Can Tether Pump BTC Through Uncontrolled Emission?

Tether’s success has always attracted people who wanted to prove that the issuer of the world’s leading stablecoin did something wrong.

Recent reports indicated that a years-long lawsuit against Tether and the crypto exchange Bitfinex was brought back to life by filing an amended complaint, which accuses them of manipulating crypto prices.

In short, the plaintiffs claim that Tether prints USDT without any collateral. Then, the stablecoin is used to buy crypto, including BTC, to artificially boost prices. According to plaintiffs, crypto investors overpaid for crypto because of the pump and, therefore, suffered billions of dollars of damage.

The case has been dragging on since 2019, and the recent complaint is aimed to revive it. While the litigation continues, we will look at whether it is theoretically possible to “pump BTC using the uncontrolled emission of USDT.”

The current USDT market cap exceeds $114 billion. Reserves, as reported by Tether and audited by BDO Italia, mostly consist of Treasury bills (79.88%), overnight reverse repurchase agreements (12.2%), and money market funds (6.77%).

Since 2019, no one has been able to provide evidence supporting claims that Tether was printing USDT out of thin air without respective collateral. Given the attention Tether gets from its competitors who dream about taking its market share, it’s hard to imagine that the company would have been able to get away with such tricks without getting discovered.

Taking a look at the chart of USDT market cap in recent years, we can see a fairly strong pullback from $82 billion to $65 billion. This pullback occurred back in 2022 when crypto markets found themselves under pressure amid the Terra (LUNA) disaster and FTX collapse.

Such a pullback is hardly surprising as the USDT market cap depends on the demand for stablecoins, which, in turn, is correlated with demand for crypto in general. It should be noted that the correlation between the USDT market cap and demand for “true crypto” is not full.

Demand related to purchases of coins and tokens is not the only source of demand for USDT. The stablecoin is actively used for cheap transactions, including international ones. With a daily trading volume that is often close to $70 billion, Tether is the most traded asset in the crypto universe. In addition to transactions, people who reside in countries with weak economies use Tether for savings, which also creates demand for the stablecoin.

In order to “pump BTC”, Tether first needs to get away with printing USDT without sufficient collateral (a charge which has not been proven despite multiple attempts) and then use it to secretly buy BTC (obviously, with the help of some shady crypto exchange – another charge which has not been proven).

Put simply, it’s just another conspiracy theory. There are three main pillars for USDT demand: crypto demand, transactions demand, and inflation protection demand. If demand grows, Tether is able to purchase collateral and print additional USDT.

There’s no need to “pump BTC” with USDT: if demand for Bitcoin grows, demand for USDT will grow, and traders will need USDT to buy BTC on exchanges.