How is a USD-chained currency like Tether economically possible?

Question

(I'll try my best to keep it relevant to Bitcoin, but feel free to close it if it seems inapplicable to Bitcoin trading. It's more about economics)

Say there's a currency whose supply is controlled (e.g GBP in 1990, or USDT) to keep the exchange rate fixed (GBP/EUR or USDT/USD)

But sometimes the exchange rate is slightly higher or lower than intended. If it's higher, one can borrow more of the valuable currency, sell it, and then pay back with interest, and profit from the difference, because there's no doubt that the currency's value will be lowered to reach the exchange rate target.

In the end, George Soros and his $15 billion budget made at least 20% profit, according to the source, and GBP was forced to become free instead of 1.2 GBP/EUR .

My question is, what protects USDT from this kind of economical strategy which is guaranteed to make Bitfinex, the minter of USDT, a loss? Is that because they hold the majority of USDT?

Answer 1

Bitfinex, the issuer of Tether, claims that all of the USDT is backed by USD and USD equivalents. As such, the intrinsic value will be close to [$1 * asset impairment], and so no market manipulation/pegging is required to maintain parity, so long as their assets actually match the tether outstanding.

Although no action is required, there is an opportunity for Bitfinex to buy USDT with USD when the price dips below 100 cents and sell when its over 100 cents if they actually are fully backed. This would tighten the trading range, and make Bitfinex a profit in the process.