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So I don't understand how Tether (USDT) works. I hear two contradicting things about it. First, is that it is pegged to the dollar, plus or minus a few cents here and there. Second, that you can buy or sell freely from some other cryptos.

BUT, usually when lots of people are buying a crypto, it's price will go up. But tether seems to somehow decouple demand from price. I thought that was impossible?

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the company behind usdt (tether) can create and sell new usdt (eg. if the price is greater than 1$) and buy them back (eg. when the price is smaller than 1$). they say they have enough money to buy all usdt back (but many people are in doubt about it). furthermore the community knows that tether tries always to adjust the price of usdt to 1$. so only very few people will sell usdt for <1$ or buy it for >1$ (because it is probably uneconomical). so the trader-community is "helping" tether a little bit by continuing mostly accepting this 1usdt=1$-"rule" which could be useful for everyone on a long-term basis.

  • They can buy and sell, but do they? For example take an exchange like Poloniex which supports USDT but not USD. There is no way to change USD to USDT on Poloniex, so even if they wanted to, they couldn't. I have a hard time believing they have accounts with, or agreements with, every exchange where USDT is supported. Furthermore it seems they can't accept USD from non-Taiwanese accounts right now, which limits their shepherding ability. Probably it is the exchanges that are arbitrarily deciding that USDT should be worth $1USD. The exchanges are pegging the value, not Tether.io. Yes? No? – dnh37 Dec 31 '17 at 16:20
  • And if tether.io isn't really buying back USDT much, but is selling USDT at will to anyone who wants it, that's surely a dangerous situation. They are basically printing their own money. This is too crazy to be true -- surely I'm missing something..? – dnh37 Dec 31 '17 at 16:25
  • The question about Tether really buying back or not, is a discussion topic that does not have place on BitcoinSE – Cedric Martens Jan 31 '18 at 0:23

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