What does this mean?

Most reputable Bitcoin exchanges allow their customers to exchange cryptocurrencies for US dollars (USD). However, some large exchanges including Bitfinex only offer "Tether" tokens (USDT), which are supposed to be exchangable 1:1 to US dollars.

Because Tethers are riskier than actual US dollars, the market attaches a risk premium to them by demanding more Tethers than USD in exchange for a Bitcoin. This site tracks that risk premium.

Why should I care?

Over $2 billion dollars of Tether have been issued, but the company behind them has never been audited and was subpoenaed by the Commodity Futures Trading Commission in December 2017.

What's more, Tether is closely linked to the Bitfinex exchange, which is suspected of using Tether to artificially prop up the price of Bitcoin.

If it becomes clear that Tether is not backed by USD, Tether holders will try to cash out into any other cryptocurrency at any price possible, causing prices on those exchanges to skyrocket. If this happens, those exchanges may become insolvent and trap customer funds completely, as happened in 2013 with Mt. Gox.

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Credits

Written by Jani Patokallio (@jpatokal). Data from Cryptonator and the GDAX API. Source on Github.