-called wolf, already made clear his opinions about Tether by calling it a “massive fraud.”
He is obviously not a fan of the digital coin. The negative opinion of not only Belfort but a number of people as well is due to the suspicious front of the company. The primary issue was in the fact that according to their home page’s, the company is subject to regular professional audits. However, the truth is Tether has never been actually audited.
Tether is a digital currency with its tokens’ value tied with the US dollar. According to them, they hold dollar reserves of equal number to their tokens currently in circulation. This way, they assure the people that their value has a reliable back up. As mentioned before, their website claims that their reserve holdings are published daily and that these undergo frequent professional audits.
They assure people that all Tethers circulating the market always match their dollar reserves. But reality seems to be far from Tether’s claims on its website. The company promised frequent audits but this was not the case. Additionally, the audits that have appeared on the site have not been thorough. As a result, people cannot help feeling suspicious about Tether’s activities.
It’s not really a surprise for people to feel concerned. After all, the Tether tokens currently in circulation are worth around 2.2 billion dollars. Tether’s actions are less than kosher and so the suspicion that their tokens are being printed based on thing continue to grow. People are starting to believe that Tether is only using the tokens to prop up Bitcoin.
On that note, a report said that Bitcoin’s worth would be 25% less than its current worth without Tether tokens. Many people in the cryptocurrency market are strongly suspecting that Tether is a major scam. The suspicion is that Tether is used as an artificial support to the Bitcoin market. The result is a consistent rise in the price of Bitcoin, which then attracted more people to invest.
They are saying Tether is used to convince people that Bitcoin continues to prosper. The tokens in circulation prevented Bitcoin to go down when it should have gone down. By keeping up with it, more and more people are lured into the game. According to Belfort, Tether provides a false support that fueled Bitcoin’s rise when it should have crashed a long time ago.
Besides Tether, another concern in the cryptocurrency involves BitFinex. According to its website, BitFinex is the biggest and most advanced bitcoin exchange platform. The exchange is not US-based and doesn’t work for the US citizens. It’s a major exchange in Taiwan and Hong Kong, which seems to be connected with Tether.
According to data provided by data.bitcoinity.org, the exchange has dominated the Bitcoin trade exchanges in the world with a market share of 41.72% That around 20% bigger share than US’s own exchange, Coinbase. It looks like great news but its history will leave people a bit of concern. BitFinex has a history of getting stolen of 1500 bitcoins due to a hack back in May 2015.
Then the next year, it suffers yet another hack. This time, the hackers stole around $72 million worth of bitcoins. But the concerns about BitFinex do not end here. People are also concerned that the exchange is not completely transparent about how it played a key role in the creation and establishment of Tether.
The crypto world is not impressed and fear that centralized exchanges will be the catalyst for destroying the whole concept of cryptos. It is no wonder that Ethereum creator Vitalik Buterin lashed out in a interview with Jon Evans at TechCrunch Sessions: Blockchain, stating:
I definitely hope centralized exchanges go burn in hell as much as possible
Back to concerns about Tether, the digital coin is pegged to have a rate of 1:1 with each Tether token having a corresponding dollar reserve. But this was not established as Tether is not completely transparent and lacks the necessary professional audits it promised. Because of the questions behind Tether, which is linked back to BitFinex, the largest cryptocurrency exchange is now being scrutinized.
The U.S. regulators started inspecting BitFinex, which followed by a report that it has parted ways with its auditor. Over the last few months, the cryptocurrency market fell under much attention due to the issues about bitcoin and ICO. But in the background of all these, the issue about BitFinex and Tether is quietly brewing. In March or April of this year, BitFinex said to have lost its access to the US banks it has been corresponding.
Normally, a financial entity wouldn’t have survived a knock to its service capability such as this. But since it is Bitcoin, the company did. BitFinex is a major player and if falls down, there’s going to be a meltdown. With issues concerning Tether and the relationship between the two, the cryptocurrency ecosystem could be really agitated.