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Coin Metrics co-founder takes aim at WSJ’s Tether FUD

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The co-founder of crypto data and insights firm Coin Metrics has fired back at yet another article in mainstream media claiming that the “Bitcoin bubble” has been driven by Tether.

Nic Carter, a former Fidelity crypto asset analyst and Castle Island Ventures partner, slammed the Wall Street Journal article titled “Behind the Bitcoin Bubble” by Andy Kessler, alleging that it verged on “journalistic malpractice”.

“Normally, if you are a columnist writing in one of the most respected financial publications, you might try and evaluate the data behind that claim, instead of just uncritically accepting it. But Mr. Kessler did no such thing. He just blindly repeated a fanciful claim from an anonymous blogger in order to imply that Bitcoin’s price was somehow dependent on Tether.”

The award-winning WSJ writer based some of his fairly extensive criticism on the work of a blogger called “CryptoAnon” in a viral post called “The Bit Short: Inside Crypto’s Doomsday Machine”. Kessler wrote the blogger had “found that as much as two-thirds of Bitcoin buys on any given day were purchased with Tether” based on CoinLib data.

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Raising questions over Tether and its lack of audits and the idea USDT was being employed to buy Bitcoin to “jack up its price,” Kessler added;

“Normally I wouldn’t care. Bitcoin is nothing, it’s vapor, a concept of an idea. Transactions using Bitcoin are few and far between. It’s not a store of value—anything that drops 30% in a week can’t play that role.”

Kessler said he must also note that “wallet provider Coinbase, the largest holder of Bitcoin, says it ‘does not support USDT.’ Do they know something? (Coinbase offers its own stablecoin USDC, in partnership with Circle.)

Carter, who is now board chair at Coin Metrics, wrote that assessing trade between USDT and Bitcoin using data called CoinLib was “indefensible” as it included tens of billions of wash trading data from exchanges that reputable data sources ignore.

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He said any serious trader knows that “many of the exchanges composing the CoinLib sample are not credible, and that the resultant data was thus completely unreliable.”

“As I will demonstrate, this data is not sufficient to make the case that Bitcoin liquidity is dominated by Tether, and relying on it is liable to mislead. Unfortunately, the mainstream financial press is now amplifying these erroneous claims.”

Carter stated that CoinLib is taking the data outputs from marginal and often non-fiat connected Tether based exchanges as face value, and “unsophisticated analysts like CryptoAnon” are using it to disseminate FUD about Bitcoin’s liquidity.

He argued that highly regulated exchanges and institutional fund providers do not rely on or even support Tether in some cases and they all facilitate an on-ramp to Bitcoin and support the price.

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“Other entities like Cash App, Paxos, Paypal, BlockFi, Robinhood, Bitwise, and Grayscale all facilitate various forms of exposure to Bitcoin and are connected to the commercial bank system and in some cases publicly-traded companies. No Tether present.”

Carter concludes that Kessler needs more research and called for a retraction and a correction by the WSJ:

“Wild theories relying on data that everyone in the crypto industry knows to be erroneous do no one any good.”

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Hindenburg research offers $1m for disclosing exclusive Tether information

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  • Hindenburg has accused Tether of lacking transparency in disclosing its backing reserves. The firm says that this secrecy puts Tether’s investors at risk.
  • It isn’t the first time that Tether is facing accusations of irregular dealings. It has also come under fire for alleged market manipulation.

Hindenburg Research announced a one million bounty on information disclosing Tether’s (USDT). backing reserves. The forensic financial researcher has expressed its doubts about the stablecoin’s backing. 

According to Hindenburg, Tether’s secrecy on the matter exposes its investors to risk. This claim follows another by Alex Mashinsky that it was minting new USDT for cryptos. Such minting contravenes Tether’s terms. Mr. Mashinsky is Celsius’ CEO>

Today, Tether stands among the top 10 cryptocurrencies in the market. But, these claims might make it lose credibility within the crypto sector. The forensic financial firm says that it’s vital that Tether discloses its backing.

Now, its users can take advantage of this opportunity to earn a bounty. All they need to do is help the firm dig out the secrets surrounding the Tether stablecoin.

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Hindenburg is a financial firm dedicated to the exploration of financial research. It seeks solutions for major stress points within the financial and crypto space. Its diversified functions enable it to look into different financial aspects include credits, derivatives.

How Hindenburg plays a role in this research

Hindenburg is well-versed in offering the best investment advice. Besides identifying financial irregularities, it tracks financial fraud and illegal monetary connections. Since its start, it has been producing reports on different projects. It also maintains their progression of its platform.

Tether has kept mum on its possible fraudulent activity. It insists that it holds $1 is to every 1USDT on the company’s US dollar traditional reserves. But, it also stated that a good amount of USDT has its backing from US commercial paper. This factor places it at the most-coveted position in the commercial paper market.

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Not its first rodeo

In 2019, Tether found itself facing accusations of market manipulation. Additionally, it faced allegations of not disclosing all USDT risks to its users. It wasn’t alone in this as crypto exchange Bitfinex also found itself in the same scandal. Both companies were lucky after a court ruled against half of the plaintiffs’ claims.

But, New York’s district attorney general ordered an end of their activity in the state. Everyone is trying to understand why Tether finds itself in illegal claims. 

It’s a viable hedge against the volatility connected to other cryptocurrencies. But it isn’t doing enough to bring trust back from its users.

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Tether on the spotlight for minting new USDT used for crypto-loan collateral

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  • Tether faces more headwinds as one of its big customers, Celsius Network, confirms giving other cryptocurrencies as loan collaterals.
  • The loan agreement varies depending on crypto volatility, Celsius Network says, with higher crypto collaterals when crypto prices fall.

One of Tether’s major customers, Celsius Network quasi bank, says Tether lends out new stablecoins (USDT) in return for cryptocurrencies. This is contrary to the company’s current terms of service which state that “only money will be accepted upon issuance.” Alex Mashinsky, the CEO of Celsius Network, told the Financial Times;

If you give them enough collateral, liquid collateral, Bitcoin, Ethereum and so on . . . they will mint tether against it,

Additionally, he says “new USDT is issued for such loans,” then destroyed once the loan is closed. This strategy “does not permanently increase USDT in circulation,” he adds.

Launched in 2014, Tether’s USDT is the world’s leading stablecoin with a $70 billion market cap. The token’s utility mainly lies in providing easier ways to trade other crypto assets. As its name holds and as its white paper reads, Tether is backed to the US dollar at a ratio of 1:1.

In recent years, however, the stablecoin operator has been the subject of regulatory and media scrutiny. The Commodity Futures Trading Commission (CFTC) and the New York attorney-general’s office claimed misrepresentation of the firm’s reserves. Tether neither confirmed nor denied these claims, but was fined $41 million for the same. CNF also reported that Bloomberg Media had put forth similar claims which Tether threw out claiming a plot to defame it.

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Tether disputes claims of reserve Mmsrepresentation

In a primer published in May this year, the company says,

Newly issued [USDT] must be backed by collateral” and that “redeemed [USDT] tokens are not released back into circulation unless new collateral has been provided.

All through, however, the stablecoin issuer has declined to clarify its alleged crypto-lending feature or whether it was minting new tokens through it. Instead, it has issued the following statement:

We have a select, small group of customers that borrow USDTs in exchange for posting security. These loans are secured by collateral in Tether’s possession of well in excess of 100 percent of the loan proceeds and earn monthly interest. Our lending program was first disclosed long ago in our reserves breakdown and is not a secret.

But as Mashinsky notes, their USDT loans are typically 30 percent over collateralized, and amounts vary with volatility. Should Bitcoin, for instance drop, the company has to give Tether more of the crypto asset.

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Of note, Celsius, which US regulators are after for unregistered offerings, had borrowed $1B worth of USDT from Tether earlier this month.

Among its many troubles, Tether is now battling a US class-action lawsuit. Plaintiffs allege Tether issued unbacked USDTs to purchase Bitcoin and manipulate the market. The company has disengaged itself from such claims, calling the case “shambles” and a “clumsy attempt at a money grab.” The firm has also made a micro win as a federal judge dismissed half of these claims last month.

  • Tether faces more headwinds as one of its big customers, Celsius Network, confirms giving other cryptocurrencies as loan collaterals.
  • The loan agreement varies depending on crypto volatility, Celsius Network says, with higher crypto collaterals when crypto prices fall.

One of Tether’s major customers, Celsius Network quasi bank, says Tether lends out new stablecoins (USDT) in return for cryptocurrencies. This is contrary to the company’s current terms of service which state that “only money will be accepted upon issuance.” Alex Mashinsky, the CEO of Celsius Network, told the Financial Times;

If you give them enough collateral, liquid collateral, Bitcoin, Ethereum and so on . . . they will mint tether against it,

Additionally, he says “new USDT is issued for such loans,” then destroyed once the loan is closed. This strategy “does not permanently increase USDT in circulation,” he adds.

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Launched in 2014, Tether’s USDT is the world’s leading stablecoin with a $70 billion market cap. The token’s utility mainly lies in providing easier ways to trade other crypto assets. As its name holds and as its white paper reads, Tether is backed to the US dollar at a ratio of 1:1.

In recent years, however, the stablecoin operator has been the subject of regulatory and media scrutiny. The Commodity Futures Trading Commission (CFTC) and the New York attorney-general’s office claimed misrepresentation of the firm’s reserves. Tether neither confirmed nor denied these claims, but was fined $41 million for the same. CNF also reported that Bloomberg Media had put forth similar claims which Tether threw out claiming a plot to defame it.

Tether disputes claims of reserve Mmsrepresentation

In a primer published in May this year, the company says,

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Newly issued [USDT] must be backed by collateral” and that “redeemed [USDT] tokens are not released back into circulation unless new collateral has been provided.

All through, however, the stablecoin issuer has declined to clarify its alleged crypto-lending feature or whether it was minting new tokens through it. Instead, it has issued the following statement:

We have a select, small group of customers that borrow USDTs in exchange for posting security. These loans are secured by collateral in Tether’s possession of well in excess of 100 percent of the loan proceeds and earn monthly interest. Our lending program was first disclosed long ago in our reserves breakdown and is not a secret.

But as Mashinsky notes, their USDT loans are typically 30 percent over collateralized, and amounts vary with volatility. Should Bitcoin, for instance drop, the company has to give Tether more of the crypto asset.

Of note, Celsius, which US regulators are after for unregistered offerings, had borrowed $1B worth of USDT from Tether earlier this month.

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Among its many troubles, Tether is now battling a US class-action lawsuit. Plaintiffs allege Tether issued unbacked USDTs to purchase Bitcoin and manipulate the market. The company has disengaged itself from such claims, calling the case “shambles” and a “clumsy attempt at a money grab.” The firm has also made a micro win as a federal judge dismissed half of these claims last month.

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US Regulator Orders Tether To Pay $41,000,000 in Fines – Here’s Why

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The Commodities Futures Trading Commission (CFTC) is ordering the entities behind the Tether stablecoin (USDT) to pay $41 million in fines.

According to a new press release, the CFTC charged Tether Holdings Limited, Tether Limited, Tether Operations Limited, and Tether International Limited for making “untrue or misleading statements and omissions of material” related to USDT.

USDT is pegged to the US dollar, and Tether claims it is completely backed by corresponding fiat assets, including the dollar and the euro.

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According to the statement, the regulator examined 26 months between 2016 to 2018 and found that Tether only had sufficient reserves to fully back USDT on 27.6% of the examined days.

“In fact Tether reserves were not ‘fully-backed’ the majority of the time. The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that Tether falsely represented that it would undergo routine, professional audits to demonstrate that it maintained ‘100% reserves at all times’ even though Tether reserves were not audited.”

The CFTC also says Tether dipped its reserve funds into the operational and customer funds of crypto exchange Bitfinex.

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“The order also finds that, instead of holding all USDT token reserves in U.S. dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves; comingled reserve funds with Bitfinex’s operational and customer funds; and held reserves in non-fiat financial products. The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a ‘liquidity crisis.’”

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