It doesn't take a genius – or even a technical analyst – to see that there are some intriguing movements on the Tether (USDT) price chart. Specifically, direct your attention to the blue tracker, which represents the market cap of the token. The relevant period is circled in red, as shown below.
As one can see, on January 27, 2018, the market cap of USDT increased by approximately $633 million, a 40 percent gain that occurred almost instantly.
Indeed, the Tether market cap at 16:59 UTC that day was $1.614 billion. Just five minutes later, the Tether market cap was $2.247 billion. And yet, the USDT price hardly deviated from its apparent peg to the equivalent of a US dollar. Incredible – it almost defies economics.
As claimed on the Tether website, "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD." That would mean that, ostensibly, Tether Holdings Limited added $600 million dollars (or its equivalent in various fiat currencies) to its books at some point before minting those USDT. That's distinctly possible due to the immense profitability of operating a cryptocurrency exchange.
Readers may remember that J. L. van der Velde has been listed as a part-owner in Tether Holdings Limited and is identified as CEO of the bourse Bitfinex on LinkedIn.
In fact, Tether further claims that despite international processing delays, "The Tether Reserve remains in surplus of the 1:1 backing of USDT and has more than the necessary currency on deposit to redeem all existing tethers."
However, this might seem a tad surprising since the project's "proof of funds" – a memorandum by the Friedman LLP accounting firm – found that Tether possessed approximately $440 million across three banks as of September 15, 2017. Of course, earlier this year, it came to light that Friedman LLP severed its relationship with Tether. It's not immediately apparent whether the relationship was dissolved over anything to do with the printing of Tether tokens.
But why is Tether important?
Well, at the time of writing, the token accounts for roughly $1.15 billion worth of 24-hour trading volume on the BTC/USDT trading pair. Yes, Tether holds sway over two of the top three largest bitcoin markets.
There has also been speculation that USDT might be utilized by Bitfinex, the largest bitcoin exchange by volume.
Forgetting the bitcoin maximalists for a second, Tether is also influential to the Ethereum ecosystem, as demonstrated by the prevalence of ETH/USDT trading pairs on OKEx, Binance, and Huobi.
As ETHNews previously reported, Bitfinex and Tether were subpoenaed by the Commodity Futures Trading Commission (CFTC) in December 2017. And, after it was revealed that ING Group has a banking relationship with the companies, the Dutch Parliament demonstrated an active interest in the activities of Bitfinex and Tether.
We certainly live in interesting times.