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The cryptocurrency markets are undergoing an unexpected stress test as Tethers are becoming impossible to move or trade. After a hacker redirected one of the recent issuances of USDT to an unauthorized address, exchanges and users have been cut off from using the pegged currency. Tether plans a temporary hard fork to freeze the funds from moving, while trying to resolve the situation.

In the past few months, Tether has been criticized for providing unaudited, artificial liquidity to the Bitcoin markets and inflating the price.

The latest event around Tether has increased the scrutiny on the company, as well as Bitfinex, the biggest user of Tethers.

At the moment, OKEx, the newly launched Chinese exchange, has stopped deposits and withdrawals of USDT.

Kraken, one of the main USDT markets for moving to fiat, has also moved USDT offline, waiting for an upgrade to correct the theft:

https://twitter.com/krakenfx/status/932895171464720385

Other exchanges using USDT include Poloniex, HitBTC, Binance, YoBit. The need for this is that using USDT removes the requirement for more detailed customer information reporting.

As for the lost Tethers, cryptocurrency enthusiasts are still skeptical, since even without the hack, Tether has been noticed to issue the vast amounts of tokens with no audit. Some see a strange coincidence behind the recent issue and the moving of funds, which remained unnoticed for three days. Jackson Palmer, creator of Dogecoin, sees the hack as highly suspicious of being an inside job:

The news of the hack also broke out during a live chat on the Tether pitfalls on the @jimmysong channel:

The biggest concern about Tethers is the ability of the Bitfinex price to affect the general market sentiment and have a spillover effect to other exchanges. In addition, the amount of Tethers that help run several exchanges bring back ghosts of funds disappearing if an exchange fails, not unlike the case of MtGox.

The other question is how mainstream investors would view the Tether injections if Bitcoin futures get traded on the CME Group exchange. Tether and Bitfinex may come under scrutiny for a form of hidden asset price manipulation.