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New tracker shows users need to pay 5% more Tether [USDT] than USD to buy Bitcoin
The Tether debacle has stirred the crypto community. While some suspected something was wrong with Tether [USDT] on account of repeated controversies surrounding the coin, others chose to believe in the world's leading stable coin in the crypto market. It was not until a few days ago that the crypto token, whose value is pegged to $1, lost its stability and slipped by 5% in the market - dropping below the $1 mark. Many have said that the eighth largest cryptocurrency in the world is losing its charm and has begun its downfall. The Tether community claims that major cryptocurrency exchanges have used USDT as a replacement for the U.S. dollar. "Most reputable Bitcoin exchanges allow their customers to exchange cryptocurrencies for US dollars (USD). However, some large exchanges including Bitfinex only offer "Tether" tokens (USDT), which are supposed to be exchangeable 1:1 to US dollars," the community stated. Disappointed, the Tether community has built a website - untether.space - which will track major cryptocurrency exchanges that use USDT as their base currency and exchanges using the U.S. dollar. The website analyzes the average Bitcoin [BTC] price on exchanges against USD and USDT.
Since the price of one USDT token should be equivalent to one dollar, there should be no price difference on exchanges using Tether and USD. On the contrary, the data on website showed that there is considerable difference in the trading prices between the stable coin and USD. Major cryptocurrency exchanges demand more USDT tokens than USD in exchange for other cryptocurrencies. The website was created by the community to track this price variance between the cryptocurrency and the fiat currency. The community believes that a risk premium associated to the cryptocurrency is the cause of the price difference. "Because Tethers are riskier than actual US dollars, the market attaches a risk premium to them by demanding more Tethers than USD in exchange for a Bitcoin,"Â according to the website. This site helps gauge this risk premium. Financial institutions shying away from the crypto space have caused crypto exchanges to use USDT as a substitute for USD. Customers have to shell out more USDT tokens than USD to buy the same amount of Bitcoin from these exchanges, owing to the risk premium. 
Over the past few days, the stable coin dropped well below its peg to as low as $0.95. The devaluation of USDT coupled with increasing skepticism from community members presents a risk in the market for exchanges that trade using the coin and this risk is being passed to the stable coin's investors. This will only increase the risk premium associated with trading in Tether. The higher the risk premium, the more the stable coin strays away from its original value. The graph above clearly shows that there is a stark difference between average USD and average USDT charged for the same BTC, proving the poor stability of Tether. USDT users are questioning Tether Ltd, the company behind the stable coin, regarding its claims of the dollar cash reserves backing the cryptocurrency. The company has failed to furnish an audit to prove the existence of these cash reserves. The stable coin has also been linked to the controversy surrounding the crypto exchange Bitfinex. Bitfinex, which shares the same management team as Tether Ltd, has allegedly been involved in Bitcoin price manipulation utilizing USDT, but the company has denied all claims.
