So let's do a hypothetical experiment that considers a Tether fail or regulatory capture situation:

1/10 We've experienced a few broken peg Tether situations before. What happened to the price of Bitcoin and Ethereum during the peg break to ~0.90 on October 15th?:

2/10 What you can see is that with a ~10% drop in the price of Tether, there was a jump by ~10% in the price of Bitcoin and Ethereum as people ran for the exits. This makes sense: you want to exit to a larger coin so you can withdraw to fiat at some point in the near future.

3/10 But what happens as Tether value continues to fall? Well, of course, those less valuable Tethers are less and less able to push the price up. But you might still be able to trade for other stablecoins, right? What happened to the value of TUSD in October?

4/10 You can see the price rose **more** than 10% - a full 11.5%. Why? Why would other stablecoins rise in value as regular coins go up, too? Because people still want to hedge because they're still worried the price of Bitcoin and alts will collapse with a Tether collapse.

5/10 Another key point is that there are two types of exchanges: fiat and stablecoin exchanges. What happened to the price of Bitcoin on October 15th on Coinbase vs Bitfinex? On Coinbase, BTC price rose ~4%. On Bitfinex it rose nearly 7%.

6/10 Okay, now we can get into hypotheticals. If Tether is captured, volumes spike on all exchanges and people move their Tethers into either: alternate stablecoins, or BTC and ETH with the hope of exiting to fiat on Coinbase and Gemini. What happens when volumes spike there?

7/10 Not to mention, with Coinbase and Gemini being heavily regulated compared to BFX, Binance, Huobi, etc, you can bet your bottom dollar that they'll be closely examining any transactions that do go through. Where'd all this money suddenly come from?

8/10 Moving on, people will be selling all their coins for fiat on fiat exchanges, causing prices to collapse. Those Bitcoins worth X on Bitfinex are going to be worth significantly less on these exchanges. You just lost X% by simply moving your Bitcoin from one place to another.

9/10 On top of this, the price for Bitcoin and other major coins listed on fiat exchanges will continue to rise as people continue to rush for the exits. The Bitcoin that's cheap on those fiat exchanges will be **very expensive** on shitcoin exchanges like Binance.

10/10 This all comes to an end when the liquidity for Tether finally vanishes and the price nears zero. Now you get your real price collapse as people trade whatever BTC/ETH/BCH (etcetera) for stablecoins like TUSD, Paxos, USDC, or GUSD. Those stablecoins remain overpriced.

And there it is. If you don't think a Tether collapse cripples markets and exchanges, good luck. It's gonna be a helluva shell game if/when it occurs.

I'm amending this thread from March. Please feel free to reread, but here's my new hypothesis:

there are two possibilities I foresee in the event of a hypothetical seizure now

1. Tether is fully centralized and all freezable. If the government moved fast enough they would be able to negate a massive push to sell. I honestly need to consider what this would mean for the market and BTC price because I'm not sure what happens when 4bn is frozen.

2. However, often times, criminals hear rumors that there will be a seizure/enforcement action and attempt to frontrun authorities and customers. If this is indeed the case, then we will likely see something more along the lines of what I originally postulated.