Everyone thinks Bitcoin's biggest risk is regulation, governments
or hacks. It's not. The biggest risk
is one company, Tether. Right now Tether controls $100 billion.
It's the largest stable coin on earth, supposedly backed
by US dollars. But here's the problem. Tether
has never had a full independent audit. They've been fined
by regulators, they've admitted to pass reserve misrepresentations, you
know, it's confidence drops even slightly, it's going to
be like a bank run. Instant panic, total liquidity freeze, forced
liquidations, cascading across every exchange. And
Bitcoin just gets obliterated, right? So I'm going
to show you exactly why Tether is cryptos and
particularly Bitcoin's biggest ticking time bomb, and
what happens when it breaks and why you should really be
considering closely what you own. So here is
the first section I want to discuss with you. It's what is Tether, right?
So let's start out simply. Tether, USDT, is
what's called a stable coin. It's supposed to be backed by
one to one on a US dollar basis. So one US dollar equals
one Tether, yeah? So that's what it's
supposed to be like. So it's stable. It's pegged to the US dollar.
Stability is what allows traders to move in and out of
crypto, avoid volatility, store value inside exchanges and
provide liquidity through this thing called DeFi and so forth. Tether's
market cap sits roughly at about $100 billion. That
makes it the largest stable coin on Earth. But
if the biggest dollar substitute is in crypto, and
it's not solid, what does that say about everything else built on top of
it? It's like an unordered to bank, right? So here's where
it gets uncomfortable. Tether has never undergone a
full independent top tier audit of its reserves. They
publish attestations, they publish summaries, they
publish breakdowns of holdings, but a full forensic audit
has never been done. So historically, Tether has been fined by
regulators. It's admitted misrepresentations in the past
and shifted its composition. It talks about different
reserves being commercial paper of unknown entities. They
even claim their own portions of US treasuries, right? But here's the
real key question. If you were running the largest, basically quasi-bank in
crypto, wouldn't you want to remove all of
the debt and do a transparent audit. So if it's clean,
why not prove it, right? And here's where it gets messy. There's
contagion risk. This is where it starts to escalate. It's
very scary. Crypto runs on liquidity. That's how
it runs. And liquidity runs on stablecoins. And
stablecoins run on trust. If confidence in Tether
drops, this is what happens. One, traders
rush to redeem all their USDT, their Tether coins, for real actual
dollars. Step two, exchanges start to halt withdrawals. And
step three, panic starts to spread across every single exchange, it starts to
spread, and then it forces liquidations, and it
starts to cascade. Prices then collapse massively. Liquidity basically
disappears and dries up. And we've seen kind of similar versions of this with The
FTX collapse and Terra Lunar and Celsius and all these other things. And
the markets basically freeze, right? And each time liquidity just basically evaporates.
Each time there's like force selling and accelerated collapse. It's just
wild. But here's the difference. FTX was a major exchange. Tether
is the plumbing of the entire ecosystem. So
if the plumbing breaks, How does the house stand? Just
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link in the show notes and let's get your money working for you. Now back
to the episode. So if we look back in history, which is all we can do, it
doesn't repeat, as I said before, but it rhymes. So in 2008, confidence evaporated
in mortgage-backed securities. The CDOs basically grouped
bonds that were just poisonous, right? And Lehman's, as a
result of that, collapsed. Lehman Rise, 100-year-old bank lending froze. Iceland
went bankrupt. Liquidity crisis. Banks didn't fail
because they were worthless, they failed because confidence vanished. And that's what
happened in the past in 1929 with bank runs. It's a psychology of
fear. And even when there's bank runs on solvent institutions, and
everyone withdraws, it collapses. And right now, as I'm recording this, I've said before in
just a previous episode, Binance is in trouble because people are
repealing and ripping out their crypto holdings out of Binance, and
that company, while solvent, can collapse. So crypto is very fragile
because it has no safe switches. It's
got no lender of Last resort, there's no deposit guarantees
like banks. There's no central bank backstop. There's
no coordinated rescue mechanism. If Tether faced
a true redemption crisis, who steps in? The Federal
Reserve. They're not going to do that. Not like they did in 2008 with the
GFC. So when trust disappears in a market built entirely on
trust, what's left? It's kind of like the
final domino. So Bitcoin's value proposition is
all about decentralization. But it's really a trading ecosystem.
It's actually highly centralized as most liquidity pairs against USDT,
right? So it's actually very centralized thing. It's just the
narrative is decentralized, because it gets more pundits into play, which
actually props up. or the price because there's no value in it. Most exchanges
use it as like USDT is a currency, so to speak. And
most of the arbitrage flows actually depend on
it, right? So if USDT tether breaks it significantly, all
the liquidity depends on vanishes. And when liquidity vanishes, vroom!
It starts to widen, buyers start to disappear, force selling, Bitcoin
technically could go to zero, right? Practically, it would mean total ecosystem
failure, and totally possible, right? This is one of the long tail risks no
one's talking about. And this is the one scenario that permanently destroys trust
in an asset class. Because it's not about a hack
or a rogue CEO or a bad algorithm or whatever happened
with Enron, you know, like poor accounting. It would mean that
dollars propping up the entire system weren't actually real. It's
like one big fraud, right? And once the trust is gone, it's
hard to rebuild it. And this is a real possibility. Now, to
be fair, Tether has survived multiple market crashes, it's
processed billions of redemptions, it's done that before, it's increased transparency over
time, it's done all these things. There's been Tether scares before, but
the risk is not about what has happened already, but it's more
about what could happen under stress, real stress, like a proper
recession, a proper redemption. an unwinding of
the entire system. It's not hysterical, but
it could be controlled. So here's an example. It's not really a prediction, it's more
of a black swan, okay? Something we can't see. But
it's the single most structurally dangerous point
in the entire world of crypto. If Tether holds, the system
survives. If Tether breaks, it won't just be
another crash, it'll be systemic, right? It'll be very much
the same as what happened in 2008 with mortgage bonds, but you won't have
a bailout. That would be the way I could explain it the most, and totally
possible, right? If the GFC could happen in 2008, this could definitely happen in
the world of crypto, right? And that's why you need to understand where liquidity truly
comes from. So I want to know, do you think
Tether is solid? Do you know much about it? Or is this a ticking time bomb that
no one's talking about? So if you want deeper dive breakdowns like this
without the hype and a BS straightforward show, without
tribalism and cult-like tendencies and
spruiking, except for my book, because you can buy for nine bucks, it's
just a read, go do it, then hit the subscribe button. Stay smart
and stay sharp. See you in the next episode. Thanks for listening to Money Grows
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