As long as this continues, Bitcoin's value will fluctuate violently as pump and dump schemes are executed.
Tether is a crypto that's being generated at will by Tether Limited. It's pegged to the dollar at a 1:1 ratio, which means they'd have to have 1 real dollar in reserve for every Tether in circulation. They claim they do, but it's glaringly obvious that they're lying.
The real problem is that Tether is majority owned by Bitfinex, one of the largest crypto exchanges in the world. This is a dangerous conflict of interest. What many people think is happening is this:
Unbacked cryptocurrency is being created out of thin air by Tether. It's then transferred to exchanges like Bitfinex, where it's used to go long on Bitcoin. This fake money is used as collateral for margin trading, greatly amplifying the effect.
Bitcoin's price goes up. People are tempted into buying "hot" Bitcoins for FOMO and because "everyone else is going long too".
Bitfinex sells you Bitcoin and other crypto for real money, charging you (fat) fees for transactions.
Tether has minted half a billion's worth of tokens just in the last 3 months. Since the market (still) trusts that they're worth 1 dollar each, it gives the illusion of liquidity and high demand for cryptocurrencies, especially Bitcoin.
Tether is responsible for the current bitcoin rally, which started back in april when it was worth about $1,000 USD and continued to about $19,000. At the time it started, there were less than 10 million Tethers in circulation, but over the last 8 months they have minted over a billion dollars worth of them. This has pushed the price for bitcoin up at an alarming rate. What is even weirder is that right around the time their supply exploded, all US banks cut them off, which means US customers had no way of wiring money to them when buying Tether tokens. Yeah. They're a company that issues USD-backed coins by the billions, but can't bank in the US. Sounds like the perfect place a bunch of serious investors would pour 1 billion dollars into.
The suspicion, of course, is that it's Bitfinex and other exchanges "buying" Tethers. Not real people. Then they throw it into the crypto ecosystem and it just grows and grows. When you are buying Bitcoin, you are essentially in an auction where your opponents can bid with fake money. Would you still want to buy if you knew this?
The last of several Tether floods, in december (over 200 million), managed to pump Bitcoin up to over $19,000. My guess is that (aside from their usual scam) they were trying to protect Bitcoin's price from the new CME futures. However, their printing shenanigans have since stopped being enough to keep up with the bears. Close to Christmas they issued another 100 million that had no effect. Tether was spread way too thin and drawing too much attention. Hence last week's 30% "market correction", which was actually whales unloading and cashing in.
I doubt the crypto market can take another hit like this. For now, cryptos will rally again for a few months and reach a market cap of maybe 800 billion at best, and then it'll become impossible to keep pumping, and the whales will abandon ship, this time for good. They'll dump Bitcoin in favor of some other crypto. However, this may not be so easy. With transaction queues so long, it'll be mass panic if the price starts dropping. People won't be able to get out of their positions until days later.
There's also the latent risk that Bitfinex gets "hacked", busted by law enforcement, or becomes insolvent. That would instantly trigger armageddon.
