As long as there are actors in the system who can liquidate Tether at ~$1, the peg will be maintained. If it goes to 99 cents, those actors would buy and immediately liquidate for risk-free profit. Who cares if you personally can redeem them -- you don't need to, as long as someone can.
Whether someone always will be able to is the critical question, and there are certainly enough red flags that I wouldn't touch tether personally.
I care because I don't require an intermediary to withdraw my USD "IOUs" from a normal bank.
In the case of Tether these intermediaries that decide whether or not I get my USD (Alameda, FTX, etc) are located on the opposite ends of the earth stockpiling cash by playing trading games and have a vested interest in ensuring I don't get my USD, especially when they don't have the full capital to redeem. You know this will eventually end up in a redemption crisis that will be magnified by shady loans/guarantees that attempt to stave off a de-peg but eventually blows up.
That's really the problem with Tether, they want to be a bank without the regulation, backing, or standard courtesies provided by banks. Everyone will eventually learn their 1920s banking lessons all over again.
There's a question of what rate these traders are going to do this arbitrage in a bank run situation. To do the trade, they need to pay cash under the assumption they'll be able to get it back later. (How long? A day? More?) Their risk of losing the money might be low on a normal day, but not zero. What if today is the day things get weird?
So any trader is going to have a limit on how much cash they're willing and able to put at risk, based on Tether's promises. This limit may be lowered if things look iffy.
They do profit if they can buy at a lower price. It's only competition that keeps them from doing that.
Oh suddenly middlemen are fine. I thought crypto was all about cutting out the middlemen?
Also, even if you follow that premise, that someone should at least be independent of Tether. With so much of the classification "at their sole discretion", this seems questionable.
> I thought crypto was all about cutting out the middlemen?
No, there are hundreds of great use cases for cryptocurrency. The idea that every currency should do everything is ridiculous. Tether was specifically designed to be a tool for "middlemen" to avoid the overhead of dealing with the archaic US financial infrastructure.
If you want to be able to redeem a stablecoin directly to USD in a bank account at a moment's notice, use USDC and a Coinbase account or something. Those extra benefits come with extra risks, where certain organizations can seize your USDC at a moment's notice. If you need to move dollars between crypto exchanges, use Tether. US bank accounts and crypto exchanges are like cesium and water. They do not mix, and tend to explode violently.
The reason that multiple things exist is that there are multiple use cases, even for things that seem to an outsider like they are very similar. Tether, USDC, and DAI all have very different use cases, even though they all represent a dollar. This is fine. This is the way things are supposed to work.
Whether someone always will be able to is the critical question, and there are certainly enough red flags that I wouldn't touch tether personally.