We have a tale to tell today, a tale of Tether, Bitcoin, and how the most volatile asset in the history of volatile assets is being used to back a supposedly “stable” currency. Yes, you heard it right. It’s like using a trampoline as the foundation for your house because the ground is too dull and oh-so conventional. But let’s not get ahead of ourselves…
A Little Story Called ‘The Terra-Luna Fiasco’
Before diving into the Tether tale, let’s stroll down memory lane and revisit the Terra-Luna fiasco. Ah, Terraform Labs, the mastermind behind the TerraUSD stablecoin – a beautiful concept ruined by an unorthodox backing policy. A stablecoin, backed by cryptocurrency, turned out to be as stable as a soufflé in an earthquake.
Tether admitted today to buying billions worth of #Bitcoin in Q1 2023, and says they will buy more…
This is what the “conspiracy theorists” have been saying for years. My guess is some damaging news is coming out shortly, and they’re trying to mitigate it.
— WhaleWire (@WhaleWire) May 17, 2023
And what happened when the rumors started? A classic bank run, but in the digital world, resulting in a price crash that echoed throughout the crypto market. Isn’t that a beautiful prelude to what we might witness with Tether?
Tether: The Next Big Show in The Crypto Circus
Tether Limited, a private company with as much transparency as a brick wall, has decided to follow in Terraform Labs’s footsteps. Their grand plan? Back their stablecoin, Tether, with Bitcoin. Yes, you heard it right. Bitcoin, the poster child of volatility, is now the sturdy backbone of a stablecoin.
It’s as if they saw the Terra-Luna fiasco and thought, “Hey, that looks like fun! Let’s do that too!”
The fact that Tether isn’t fully backed by US dollars has been a concern for years. But instead of addressing these concerns and putting investors at ease, Tether decided to add fuel to the fire by buying billions worth of Bitcoin. The rationale behind this move is as clear as mud.
A Potential Domino Effect: The Risks of Cryptocurrency
Let’s not beat around the bush here. If either Tether collapses, it won’t just be a problem for those holding these coins. It’ll be a domino effect, a seismic wave that will shake the entire crypto market. And it won’t stop there. The repercussions could reach as far as the global financial system. Because you see, in the magical world of cryptocurrency, even “stable” coins can cause instability.
The Grand Finale: A Word of Caution
Before you dive headfirst into the volatile pool of cryptocurrency, remember this – behind the glittering allure of digital assets lie risks that are as real as the money you’re investing.
Whether it’s Tether’s bitcoin-backed stability or any other newfangled crypto-concept, remember to look beyond the smoke and mirrors. After all, a trampoline might give you a thrilling jump, but it’s a terrible foundation for a house.