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The community reacts: "Tether has more backing than my bank account"

chepicap.com 01 May 2019 22:00, UTC

The building pressure from the Tether/Bitfiniex imbroglio has forced Tether to admit that it’s stablecoin isn’t fully backed, with only 74% of USDT’s supply accounted for; but with the markets flaccid reaction, what is the crypto community saying about this latest revelation?

Okay so perhaps “revelation” is a little bit of a misnomer for this unraveling situation, no one is particularly surprised that Tether’s USDT isn’t fully back, its been speculated upon for many months.

However, the firm isn’t worried about this latest declaration, with a representative lawyer stating that Tether doesn’t need to be backed 1:1 for every USDT issued.

Ethereum co-founder and Cardano founder, Charles Hokinson seemed to echo this aformentioned statement, drawing parallels with traditional banking, Tweet the following:

Well at least tether has more backing than my bank account https://t.co/Tm6ZgBiXZF
— Charles Hoskinson (@IOHK_Charles) April 30, 2019

Surprisingly, despite the FUD and controversy surrounding Tether, many shared this perspective:

Fear inducing headline:

“Only 74% of #Tether is backed by cash and equivalents😱”

The truth:

Your bank would collapse if everyone tried to withdraw, they have nowhere near 74% liquidity.

Calm down people. Buy Bitcoin.
— Bitcoin Birch 👨‍💻 (@BitcoinBirch) April 30, 2019

Max Keiser, notable Bitcoin propagator, and host of the Keiser Report also noted this, suggesting that the Federal Reserve is only 1% backed…

Tether is 74% backed.

Fed is 1% backed.

JP Morgan is -20% (un)backed.
— Max Keiser, tweet poet. (@maxkeiser) April 30, 2019

You think tether is bad, wait til you learn about the federal reserve.

Whew, boy
— Rick (@CryptoRick_) April 30, 2019

… and they may have a point. Many banking systems run upon a fractional reserve, in which only a fraction of bank deposits are backed by actual cash, making a fraction of those deposits available for withdrawal. The reason for this is to expand the economy by freeing up capital that can be loaned out to others.

This system saw a myriad of banks forced into closure during the Great Depression of 1946, because of a run on the banks with many people trying to withdraw at one time.

However, not everyone agrees with this, with a few seemingly seeing the double standards within many of the aforementioned arguments:

Bitcoiner Project Assessments:

- DAI/Maker: SCAM
- Zcash: SCAM
- Litecoin: SCAM
- Ethereum: SCAM
- The Fed: SCAM
- The US Government: SCAM
- Bitfinex/Tether: Listen, it's complicated. You really have to dig into the nuance of the situation. Don't want to rush to judgement here.
— Ben DiFrancesco (@BenDiFrancesco) April 30, 2019

However, one Twitterati summed up the situation in a way that pretty much everyone can get behind, posing the question: if Tether is only 74% backed by fiat which is backed the “full faith and credit” of the U.S. government, then what are Tether holders actually holding?

Thinking about it, holding tether is holding a token which is only 74% backed by something which is only fractionally backed.

Basically you’re holding an ant’s fart $USDT ↔️ 🐜 💨
— Goomba (@remigoomba) April 30, 2019

The fallout even made Justin sun postpone one of his incentive drives, putting TRON’s USDT rewards program on hold until further clarity was given regarding the situation:

I’ve decided to postpone our #USDT rewards program for future updates until there’s more clarity regarding @bitfinex and @Tether_to. Regardless, I firmly believe stablecoins will continue to play a big role in the blockchain space. $TRX #TRX #BTT $BTT https://t.co/xpe1eA2URK
— Justin Sun (@justinsuntron) May 1, 2019

So, while the rocky debate continues, the market – for now, at least - seems stable.

What do you think about this latest revelation? Let us know in the comments!

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