Price rises seems to be driven heavily by more tether being created out of nothing, leading to another speculation and news frenzy, leading their btc being more valuable and safety from default despite creating more tether.
If bitcoin goes down rapidly or people start exchanging lots of tether for bitcoin (because you can't actually get USD from it) I think it will end up exposed, since as btc goes down their backing value goes down.
To be fair, this already happened. Bitcoin crashed from $22k to $4k, and this was at the height of tether worry.
I actually wrote a comment about their dynamic two years ago when this happened.
How do you know that? Can you see Tether USD bank account, and can confirm that no USD is deposited there when Tether is created?
https://crypto-anonymous-2021.medium.com/the-bit-short-insid...
The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that’s true! Tether Ltd.’s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month.
The answer was — at least up to the end of September 2020 — not nearly enough:
From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million — going from $4.7B to $5.3B. (The table is in Bahamian dollars, but the Bahamian dollar is pegged to the US dollar, so 1 BSD = 1 USD.)
But during the same period, total issued Tethers increased by almost $5.4 billion — going from $4.6B to $10B!
