The issue pertaining to the possibility of an artificial creation of Tether tokens is turning many heads, and if some reports are to be believed, this might emerge as one of the biggest Ponzi schemes in the history of crypto markets. Many analysts are predicting that Bitcoin can collapse to as much as 80 percent if its price has been artificially bloated by the Tether tokens.
In yet another development which can be a bit concerning is that Tether has ended and ‘dissolved’ its relationship with audit firm Friedman LLP. Tether is being owned by Bitfinex, and one of the most famous critics of these two companies which go by the name Bitfinex’ed has recently posted a series of tweets, blogs, and schemes wherein the blogger accuses Bitfinex to have created Tether tokens “out of thin air” and artificially driving the price of Bitcoin.
Tether is a cryptocurrency pegged to the U.S Dollar which means that the cost of one Tether token USDT is same as the value of one U.S Dollar at any given point in time. Till now, Tether claims to have $2.2 billion investor deposits in its bank accounts that are backed by Tether tokens in 1:1 ratio. However, the investor concerns have been growing considerably since the series of reports being posted by Bitfinex’ed.
David Gerard, author of Attack of the 50 Foot Blockchain said: “Everyone in crypto is very worried about the tether situation, and if these really count as dollars.” Analysts say that if at all the news turns out to be true, this could probably trigger the next “bloodbath” in the crypto markets soon.
Moreover, with the recent parting up with audit firm Freidman raises further concerns. Auditing could have been one way to confirms whether Tether really has equivalent U.D Dollar deposits in its accounts to the number of USDT tokens out there in the market.
A company spokesperson is said to have emailed a statement to Coindesk of ending ties with Friedman LLP stating: “We confirm that the relationship with Friedman is dissolved. Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”
The spokesperson further wrote: “As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”
Moreover, a lot of skepticism has been raised on the issuance of Tether tokens. The company has reportedly issued a large number of Tether tokens around 50-100 million at a time, and there have been raising doubts as to which investors are buying them. With Bitfinex’s sinking relationship with banks last year, it has largely remained dependent on Tether for moving funds in and out of its exchange. Some raise doubts that Tether might be issuing extra tokens than the corresponding backing in U.S dollars, and further sending them to Bitfinex.
Last week, an anonymous report with the name “Quantifying the Effect of Tether” which concludes that it is “highly unlikely that tether is growing through any organic business process, rather that they are printing in response to market conditions. Tether printing moves the market appreciably.”
It also states that “48.8 percent of BTC’s price rise in the period studied occurred in the two-hour periods following the arrival of 91 different tether grants to the Bitfinex wallet. “Bitfinex withdrawal/deposit statistics are unusual and would give rise to further scrutiny in a typical accounting environment. If there is questionable activity, the author believes a 30-80 percent reduction in BTC price could be forecast.”
There have been mounting concerns regarding all of the suspicious activities pertaining to Tether tokens in the recent times. Nicholas Weaver, a professor from UC Berkeley’s International Computer Science Institute says that if Tether fails to build confidence in its investors and fails to hold its value, the crypto markets could possibly see “bloodbath”.
He tweeted: “At current prices, net new bitcoin requires $18million of net new dollars flowing in to maintain the price. Yet there is a net $100million a day of fake dollars in the form of Tethers…If that tether printing press ever breaks, there will be a true bloodbath on the cryptocurrency prices. Good.”