Tethers are Risky, Warns Weiss Ratings Agency

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Tethers pose risk in the world of cryptocurrency, but at this point are almost indispensable in terms of liquidity, pointed out the Weiss ratings agency. The analytical team recently released a list of ratings for crypto coins, puzzling a part of the community.

In a regular blog post, Weiss underlined issues that already are known to at least a part of the crypto community:

“The big issue: There’s never been an audit, and the folks behind Tether has been quite shady when asked. They have continuously claimed their tokens are backed 100% by actual dollars, yet they have failed to present any evidence to support this claim.”

The statement comes at a time when new Tether, or USDT tokens have not been printed to boost Bitcoin, but Ethereum-based tokens increased their supply.

Weiss also noted that even with the large supply above 2.2 billion USDT, the token is one of the few cryptocurrencies where daily volumes are larger than the total supply. This means that on some days, the entire supply of Tethers sees a fast turnover. Each Tether is, on average, traded twice in 24 hours.

The ratings agency warns investors to generally avoid sitting on a lot of Tethers, and only use them judiciously, if absolutely needing to use crypto-only exchanges and avoid fiat transfers.

Weiss for now does not predict a “run” on Tethers. At this point, there is no exchange except for Kraken with a free market to trade USDT for dollars. But crypto-only exchanges may see a very disproportionate exchange rate between Bitcoin and USDT, which would show a drop of value in the otherwise allegedly fixed-price token.

All the while, Weiss remains positive on the value of crypto coins:

The constantly changing crypto landscape means that Weiss ratings will also evolve its criteria to better reflect value and risk, as sometimes a project may not be transparent enough to evaluate. The review of Tethers is for now just an opinion, and not a verdict on their safety.