[hedonistbot]

They should already own a ton of bitcoin and someone speculated in a previous thread that their reserves are actually in bitcoin, which would make a lot of sense. The problem here is that every time someone redeems their tether for real dollars, Tether (the company) have to sell part of their reserves and this brings bitcoin price down, in effect dwindling their reserve pool. If there are enough bitcoin buyers or there aren't many people redeeming their tethers for dollars, they should be fine. However, if people lose faith in tether (the coin) then mass redemption will crash bitcoin prices (judging by the daily volumes of tether trading) and there won't be enough reserves to cover everyone at par with the dollar. Hence the pyramid scheme allegations. This is all assuming they don't hold $2+ bn cash in reserves.

[profuse99]

very plausible vector for contagion! do u remember what thread that was your are referencing?

[hedonistbot]

I can't recall the hn thread (there have been tons of crypto currency threads recently), but the comment was referencing this reddit discussion where a bitfinex representative made the same conjecture:

https://archive.fo/R6sku

> Isn't it more plausible that this is not someone writing a check for tethers (money coming in from outside the crypto ecosystem) but more likely it is coming from converting other cryptos into USDT?...