# How is Tether used to buy Bitcoin



## Brendan Burgess

Yahoo Finance said:
			
		

> Famed economist Nouriel Roubini says ...
> 
> Roubini noted that there’s academic research to suggest that “this pseudo stable coin Tether has been created by fiat” and is “used literally to manipulate the price of Bitcoin.”



Can anyone explain how this works in practice? 

The theory is that behind every Tether there is $1.  I don't think that anyone believes this.  

So they issue a billion dollars of Tether and use it to buy Bitcoin and push up the price. 

But someone who sells their Bitcoin presumably doesn't want Tether, they want real dollars. 

Or, are the transactions completely artificial?  They open an account with an exchange and lodge Tether in it. Then they open another account with Bitcoin. And swap them at inflated prices? 

Brendan


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## Duke of Marmalade

Good questions _Boss_, I hope you get answers.
I read up on Tether on Wiki.  This does not pass the smell test.  If Roubini et al were to make these allegations against Bank of America or Citibank they would be sued to high heaven and I am sure Tether have access to clever lawyers.
The fascinating point revealed by Roubini is that Tether's market cap increased from $4bn to $20bn last year.  Now as I understand it Tether was introduced to facilitate folk who like US dollars but wanted them in crypto form.  Now part of the narrative of the manipulators has been the potential debasement of fiat as a result of Covid, but why would that cause a surge in demand for Tether?
So listening to Professor Roubini who can doubt that bitcoin is worthless.  The problem with shorting it is that you are trying to second guess the manipulators.  How greedy are they?  Are they near the point of dumping or will they pump it up to $50?  I feel that once the music stops we will have one heck of a crash in the price.  The hyperbolic bubble is not good for bitcoin's long term sustainability.

The other interesting point of that interview was when the interviewer put it to him that Central Banks adopting digital was an endorsement of crypto.  Prof Roubini fairly rubbished that one but the telling point is that the interviewer had fallen for the false hype, because crypto land is replete with false hype and narrative.


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## Brendan Burgess

Has Tether any other function other than in relation to Bitcoin?  

Does anyone use it? 

Brendan


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## WolfeTone

My understanding is that the allegations, and investigation, of bitcoin price manipulation with tether refer to the 2017 spike in price and subsequent crash in price.
The investigation into this alleged price manipulation is, according to Roubini, near completion and he expects legal proceedings of some sort.
It appears to me that Roubini is pointing to an allegation of price manipulation in 2017 (investigation in 2018) as evidence of price manipulation today in 2020/21.
As I've mentioned earlier, Roubini is not saying anything new that he hasn't been saying over the last decade.

I had a look at Tether and from what I can make of it it's hard to see from my perspective to what extent Tether has, or is, manipulating the bitcoin price - admittedly I would be a novice in these matters. 
Tether has a mkt cap of $20bn and purports to be pegged to the $ 1:1, being a "stable coin".
The allegation appears to be that under audit Tether Ltd has failed to satisfy regulatory authorities that there is $20bn (or $4bn back in 2017) to substantiate its 1:1 peg with the dollar.
So assuming, at an extreme level, tether has zero capital and has bought $20bn worth of bitcoin, this is the fraud. This is form of front-running? Pump and dump?

The play at hand would be, using Tether (backed by nothing) to buy BTC and pump up the price and as the price starts to increase to then sell the BTC for actual $?

I'm not sure to what extent this is actually affecting the overall long-term price of BTC as the fraudulent activity requires both a significant buy to pump up prices, _and _a significant sell to exploit the dollar profit, resulting in a drop in prices.
Where do 'whales' fit into all of this? Who is co-ordinating the price manipulation?
Bitcoin is going for over a decade now and has a makt cap of $500bn...if there is price manipulation the extent of that manipulation is hard to gauge, but the larger the makt cap then the harder to manipulate, imo.
You would need money-printing-out-of-thin-air type resources of central banks or sovereign states to affect the price in the manner it is rising now, imo.
Are central banks or sovereign states buying bitcoin?


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## Duke of Marmalade

Strong suspicion Tether manipulated btc in 2017.  That required $4bn to increase btc mkt cap from $18bn to $350bn.  If that is proven can there be any doubt that an increase of $16bn in Tether in 2021 caused the increase in mkt cap of btc from $200bn to $500bn?  Perhaps the whales see the writing on the wall and are having their last fling, though I agree with @WolfeTone that it is hard to envisage collaboration amongst the thieves.
Whatever way you slice it, how can anybody make sense of a 50% increase in btc over the last 2 months?  What has changed?  A vaccine?  _theo _I know it is against AAM rules to give investment advice but cash in your btc NOW.


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## WolfeTone

Duke of Marmalade said:


> That required $4bn to increase btc mkt cap from $18bn to $200bn



This is where maybe my naivety is coming to the fore. How would a $4bn worth of purchases result in mktcap from $18bn to $200bn? Are we talking about $4bn of quick purchases to trigger a FOMO frenzy? Is that how it works?


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## DazedInPontoon

Personally I wouldn't touch tether or trust that it's fully backed until I saw conclusive proof that it was. But I also think that assigning all of bitcoin's value to tether shenanigans makes no sense. It just looks like working backwards from having your mind made up and trying to convince yourself tether is the secret key that explains it all.

Three points to consider:
- Bitcoin had a value for years before tether existed, and when it had way worse infrastructure, on-ramps and orders of magnitude less users.
- Coinbase now has 35 million customers, and does not deal in tether.
- Saylor and MicroStrategy alone bought over $1b worth of bitcoin in the last 6 months. Nothing to do with tether, and that's just one guy and his company.


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## Brendan Burgess

WolfeTone said:


> The play at hand would be, using Tether (backed by nothing) to buy BTC and pump up the price and as the price starts to increase to then sell the BTC for actual $?



But in practice, how do you use Tether to buy Bitcoin? 

Or do all the exchanges just accept Tether as valid? 

If that were the case, they could have bought $20 billion worth of BTC and the exchanges have useless Tether

Brendan


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## DazedInPontoon

Brendan Burgess said:


> Or do all the exchanges just accept Tether as valid?



No, some do, some don't.



Brendan Burgess said:


> If that were the case, they could have bought $20 billion worth of BTC and the exchanges have useless Tether


No, exchanges merely match buyers and sellers, the same as if you sell shares on degiro you are not selling it *to* degiro. If some customer bought $20m of bitcoin with tether, then some other customer(s) sold them $20m for tether, and now hold that tether.


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## Duke of Marmalade

WolfeTone said:


> This is where maybe my naivety is coming to the fore. How would a $4bn worth of purchases result in mktcap from $18bn to $200bn? Are we talking about $4bn of quick purchases to trigger a FOMO frenzy? Is that how it works?


Actually it was from $18bn to $350bn, earlier post corrected.
Two reasons.  The first is that the price is set at the margin between buyers and sellers.  $16bn of buyers is a lot even if the market cap is a multiple of this.   For example, I would guess the Irish housing market to have a value of about €300bn (1m houses at €300k each).  Annual sales run at about €7bn.  If someone came looking to spend €16bn, prices would go through the roof (see what I dun there?).  Admittedly a much greater proportion of the bitcoin stock is actively for sale. The second reason is the contagion or momentum effect, FOMO if you like.


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## WolfeTone

Brendan Burgess said:


> But in practice, how do you use Tether to buy Bitcoin?



Not sure, I can't find an exchange that seems to accept it. I did come across one site that facilitates users to deal directly amongst themselve. A type of ebay for crypto if you like. All sort of fringe stuff by the look of it. 

Roubini has promised that law enforcement will act in the coming months against tether and the manipulators. The details of that enforcement should give a greater insight into the extent of price manipulation.


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## Brendan Burgess

Hi Duke 

That is a great article. I had not realised the extent to which Tether is being accused  of fraudulently pumping Bitcoin - I thought it was just an idea of Roubini. 

But these two comments summarise it well: 

“I really don’t know how far the insanity can go. The crypto market is 100% irrational, sustained entirely by ignorance and misinformation,” he said. “How can anyone make predictions about that?”

*David Golumbia: The insanity will continue—unless it stops

Brendan *


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## tecate

DazedInPontoon said:


> It just looks like working backwards from having your mind made up and trying to convince yourself tether is the secret key that explains it all.


It certainly seems that way to me.



Brendan Burgess said:


> That is a great article.


What article? You mean Amy's blog post? And I guess it's 'great' in that having worked your way back, this helps to explain the world? I'm familiar with all of their 'work'. They all suffer from exactly the same issue as is going on right here. They're looking for an angle to take decentralised crypto down. They'll talk about Tether/Bitfinex today - and tomorrow it will be something else. Having watched Roubini's interview, you think he sounds like he has a modicum of objectivity?  Take a look at his twitter feed - the guy is obsessed.

Imagine that Tether has been around (in one form or another) since 2014 and yet, these guys are making a meal of it only now. The crypto community has had concerns with regard to Tether for years. It's nothing new. Ironically, they're not necessarily the very same concerns. The fact is that as it's centralised, it represents a risk by virtue of that centralisation. Having any sort of dependency on a centralised entity flies in the face of what decentralised crypto is all about. The irony is that whilst it could be a bad actor, there is no clear evidence that it has acted in bad faith for the most part.

There are academic studies that suggest market manipulation but what you guys or any of those 'esteemed' critics have failed to mention is that there are also academic studies that have emerged with the polar opposite finding. But hey, why should we bother to mention that?
On the occasions that it has erred to date, that has come about as a direct result of the actions of the international banking system (leaving them shut out - high and dry on a number of occasions) and US authorities (locking them out of their own funds). Having said that, I don't like crypto having any sort of dependence on a centralised entity. Tether has been a concern for me for a long time. There's no doubt but that certain bodies within the US want to take them down and one way or another, they will be taken down.

However, the market has grown and the dependency that the sector once had on Tether has long since passed. The use of stablecoins exploded in 2020. Whilst Tether remains the largest used, the stablecoin sector is broadening. There are a raft of other stablecoins available for use now. We had more news on that earlier today when the OCC issued yet another crypto-positive interpretive letter in which it sets out that Banks can now issue  stablecoins and host nodes to support such networks.
In terms of daily transaction volumes, Paypal and Grayscale account for multiple times that of Tether. So if Tether/Bitfinex is seen as an attack vector by someone in a powerful position, sure it will let some air out of the tyres but bitcoin and crypto are bigger than that. What doesn't kill it makes it ever more resilient.


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## Brendan Burgess

Can someone please explain how Tether works in practice. Forget for the moment whether it's the cause of the bubble or just another anti-Bitcoin conspiracy theory.

If I have one Bitcoin worth $40,000 and I go onto an exchange, I presume I can sell it today and get $40,000 cash into my bank account?  Will I get that cash into my bank account today? Or how long does it take? 

If I have one Bitcoin to sell, why would I exchange it for Tether instead of dollars? 

And the most fundamental question of all, what is the point of Tether?  If I have $40,000 in my AIB current account, why would I exchange that for 40,000 Tethers? 

I can understand that someone with $40,000 in their AIB current account might buy 1 Bitcoin because they expect that they can sell it for $1m cash later this year.  But Tether is tethered to the dollar, so it can never be worth more than $1. 

Has Tether any use at all? 

Brendan


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## Brendan Burgess

I read this but am only a bit more informed.

*What is Tether used for?*
_The primary purpose of Tether is to provide liquidity and a hedge against market volatility. The tokens are pegged to a fiat, which means there should be no loss of value or volatility as with other tokens.

This also makes the stablecoin less risky than typical cryptocurrencies. Its relevance as an alternative to fiat is a big advantage that cannot be overemphasized cherished by traders and investors. For many investors, Tether provides an avenue to park their investments when the market is bearish, especially in countries where converting from cryptocurrencies to fiat is a hassle._

So, if you have Bitcoin and you think that it might drop temporarily on its way to $1m , you exchange it for USDT.    And then when it starts to go back up again, you buy BTC with your USDT. 

Seems ridiculously risky to me.  You have to believe that the guys behind Tether Ltd actually have the real dollars in their bank account. Not only are they not audited, but they won't even tell journalists which bank account the dollars are in. 

Brendan


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## DazedInPontoon

I've never used tether and would not trust it, but I think I can provide some answers


Brendan Burgess said:


> If I have one Bitcoin worth $40,000 and I go onto an exchange, I presume I can sell it today and get $40,000 cash into my bank account?


Well more precisely you would typically sell on an exchange and then have a balance of EUR/USD/Tether/whatever on the exchange. You could then indeed issue a withdrawal of the fiat.



Brendan Burgess said:


> Will I get that cash into my bank account today? Or how long does it take?


Oh well now you're into the murky waters of legacy banking, it will depend on what country you are in, what country the exchange is in, is it a weekend etc, right?



Brendan Burgess said:


> If I have one Bitcoin to sell, why would I exchange it for Tether instead of dollars?


One reason would be that you can move it quickly between exchanges 24/7 regardless of geographical location. This is very important for market makers doing arbitrage.

Another might be that you want to transfer money to an exchange that does not accept your fiat of choice.



Brendan Burgess said:


> And the most fundamental question of all, what is the point of Tether?


In summary because usage of fiat is restricted by limitations of legacy banking.


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## Brendan Burgess

A bit more here

*








						What is Tether? Everything You Need to Know
					

What is Tether?Tether (USDT) is the world's most popular stablecoin. As such, it serves multiple purposes in the market making it a core cryptocurrency in many investor strategies. While it may be impossible to envision a crypto market without Tether, this hasn't always been the case. The Tether p




					www.securities.io
				



*
_As USDT issuance got into the billions, these claims came under heavy scrutiny. In March 2019, the company changed the backing of USDT to include loans to affiliate companies. _

So they are not backed by dollars but by loans denominated in dollars. 

*Exit strategy*
_Market volatility is a major concern in the crypto sector. When the bears start to take over the market, investors only have a few options to consider. They can sell their holding and convert them back into fiat. This process is time-consuming and involves the most fees possible. Or they can ride the bear market out and take the losses. Tether adds a third option to the equation. Convert to Tether and avoid the fees and volatility._


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## Brendan Burgess

Thanks Dazed

I presume you live and work in Ireland? Mayo perhaps?

If you decide today Friday at 12 noon to sell your Bitcoin for cash, when will the US$ arrive in your bank account?

I assume by the way, that if you sell them now, you will get $41,256 for it, even if it takes a day or two to get into cash.



Brendan


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## Brendan Burgess

DazedInPontoon said:


> I've never used tether and would not trust it,



So does that extend to the exchanges which use Tether? Would you trust your real dollars to Bitfinex?


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## DazedInPontoon

I would not trust my money (USD or bitcoin) to Bitfinex.

I have used Kraken, I checked if Kraken supports Tether and it seems they do, but I've never used it.

I have sold bitcoin on Kraken. When I sell, I sell to euro and therefore have a euro balance afterwards. When I withdraw from the euro balance it's a normal SEPA payment from their bank account to mine (typically has taken a day or so I think). USD or Tether are never involved. I could presumably sell for Tether instead of euro on Kraken if I wanted to though.


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## Brendan Burgess

Thanks Dazed

So if you sell today at 12 noon and Kraken pay by SEPA you should get it into your own bank account today, or maybe the next working day? 

Brendan


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## DazedInPontoon

yes


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## tecate

Brendan Burgess said:


> _As USDT issuance got into the billions, these claims came under heavy scrutiny. In March 2019, the company changed the backing of USDT to include loans to affiliate companies. _


In 2019, the Americans froze Bitfinex assets held in a third party financial services company. That is the reason that Bitfinex were backed into a corner and made these changes. This meant that rather than a complete 1:1 backing, reserves were reduced to 70%.


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## Brendan Burgess

Hi tecate

Do you use USDT ? 

Do you trust them?

Brendan


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## tecate

Brendan,
I have used USDT in the past but fleetingly. My view is the same as with any centralised entity in this space - the default position is not to trust. There are folks in places like China who rely on them due to state controls on trading. Others use them as part of their trading strategy.
As per my previous post, I believe that they have nevertheless proved to be very useful to the sector up until now. However the sector is no longer 100% dependent on Bitfinex/Tether.

An interview with their CTO and General Counsel is about to be published. That should help to further inform this discussion.  I'll post a link to it once its out.


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## tecate

@Brendan Burgess  - Here is that interview with Paulo Ardoino (CTO @ Bitfinex) & Stuart Hoegner (General Counsel @ Bitfinex).  LINK.
Clearly, this is their version of events. Somewhere between the two versions of events lies the truth. The current injunction restricting lending runs until January 15. It may be extended as has happened in the past. However, the interview does give folks a better understanding of how Tether works and the role that it plays.


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## Duke of Marmalade

Bold @tecate 
This thread is about the practicalities of tether.
I'm 25 minutes through the interview.  The interviewer is goo even though he stated upfront that he is "on their side".  The amount of squirming "we don't comment on that" is telling.


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## WolfeTone

Thanks @tecate. Well after listening to that, I would not be endeared toward tether.

I thought their defence was reasonably robust until the question about how Bitcoin ends up in the basket of reserves.
Obviously I cannot confirm either way, but I would suspect that there may have been some underhanded manipulation, in some form, at some point, to obtain bitcoin through unbacked issued tether as per the allegations.

On the flip side, the extent of any underhanded play in manipulating the price of bitcoin is very unclear and may be impossible to gauge. The explanation of not having the ability to prognosticate when is the right time to buy in the bitcoin market is valid.


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## Duke of Marmalade

I hope this link is of practical interest: Tether is too big to fail
That piece is pure slander, if untrue.  But the folk at Tether are above suing such folk.


			
				Tether General Counsel said:
			
		

> We don’t believe in suing our critics into silence… we think it’s better to counter fiction with facts.


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## tecate

Duke of Marmalade said:


> The amount of squirming "we don't comment on that" is telling.


Telling in that it doesn't tell anything! I mean, if you want to use that to prop up your bias, have at it.


WolfeTone said:


> I thought their defence was reasonably robust until the question about how Bitcoin ends up in the basket of reserves. Obviously I cannot confirm either way, but I would suspect that there may have been some underhanded manipulation, in some form, at some point, to obtain bitcoin through unbacked issued tether as per the allegations.


But like you say, nothing can be confirmed either way. They have not been able to answer the audit question fully for a long time. However, people have to realise that it may be for other reasons...not necessarily because they have unbacked tether on the market.


Duke of Marmalade said:


> I hope this link is of practical interest: Tether is too big to fail
> That piece is pure slander, if untrue.  But the folk at Tether are above suing such folk.


Again, you're working with suppositions and nothing more. Expending resources on a no-coiner nobody (and his personal blog post) isn't likely to be energy well spent. I've not heard anyone suggest a 'too big to fail' argument insofar as thinking its Tether that's too big to fail. What I would say is that whilst you're licking your lips at the prospect and willing it on, know that whilst there might be  some market correction, bitcoin will proceed onwards and not at $0 as you suspect.


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## Duke of Marmalade

@tecate That was quite a revealing link.  The Italian guy, his name was Ponzi or something like that, seemed particularly shifty.  This Deltech thing seems very dodgy.


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## tecate

Duke of Marmalade said:


> @tecate That was quite a revealing link.  The Italian guy, his name was Ponzi or something like that, seemed particularly shifty.


Thank you for that insightful observation. It really advances the discussion.


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## WolfeTone

Duke of Marmalade said:


> I hope this link is of practical interest: Tether is too big to fail
> That piece is pure slander, if untrue.  But the folk at Tether are above suing such folk.



_Duke, _did you actually look at the associated bitcoin/tether graph in the article you linked?
I'm trying to find a correlation between the two lines, over a three year period. Maybe you can point it out?

If tether was being used to manipulate the bitcoin price, I would have expected a greater correlation. Maybe I'm misconstruing the data on the graph?


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## Duke of Marmalade

tecate said:


> Thank you for that insightful observation. It really advances the discussion.


That is always my aim, you’re welcome.


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## tecate

It seems the long running investigation by the NYAG into Tether/Bitfinex has come to an end. Tether has agreed to pay $18 million whilst admitting no wrongdoing. That's the outcome after 2.5 years of investigation and 2.5 million pages of data provided via discovery.

The company also volunteered to submit quarterly reports re. reserves. going forward.

Nouriel Roubini had spun off tweet after tweet about Tether and how it was about to bring bitcoin down - and yet, radio silence when it comes to this outcome. Incredibly objective - he'll just move on and desperately grasp at any old FUD that's anti-bitcoin.


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## Duke of Marmalade

tecate said:


> It seems the long running investigation by the NYAG into Tether/Bitfinex has come to an end. Tether has agreed to pay $18 million whilst admitting no wrongdoing. That's the outcome after 2.5 years of investigation and 2.5 million pages of data provided via discovery.
> 
> The company also volunteered to submit quarterly reports re. reserves. going forward.
> 
> Nouriel Roubini had spun off tweet after tweet about Tether and how it was about to bring bitcoin down - and yet, radio silence when it comes to this outcome. Incredibly objective - he'll just move on and desperately grasp at any old FUD that's anti-bitcoin.


The news about Tether more or less getting off was a big disappointment to this no-coiner.  Nouriel had really led me to believe that this would be the denouement.  I am disappointed in him but he still remains my hero, his substantive arguments are rock solid IMHO.
I have just finished watching an online MIT course by Prof Gary Gensler on Blockchain & Money.  He describes himself as neither a BTC minimalist or maximilist.  The course was videoed in late 2018 with BTC having fallen from 20K to 6K. The bit on ICOs was trully unbelievable - what a scam! The course confirmed me in my no-coiner convictions, in fact BTC's current $50k price seems to me to hasten its downfall.  For example, it would seem to bring forward the day of serious intervention by the FED and that would be the end IMHO.


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## DublinHead54

Duke of Marmalade said:


> The news about Tether more or less getting off was a big disappointment to this no-coiner.  Nouriel had really led me to believe that this would be the denouement.  I am disappointed in him but he still remains my hero, his substantive arguments are rock solid IMHO.
> I have just finished watching an online MIT course by Prof Gary Gensler on Blockchain & Money.  *He describes himself as neither a BTC minimalist or maximilist*.  The course was videoed in late 2018 with BTC having fallen from 20K to 6K. The bit on ICOs was trully unbelievable - what a scam! The course confirmed me in my no-coiner convictions, in fact BTC's current $50k price seems to me to hasten its downfall.  For example, it would seem to bring forward the day of serious intervention by the FED and that would be the end IMHO.



There lies his problem, one can't perform a neutral assessment of BTC in the eyes of some in this forum. You have to be categorized as either a naysayer or BTC purist, no middle ground can exist. 

So I firmly expect that Prof Gary Gensler will be denounced in the next few minutes as having nothing valuable to say.


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## tecate

Duke of Marmalade said:


> The news about Tether more or less getting off was a big disappointment to this no-coiner.  Nouriel had really led me to believe that this would be the denouement.  I am disappointed in him but he still remains my hero, his substantive arguments are rock solid IMHO.
> I have just finished watching an online MIT course by Prof Gary Gensler on Blockchain & Money.  He describes himself as neither a BTC minimalist or maximilist.  The course was videoed in late 2018 with BTC having fallen from 20K to 6K. The bit on ICOs was trully unbelievable - what a scam! The course confirmed me in my no-coiner convictions, in fact BTC's current $50k price seems to me to hasten its downfall.  For example, it would seem to bring forward the day of serious intervention by the FED and that would be the end IMHO.


Gensler has been appointed SEC Chair. He at least understands the tech - Roubini doesn't (and is blinded by his open hostility to the very notion of decentralised money). On ICOs, there isn't anyone who would disagree with you (but that's not a slight on genuine blockchain projects). On the ultimate outcome re. btc, we'll have to see, Dukey. It doesn't look that way to me but there are plenty of twists and turns left in this story as it unfolds.


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## tecate

Tether (USDT) has just reached a circulation of $50 billion.


__ https://twitter.com/i/web/status/1388467287502598149
I don't trust them any more than any other centralised entity but they've definitely got an incentive to protect the business that they've built.


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