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Some exchanges lend USDT tokens they don't have

Some exchanges lend USDT tokens they don’t have

  • A record amount of USDT is flowing into exchanges as demand for this stablecoin grows.

  • Exchanges can operate “fractional reserve” according to one major bitcoin whale.

  • Some argue that exchanges hide the real amount of USDT they own.

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As trading activity in the cryptocurrency space declines, many are buying USDT. However, there are concerns that exchanges may hide the truth about balance sheets..

Tether (USDT) continues to cause a lot of controversy in the cryptocurrency space, from lawsuits to constant daily emissions over the past few weeks. Many suspect that the token As the use of cryptocurrencies grows, new types of tokens. They can represent value or something intangible like voices. Two…

Some exchanges lend USDT tokens they don't have

More is not backed by the amount of dollars available in USDT. However, now another problem has arisen – what if, in fact, the exchanges have no declared USDT?

“Fractional Reserve Exchanges”

Over the past seven days, about $ 223 million of Tether (USDT) have entered the exchange. This number continues to grow steadily and USDT balances on exchanges are currently well above record levels..
This suggests that there is a surge in demand for USDT on the exchanges. In general, this is true. However, concerns have arisen that exchanges do not hold the amount of USDT they claim and are essentially doing “fractional reserve”.

This question was recently raised on Twitter by the famous bitcoin kit J0E007. According to him, he would be surprised “if this year ended without any major scandals on cryptocurrency exchanges.”.

There is also more troubling possibility. Some USDT-only exchanges may be running fractional-reserve shops. Now that people are selling crypto for USDT and try to withdraw, exchanges don’t really have that USDT, and need to buy it asap to maintain liquidity.

– Joe007 signals alerts funds are scams, all of them (@ J0E007) March 31, 2020

It should be noted that the “USDT deficit” was observed in the past. For example, Binance faced this problem in February, which led to the suspension of margin trading on the exchange. USDT credits are commonly used to trade on Binance on margin.

Can a default occur on the exchange??

So, what happens if exchanges lend USDT, which they don’t have? If panic starts, the consequences can be catastrophic: massive liquidations of positions and, even worse, bankruptcy of the exchange.

Of course, this is just a guess. However, if this is true, then in fact it means that in addition to the fiat system on the exchanges there is a “fractional reserve banking system”.

Some exchanges lend USDT tokens they don't have

This is a meta level that J0E007 did not leave unnoticed.

Well, let’s see if faketown crypto exchanges are able to institutionalize their scam the same way bankers did, shall we? &# 128521;

– Joe007 signals alerts funds are scams, all of them (@ J0E007) March 31, 2020

It is possible that we will never know the truth. However, if widespread panic causes crypto markets to crash again, like a few weeks ago, then exchanges will not be able to hide how much USDT they actually have..


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