There is one scenario in which the 70 billion was at one time made-up money, but where it won't ever actually tank the crypto market:
1. Tether prints $1 billion with no backing.
2. Tether buys $1 billion of Bitcoin with the the fraudulent tokens.
3. Bitcoin triples in price.
4. Tether sells 1/3 of their position in exchange for hard currency, and holds that money in their reserves.
5. Tether now has 100% reserves backing the tokens they created, and is also holding $2 billion in Bitcoin. Maybe they sell the extra Bitcoin to diversify.
6. Rinse and repeat.
Under this scenario, what these guys did was to take a massive uncollateralized loan from ordinary consumers, use it to buy buy Bitcoin, and sell off the Bitcoin in order to pay back the loan. Basically an uncollateralized version of what most DeFi borrowers are doing right now, but at a massive scale.
As long as the price of Bitcoin is going up, the scheme a surefire way to make a lot of money. If the price of Bitcoin starts going down before they can cash out, then it can easily bankrupt them and crash the market—which is also a big risk with DeFi.
It could be that we are passed that point with Tether, though. With as much scrutiny as they are under right now, if Tether ever defaults, the people who run Tether are going to be wanted for criminal prosecution in dozens of countries. They will be running and hiding for the rest of their lives. I can't believe that a few more billion dollars in the bank is worth the risk—especially if they won't be able to access those billions.
If you look at the rate of issuance of Tether since June 1 of this year, it has flattened out dramatically.[0] Could it be that the people at Tether have realized that the jig is up, and are now just trying to get things in order so they can walk away clean? Maybe.
Or, it could be that they printed so much funny money last year that the amount of Bitcoin they need to sell is more than the market can accept without tanking the price of Bitcoin, given current market liquidity. Maybe they aren't generating more Tether for themselves because they figured out that whenever they try to sell the Bitcoin they need to sell in order to replenish their reserves, they crash the Bitcoin market. Maybe they're stuck.
Or it could be that Tether is fully backed, that they have never minted any Tether that didn't correspond to $$ in their bank account, and the reason that Tether's growth has slowed is only because people are now buying USDC and other stablecoins instead. (Not likely, in my opinion.)
If the 95% crash in 2017 didn't kill Tether I'm not sure what kind of price action could, unless they are in a materially worse position now than they were in 2017 (the accusations were already super common).
It really can't happen this way. Between 3 and 4, you'd tank bitcoin's value significantly (assuming $1B is able to triple bitcoin's market value). Any sizeable liquidation of bitcoin at an inflated price is going to affect the price heavily and so now you no longer have 100% backing. (This of course depends on how elastic BTC/USDT price is)
He isn't claiming the $1b tripled bitcoin's price, just that the price tripled while they were holding $1b in coins.
$1b could also triple bitcoins price without the liquidity problems you're talking about because the initial purchase, done intelligently, can increase the price enough to kick-start another buying cycle (bitcoin goes up 100%, ends up on MSM news channels, people download coinbase and buy bitcoin, loop continues).
Why would it necessarily tank the price? Using tether to pump the price attracts new investors, and if the rally starts to slow, they can just print more
1. Tether prints $1 billion with no backing.
2. Tether buys $1 billion of Bitcoin with the the fraudulent tokens.
3. Bitcoin triples in price.
4. Tether sells 1/3 of their position in exchange for hard currency, and holds that money in their reserves.
5. Tether now has 100% reserves backing the tokens they created, and is also holding $2 billion in Bitcoin. Maybe they sell the extra Bitcoin to diversify.
6. Rinse and repeat.
Under this scenario, what these guys did was to take a massive uncollateralized loan from ordinary consumers, use it to buy buy Bitcoin, and sell off the Bitcoin in order to pay back the loan. Basically an uncollateralized version of what most DeFi borrowers are doing right now, but at a massive scale.
As long as the price of Bitcoin is going up, the scheme a surefire way to make a lot of money. If the price of Bitcoin starts going down before they can cash out, then it can easily bankrupt them and crash the market—which is also a big risk with DeFi.
It could be that we are passed that point with Tether, though. With as much scrutiny as they are under right now, if Tether ever defaults, the people who run Tether are going to be wanted for criminal prosecution in dozens of countries. They will be running and hiding for the rest of their lives. I can't believe that a few more billion dollars in the bank is worth the risk—especially if they won't be able to access those billions.
If you look at the rate of issuance of Tether since June 1 of this year, it has flattened out dramatically.[0] Could it be that the people at Tether have realized that the jig is up, and are now just trying to get things in order so they can walk away clean? Maybe.
Or, it could be that they printed so much funny money last year that the amount of Bitcoin they need to sell is more than the market can accept without tanking the price of Bitcoin, given current market liquidity. Maybe they aren't generating more Tether for themselves because they figured out that whenever they try to sell the Bitcoin they need to sell in order to replenish their reserves, they crash the Bitcoin market. Maybe they're stuck.
Or it could be that Tether is fully backed, that they have never minted any Tether that didn't correspond to $$ in their bank account, and the reason that Tether's growth has slowed is only because people are now buying USDC and other stablecoins instead. (Not likely, in my opinion.)
[0] https://coinmarketcap.com/currencies/tether/