It was almost too good to be true: a cryptocurrency that had all the positive aspects (decentralized and easily tradable) with none of the downsides (bed-wetting volatility, no security, prone to being fiddled with by hackers). Tether has been dangling that golden ticket in front of investors since its whitepaper first emerged in 2012.

But right now, it’s about as stable as a one-legged dog. At 05.51(UTC), on October 15, its value dropped to as low as $0.51. That’s a drop of some $336 million, hardly the model of stability Tether has sold investors on. It’s not the first time Tether’s price has boiled over either, causing many to wonder whether being asset-backed can really control the price of a tradeable coin.

Two interlinked factors determine the price of a coin: belief in its value and good ol‘ fashioned supply and demand. Tether has both elements. Its price sticks to $1 because of the belief that it is worth this much but its price is also affected by supply and demand which causes it to fluctuate around the $1 mark. In theory, because each Tether is reportedly backed by a dollar, traders will buy it if it goes below $1 and sell above–keeping its price level-a sort of natural market equilibrium. But what happens when the demand disappears?

Peter Pan, do you believe in Tether?

The stablecoin has had a history of uncertainty. While its whitepaper promised regular audits, it has failed to deliver, terminating its relationship with auditors Friedman LLP in January 2018, citing that its procedures were too “detailed.” In June this year, Tether released a transparency update compiled by law firm Freeh, Sporkin & Sullivan which stated its assets exceed the number of Tethers issued at the time. However, this report was met with widespread criticism as it was not a full audit, and even the law firm itself tried to mitigate the claims, stressing that it was not an accounting firm.

Recently, even more serious questions have been raised about Tether, in particular, its cosy relationship with crypto exchange Bitfinex. The exchange is the first port of call for newly-issued Tethers and both companies are run by the same group of people, according to the leaked Paradise Papers. The rot doesn’t stop there. Bitfinex has been hit with reports that its banking partner, Puerto Rico’s Noble Bank, was insolvent and seeking a buyer, further threatening the coin’s status. Within a few days, Bitfinex suspended five fiat wire deposits leading to concerns that it was insolvent.

“Stories and allegations currently circulating mentioning an entity called Noble Bank have no impact on our operations, survivability, or solvency,” denies Bitfinex.

Despite this statement, the uncertainty regarding Tether has been blamed for this sell off. To start with, Bitfinex trades Bitcoin against USD, which is actually Tether (USDT). This means, when Tether goes down in price, Bitcoin respectively rises in dollar valuation. This creates a sense of false liquidity. This fake increase in the price of Bitcoin may have led to bots and other traders believing it had broken out of the long-term triangle formation, a key piece of technical analysis, showing positive, bullish momentum.

However, regardless of Tether was the cause or not of Bitcoin making a big break upwards, the move then attracted more traders who had been seeking long term shelter in Tether’s windbreaker. This meant as the price of Bitcoin went up, the price of Tether went down. And for exchanges that measured Bitcoin against Tether, its relative value rocketed, leading to a 10% premium on exchanges using the stablecoin. This meant Bitcoin appeared to be worth $7,500 on Bitfinex while only $6,800 on Coinbase.

In response, exchanges have started taking precautions. KuCoin has stopped withdrawals and deposits of Tether due to so called ‘wallet maintenance’. This seems very coincidental in its timing, coming the day after Tether loses its peg. OKEx has more explicitly decided to give its customers the choice of which stablecoin to use by adding four others: TrueUSD (TUSD), USDCoin  (USDC), Gemini Dollar (GUSD) and Paxos Standard (PAX). Binance has considering adding more but believes they are not liquid enough to be safe.

It’s ironic that a stablecoin created so much instability in the market and a worrying sign that it was allowed to become so influential. Other stablecoins are up as much as four percent in price showing a movement away from Tether. Perhaps those stablecoins with regular audits will lead to stronger belief in their prices but if there’s one thing this has uncovered, stablecoins are belief-backed not asset-backed. And beliefs are a little less solid.