USDT will not be thunderstorm

Editor's Note: This article comes fromBlock beats BlockBeats (ID: BlockBeats), Author: 0x29, reprinted by Odaily with authorization.

Editor's Note: This article comes from

Block beats BlockBeats (ID: BlockBeats)

Block beats BlockBeats (ID: BlockBeats)

, Author: 0x29, reprinted by Odaily with authorization.USDT is the biggest thunder in the market. This should be the opinion of the vast majority of people in the industry. When USDT was issued crazily in the past two months, many articles stated that such unrestrained issuance of USDT is more and more risky. Thunderstorms can happen at any time.The phrase "Everyone is greedy and I panic" has been mentioned countless times, to the effect that it is a direction that everyone believes in, and it may not be the final direction of things.

In the previous article

"USDT: A Peer-to-Peer Electronic Cash System"

In the comments, some readers asked, "Why doesn't Tether have a thunderstorm?" When everyone thinks that USDT is risky and Tether will have a thunderstorm, things may not develop in the direction everyone expected.

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Tether's real risk

Everyone thinks about a question, what risk is the Tether company that issues USDT most afraid of. Is it regulation?

In November 2018, the U.S. Department of Justice began investigating Tether to investigate whether they were involved in the illegal manipulation of Bitcoin. This is probably the earliest confrontation between Tether and regulators; in April 2019, the Office of the Attorney General of New York first accused BitFinex and Tether of conspiring to embezzle USDT reserves to make up for the shortfall of USD 850 million, and then sued BitFinex and Tether.

And how much impact do these things have on USDT? Let's look at the price, which is the most intuitive expression.

It can be seen that these two regulatory issues did lead to fluctuations in USDT, but the maximum fluctuation was only USDT=0.94 USD, a maximum drop of 6%.

And what happened then? It was not the voice of the regulatory agency, but someone discovered that there was a problem with Noble Bank, where Tether placed USDT reserves. At that time, Noble Bank was exposed to be unable to continue operations and was preparing to sell the company's business. At that time, there was news that some users wanted to use USDT to pay US dollars at Noble Bank, but they were rejected by the bank.

The problem of redemption was the main reason for USDT's sharp drop at that time. In other words, what really worried everyone about USDT was not the regulatory issue, but the run. It is said that Tether embezzles reserves, that Tether is manipulating the market, and that Tether reserves are not 100%. Market investors are not afraid. The only thing everyone is afraid of is a run.

This is what Tether is most afraid of. If everyone wants to exchange USDT for USD from Tether, they will be thundered.

Then they need to find a way to solve this problem.

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Tether solution

So far, they have come up with two options:

The first one is the most intuitive, and it is written on Tether’s official website. In summary, it increases the difficulty of official payment.

The service fee section of Tether’s official website clearly states that the total amount of fiat currency deposits and withdrawals in the past 30 days is more than 100,000 US dollars, 0.1% for fiat currency deposits, and at least 1,000 US dollars for fiat currency withdrawals.

This means that if someone stores USD in Tether and converts it to USDT, Tether will charge a fee. If you want to convert USDT back to USD, you have to give Tether a sum of money.

Moreover, according to people familiar with the matter, the process of Tether’s redemption of U.S. dollars is also very cumbersome, and it takes about a week to complete, and it is also paid at a price of 1:1 U.S. dollars.

To sum up, if the money is simply passed through Tether's hands, it will lose a lot when it comes back. This is the first way.

The second method has not been verified, but on the whole, this logic is very feasible, and it is also the most brilliant part of Tether: they use the regulatory agency.

Let's think about it carefully, when the four letters USDT are mentioned, what is the first associated word that comes to mind? It must be words like "non-compliance" and "supervision". This may be exactly what Tether wants to achieve. They continue to attract the attention of regulators, let regulators investigate, release shocking evidence, such as audit certificates without any legal effect, arouse public opinion, and continue to attract the attention of regulators. All behaviors have only one purpose: to constantly emphasize USDT The relationship with regulation makes people conditioned to reflect non-compliance and regulatory issues as long as they think of USDT.

The result of this is: no one will go to Tether to redeem USDT.

Tether has been targeted by regulators, and USDT has been used for gray production. If you go to Tether to redeem US dollars and fiat currency, you will definitely be investigated by regulators, and no one wants to get involved with regulators.

The most important issue is that being targeted by regulation means that tax avoidance is impossible. When Tether officially pays legal tender, regulators will definitely investigate the use of the money, investigate whether it makes money, whether it is profitable, and taxes cannot be avoided.

Therefore, the feature of supervision has become a natural barrier for USDT to not be run on. The redemption process is slow, the handling fee is high, there is no premium, and there is a risk of being targeted by regulatory agencies, and it is impossible to avoid taxes. No one will go to Tether to redeem the legal currency USD .

This is the most brilliant part of Tether. The most perfect exchange channel for users is OTC: instant arrival, premium, almost no handling fee, the exchange risk of finding a reliable OTC dealer is far smaller than the official one, and tax avoidance.

Users themselves have blocked the official exchange path, and will not consider it at all.

There is also a precedent for this operation in history, that is, the prosperous years when the US dollar was related to gold. After World War II, the US dollar became the hegemony of the world currency, and it was stipulated that 35 US dollars could be exchanged for 1 ounce of gold. However, in August 1971, the Bretton Woods monetary system disintegrated, and the U.S. dollar was no longer pegged to gold. At the same time, the Federal Reserve also stipulated that no country, any central bank, or anyone could exchange U.S. dollars for gold at the Federal Reserve. There is still controversy about how much gold stock the United States still has. For example, Germany wanted to ship back the 1,268 tons of gold it stored in the United States, but was rejected by the Federal Reserve. Is this similar to Tether's current situation?

It's just that the Federal Reserve actively refused, and Tether passively refused.

Those who think that USDT will be thunderstorms mainly have three kinds: non-100% reserve risk, regulatory risk, and run risk.