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Tether (USDT) Accidentally Creates $5 Billion in Crypto

Stable coins, which are backed by fiat currency, have become an integral part of the crypto ecosystem over the past couple of years, and in that regard, Tether (USDT) is possibly the most well known. However, the very fact that it is backed by fiat makes it possible for it to be prone to certain errors, and that is exactly what happened yesterday when the team behind USDT made a mistake that had an effect on the wider crypto market for some time.

Administrative Error

In an astonishing development, the members at Tether transferred $5 billion worth of USDT tokens to the TRON Blockchain from Omni Layer, instead of the $50 million that they had originally meant. All of a sudden, the market was flooded with billions of dollars in Tether that had been created out of the thin air due to an administrative error on the part of Tether team members.

However, the team got to work quickly, and just four minutes after the transfer had been made, $500 million worth of Tether tokens were destroyed. Later on, $4.5 billion worth of token were burned in order to neutralize the error that had occurred in the first place. The problem emanated from Polinex, a highly popular and well-regarded crypto exchange. Tether had actually requested the exchange to take care of the swap, and that is when the error took place. Polinex clarified the issue in a statement.

>> Bitcoin Tumbles Below $10K Mark as Crypto Market Turns Bearish

On the other hand, the Chief Technology Officer of Tether, Paulo Ardaino, and crypto exchange Bitfinex stated that they proceeded to burn the tokens quickly enough. He took to Twitter and shared a tweet in which the burn transactions of Tether had been recorded. However, he conceded that such an error could have had a debilitating effect on the entire crypto market. It is the sort of error that can always happen when it comes to currency generation in which there is a human element, but such things usually do not happen with traditional cryptocurrencies.

At the time of writing, Tether is trading higher by 1% at $1.

Featured image: DepositPhotos © REDPIXEL

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1 USDT to 1 US Dollar May Actually Be Accurate

According to Bloomberg, cryptocurrency stablecoin Tether (USDT) has enough fiat dollars to back its tokens in circulation. No doubt, many readers will scorn that this is just another rumor as Tether is synonymous with controversy.

What’s going on?

Tether has Fiat Dollars

The original stablecoin has faced a myriad of controversy since the middle of this year when investors began questioning the validity of its purported 1 for 1 token value.

A stablecoin works by having enough fiat reserves to equal the number of tokens issued. This means that 1 Tether would be equal to 1 dollar. The idea is that it offers a safer form of crypto trading for investors who could cash in their Tether tokens at any given time and be assured that they would receive the exact same amount back in dollars. Stablecoins also act as a safety for trading with other crypto coins.

But Tether faced controversy when investors didn’t believe it had the same dollar amount as it had in its USDT coin.

However, today’s reported suggests otherwise.

Bank Statements

Bloomberg cited “bank statements” it had “reviewed,” and concluded that Tether did, in fact, have a combined fiat bank balance equal to the USDT in circulation. The period in question is between September 2017 to July 2018.

>> Coinbase Improves and Adds Crypto-to-Crypto Trading

The report also claims that the company made $6.6 million in interest in the first half of 2018.

Despite its design of being pegged 1:1 with USD, USDT has in fact been fluctuating heavily in recent months. At the time of writing, each Tether is worth $1.01 USD. So its value is over par currently. This reflects the increasing popularity of stablecoins in recent weeks, specifically as Bitcoin and other altcoins have fallen dramatically in value.

The controversy over Tether has been such that the company, along with cryptocurrency exchange Bitfinex, received subpoenas from US authorities at the end of 2017. Last month they added a price manipulation probe.

What do you think about Tether?

Featured Image: Depositphotos/artefacti

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Did Tether (USDT) Really Manipulate the All-Time Price Highs of Bitcoin (BTC)? – Crypto Currency News

Tether (USDT) & Bitcoin (BTC) – A new study has surfaced this morning putting Tether in the negative spotlight once again. Last December, Tether was subpoenaed by the U.S Commodity Futures Trading Commission to provide proof that the digital currency was in fact back by a reserve of U.S. dollars. Bitfinex was also subpoenaed due to it losing banking relationships, but continued to remain operational.

CEO of Bitfinex, JL van der Velde, spoke out against the accusations last year in an emailed statement and said:

“Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.”

Around this time, Bitcoin (BTC) reached its record high of $20,000 a coin, and these events are what prompted John M. Griffin and Amin Shams from the University of Texas Austin Department of Finance to investigate Tether’s movement.

>> Is Day-Trading Ruining Bitcoin (BTC)?

“Is Bitcoin Really Un-Tethered?”

The 66-page research paper suggests that shows that Tether was “used to provide price support and manipulate cryptocurrency prices.” The paper claims that half of Bitcoin’s price rise within December 2017 was due to Tether and its issuer Bitfinex.

The research paper says:

“Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.”

Griffin said in an interview that he’s “looked at a lot of markets” and manipulation in a market leaves tracks in the data. The data tracks with Tether are “very consistent” with a manipulation hypothesis.

Griffin and Shams’s paper has been downloaded a total of 2,780 times today and currently has 7,645 abstract views. What will become of the research remains unknown at this time, but Tether (USDT) just passed DASH and Monero to become the 12th largest cryptocurrency by its market cap.

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