On October 7th, 2021, Bloomberg released a BusinessWeek Article questioning the whereabouts of the $69billion reserves that backs the stablecoin Tether.
CEO Jean-Louis, and CFO Giancarlo Devasini of Tether deleted their Twitter account's following the release of the Bloomberg report.
Tether has since responded, dismissing the claim and calling the report an "aging story arc about Tether based on innuendo and misinformation". The response also includes a statement claiming all Tether tokens being fully backed and having consistently demonstrated by providing quarterly assurance attestations (as recently as the June 30, 2021 target date) confirming that all Tether tokens are fully backed.
There is some truth to Tether's statement, as it is not the first time Tether's reserves have been questioned. The Bloomberg report addresses the issue of Tether’s reserves backing, claiming they come from billions in commercial papers from large Chinese firms. This comes just a month after Chinese real estate developer Evergrande's default scare that dropped the crypto market at the end of September. Tether Holdings have put out an astonishing amount of digital coins reaching more than 69 billion in circulation, with over 69% being issued this year alone.
The fear that some have stated is that Tether issues large sums of coins to purchase and pump up the price of Bitcoin. This in turn fuels euphoria in the market, causing the average investor to pour more money into the market while Tether pulls out with a large profit.
The counter argument is that stablecoins are being used as intended, as a stable store of value and a vehicle to the crypto markets. Therefore the large issuance of coins is caused by a natural increase to market demand.
The idea that the issuance of Tether foreshadows a Bitcoin price pump is now taken by some as a bullish sign pointing towards a new bull run.
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