It's my understanding that the people behind Tether buy at some price slightly below a dollar, to allow some "play" (slight volatility) in the Tether market and to incentivize others to hold Tethers and provide liquidity in exchange for arbitrage. But since you bring it up, I don't know if that's true, I could be misremembering that.
I don't think it's super important to my question though.
I think it would be super helpful if some of ya'll were to watch the USDT:BTC (edit: really any USDT currency pair) order books on the exchanges on different intervals and watch the market making bots in action - this is what I think. See the spreads, see the intervals they make their trades on - study it.
This is exactly what keeps it at $1. If someone is willing to sell at $.99 then the number of buyers is gigantic. Ditto with someone buying at $1.01. That’s why it’s news when the peg drops by more than a fraction at a penny.
As for why would someone buy or sell for other than $1.00? Plenty of reasons, if a market opportunity to make 10% in a crypto investment pops up, damn right people will liquidate tether at a slight loss
"Sure, it's pegged, Anyone who fills in the right forms can get their USD back. After a few weeks. And if the request is big enough. Oh, but there was a problem with your form. Sorry. Try correcting it and resubmitting it. No, we can't tell you what the problem was."
Tether will only redeem amounts of $100k or more. The vast majority of people get out of USDT by selling it on the market.
Depending on how many people want to sell, how quickly they want to, and how many market makers are willing/able to arb it back up to $1.00, you might just take $0.99 instead.
Those who bought it at 0.9999954 and resell it at 0.9999978, making less than pennies on the dollar, but still profit. Then you make a chain of suckers until it goes back to 1USD
If the Tether is pegged to the USD, who would ever sell one for $0.99?