News: Tether TO THE MOON, Bitcoin over 40,000 USDT, more Ripple fallout

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Number go up

TO THE MOON! Tether has gone up by nearly two billion USDT over just the past few days, and is at 24.392 billion USDT as I write this! [Tether Transparency, archive]

(Remember 2017, when 600 million tethers was the total supply, and that was considered a shocking amount?)

Popular Tether derivative Bitcoin has gone up too, breaking 41,000 USDT yesterday — though it crashed down to 36,675 USDT earlier today. I was hoping for 50,000 USDT by the end of this weekend — speaking as the famous Bitcoin perma-bull that I am.

Frauds tend to keep growing until they can’t — and Tether is at the spiraling out of control stage.

The deadline for iFinex to provide the New York Attorney General with information in discovery on Tether is Friday 15 January. This doesn’t mean that a bell will ring at 00:01 15 January, and all the tethers turn into pumpkins — but that’s when the next act of this interminable saga starts.

(iFinex’s strategy appears to be to submit a massive unsearchable document dump. [Twitter] This might work, if the NYAG had done no work at all since 2018 on the issue, and hadn’t already formed a fairly well worked out opinion of iFinex’s behaviour.)



Hammer come down

More likely to cause issues is the forthcoming FinCEN regulation about documentation required to move crypto into and out of money services businesses — if you want to transfer more than $3,000 of Convertible Virtual Currencies on or off an exchange, they must collect your name and address. [Treasury; Federal Register, PDF]

This is the same rule that presently exists for cash — it’s fundamentally a further clarification following FinCEN’s May 2019 clarification of how existing law applies to cryptos.

FinCEN has put this rule through on a “substantial national security concerns ” basis, stating that the comments period is only token — this rule is absolutely going through. The US government is deadly serious about the sanctions regime — see chapters 10 and 13 of Libra Shruggedand the Department of Justice has already prosecuted over cryptos being used by North Korea for money laundering. Per the rule, “U.S. authorities have found that malign actors are increasingly using CVC to facilitate international terrorist financing, weapons proliferation, sanctions evasion, and transnational money laundering.”

The crypto industry is absolutely crapping itself about this new rule, as if it’s the end of the world. Coinbase and Andreesen Horowitz plan to fight it in court. [CoinDesk; The Block]

For some of them, it will be the end — because even the cleaner players know they’re no more than one or two steps removed from dirty money, and this will affect the flows of all sorts of questionable cash.

Given the absolute panic going through crypto, I think this is rule is a likely explanation for the Tether printer going nuts right now.

Further new year gifts from FinCEN — foreign crypto holdings now require reporting in the same manner as foreign bank accounts. [FinCEN, PDF]

If you don’t report your foreign holdings, then the IRS can find you $12,921 for each non-willful violation; for wilful violations it’s $129,210, or 50% of the account balance, whichever is greater. [IRS]



Dear sir, thank you for your relentless cynicism on crypto. How do I get rich in bits-coin?

God help me, people keep messaging me — of all people — and asking for advice on how to get into trading crypto.

First: don’t. You will lose your money. It’s a completely fake bubble right now — and you’ll be left holding a bag of unsaleable coins, and waiting for the next bubble.

You’re going to do it anyway, of course — you’ve made your decision, you just want to tell yourself that you did your due diligence.

So. You can totally make money in crypto! I would never say you can’t.

But you’re much more likely to lose your shirt.

The crypto market is highly manipulated, and all but unregulated. It’s a pool full of sharks, and you look tasty.

Treat it as gambling, not investment. You know how you can gamble and lose all of your money in an instant? This is like that.

What about the market cap? Well, if you take the price of a beanie baby and multiply it by the number of those beanies, and add this up for all the beanies, you have the “market cap” of beanie babies, here in the year 2000!

This is a very real and informative number that tells you anything you can use to make your fortune in beanies. Or maybe it isn’t.

If you read any press article going “gosh, isn’t Bitcoin’s price high! Here’s some speculation as to why, from people with an interest in selling you on bitcoins” and it doesn’t mention tethers, you can disregard it.

If you have coins you’ve been stuck with since 2018 — sell your cost basis, the money you originally paid for them. Then every gain from there is for free.

Finally: don’t do it. You will lose your money. You are lining yourself up for a role as one of the suckers. Read Part 3 again.



But don’t just take my word for it

As always, I recommend Patrick McKenzie’s 2019 piece as the definitive text on Tether: “Tether is the internal accounting system for the largest fraud since Madoff.” [Kalzumeus]

Kristian Johansson — a Bitcoin holder and advocate — wonders about the bizarre lack of mainstream media coverage of Tether’s role in the price of Bitcoin. “If it is true that more large institutions are buying Bitcoin now, then surely they would have done a detailed risk analysis and Tether would have popped up as a very real risk and something that would be discussed more openly?” [Seeking Alpha]

(People keep suggesting Grayscale’s Bitcoin fund as evidence of massive quantities of institutional actual dollars going into Bitcoin. Grayscale’s GBTC fund states assets under management in dollars — but it accepts direct BTC deposits. An unknown proportion is just Grayscale acting as a custodian for their fellow whales — reputedly almost all of it, because they don’t break out this number. It’s not real-money institutions giving Grayscale actual dollars to buy bitcoins, not at all.)

Why does Tether issue on weekends and holidays, with Bitcoin pumps on weekends and holidays? It coincidentally matches with when CME Bitcoin futures settle — “bitcoin faced selling pressure in the days ahead of the expiry, as well as on the day itself. The event was also followed by selling over the weekend, leading to a gap down on the CME chart, which doesn’t include weekend data.” [CryptoNews, 2020]

Is Bitcoin a Ponzi scheme? I’ve long held that Bitcoin technically isn’t a Ponzi — it just works like one. Tr0lly details how Bitcoin is like a Ponzi, and why it’s important that it isn’t one legally in the US — it’s a much more complicated scheme. [Tr0lly]

Jorge Stolfi, however, describes why he thinks Bitcoin is a Ponzi — with answers to common objections. [Jorge Stolfi]

If you call Bitcoin a Ponzi, bitcoiners will dive in claiming that normal investments, the government, etc. are also Ponzi schemes. Claiming everything else is a Ponzi scheme really, if you think about it, is a standard excuse from Ponzi schemers — e.g., Bernie Madoff saying in 2011 that “The whole government is a Ponzi scheme.” [New York]

Why you can’t cash out pt 2 still applies — UK banks still really, really don’t like crypto. Good luck turning your paper gains into actual money. [The Times]

Telegraph: Bitcoin’s wild ride to $34,000 fuels fresh warnings of an impending crackdown — with a quote from me. [Daily Telegraph]

Cas Piancey: a new Tether primer. [Medium]

Kiffmeister’s Daily Digest by IMF researcher John Kiff, on the Tether Question. [blog post]

This is absolutely the worst way to present a good blog post, even worse than posting an essay as an extended Twitter thread. Everyone, go suffer through squinting at the text in a graphic. [Twitter; Twitter]

The following pair of tweets are real: [Twitter, archive]



Good news for Bitcoin

The media, and bitcoiners, have gone wild with a JPMorgan analyst’s note that projects a Bitcoin price of $146,000! This means JPMorgan is going all in with crypto!!

Here’s the relevant paragraph from that analyst. It’s not the fount of optimism that enthusiastic (lying) bitcoiners have been painting it as. In fact, the number is a wild hypothetical as part of a quite negative outlook: [LinkedIn]

Mechanically, the market cap of bitcoin, at $575bn currently, would have to rise by x4.6 from here, implying a theoretical bitcoin price of $146k, to match the total $2.7tr private sector investment in gold via ETFs or bars and coins. But this long-term upside, based on an equalization of the market cap of bitcoin to that of gold for investment purposes is conditional on the volatility of bitcoin converging to that of gold over the long term. The reason is that, for most institutional investors, the volatility of each class matters in terms of portfolio risk management and the higher the volatility of an asset class, the higher the risk capital consumed by this asset class. It is thus unrealistic to expect that the allocations to bitcoin by institutional investors will match those of gold without a convergence in volatilities. In fact, an argument can be made that, in terms of risk capital, bitcoin has largely equalized with gold already given that bitcoin and its biggest fund on average currently consume x4.3 more risk capital than gold and its biggest fund.

What do crypto advocates worry about from the forthcoming Biden administration? The threat of someone who’s finally interested in doing something about the crime against humanity that’s called Proof-of-Work cryptocurrency mining. [Twitter thread]

Frances Coppola looks closely at MicroStrategy’s numbers — and why Michael Saylor is turning the company into a Bitcoin hedge fund. “Do you have a poorly-performing company that you don’t know what to do with? Bitcoin fixes this!” [blog post]

Bitcoin in the enterprise: Funke Media Group is given massive incentives to Bitcoin adoption, and is looking at 6,000 licenses — I’m sorry, Funke Media Group has 6,000 PCs locked by ransomware. [DW]



Everybody hates Ripple

Ever since the SEC’s hammer came down on Ripple and XRP in December, everyone’s been back-pedaling at the speed of light away from the coin and the company — in the hope of not getting any on them.

Bitstamp stops XRP trading for US customers as of 8 January. Other countries are not affected. [Bitstamp]

Coinbase is delisting XRP as of 19 January. Why so late? Well, there’s a lot of big holders around Coinbase. [Coinbase blog] You can still hold coins there, for some reason. Coinbase apparently spoke to the SEC “multiple times” while working out what to do about XRP. [Twitter]

Ripple got venture capital funding, presumably in the hope of looking more like a “real” company. One of the investors, Tetragon, wants their money back — now. Their deal apparently involves Tetragon being able to cash out on Ripple going public, and they’re saying the SEC declaring XRP a security that was sold to retail counts as taking company stock public. Stephen Palley has a Twitter thread on what we know about the case. [Bloomberg; Twitter]

Ripple’s XRP validator network was always functionally centralised — and couldn’t even reach consensus if it split. The model was always handwaving to fake decentralisation, where “decentralisation” is a word meaning “I want to dodge legal responsibility.” [GitHub]

The pretrial conference in SEC v. Ripple will be in February 2021. [Conference order, PDF]



Things happen

Bittrex brings good news for privacy coins! Monero, Dash, Zcash, and Grin are being delisted from from Bittrex Global. This will have been due to pressure from banks who are worried about following money-laundering rules. [Bittrex]

White House Market, the largest currently-existing darknet market, no longer accepts Bitcoin — just Monero. So much for Bitcoin’s use case. [Twitter]

I’m shocked, shocked to discover that the Bitcoin exchange with racially and sexually discriminatory employment practices underpays its black and female employees! The New York Times was sent a trove of data from 2018 and 2019 by a disgruntled Coinbase insider. [New York Times]

India considers imposing an 18% sales tax on cryptocurrency. Note that this does not require India to make crypto legal — evading sales tax on illegal goods is also a crime. [Times of India]

Here’s a nice rundown of SEC enforcement actions against ICOs. The only thing I’d question is that the SEC did contact all these companies quite early, and was trying to avoid having to take action — the eventual actions come after a year or two. Perhaps the SEC could go faster, or state how long they were trying to resolve things in the press releases. [The Dig]

Bitcoin is secured by math, which is why HK$3 million of bitcoins mathematically belong to a gang of robbers now. Their cryptographic proof must have been more robustly peer-reviewed. [SCMP]



Hot takes

BeInCrypto: Why Blockchain Won’t ‘Revolutionize’ Healthcare and Education Anytime Soon — with a quote from me. [BeInCrypto]

Frances Coppola: Crypto’s Choice: Join the Financial System or Fight It — if you want real money, you have to follow the rules of real money. [CoinDesk]

Tim Swanson: Parasitic stablecoins — how, instead of hyperbitcoinisation, the crypto world has gone as fast as possible into pseudo-dollarisation. WIth an appendix by Tim and Martin Walker. This goes into extreme detail about the legal issues around stablecoins, and how being utterly reliant on the conventional finance system is going to work out for crypto. [Great Wall of Numbers; Great Wall of Numbers]



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3 Comments on “News: Tether TO THE MOON, Bitcoin over 40,000 USDT, more Ripple fallout”

  1. More likely to cause issues is the forthcoming FinCEN regulation about documentation required to move crypto into and out of money services businesses — if you want to transfer more than $3,000 of Convertible Virtual Currencies on or off an exchange, they must collect your name and address.

    My expectation is that someone on the crypto-side will start crowing on about how you should now start transferring $2999 worth of coins. And others will probably thing this is a perfectly sensible idea. But, remember, this is a prime example of structuring, whereby you structure your economic activity to avoid automatic reporting limits (or other safeguards) and is illegal in its own right.

    1. When the equivalent for proper money came in some decades ago, a requirement to report transactions of $10,000 or more, many criminals were highly offended that the banks regarded their multiple $9,999 transactions as suspect and also worth reporting.

      1. As I noted in Why you can’t cash out pt 2:

        > This particularly affects those who discovered an old Bitcoin stash and want to turn it into cash. I know of one such case where the user had sold a car for bitcoins years ago, and wanted to cash in on the current bubble. The best the exchange could come up with was sending it in daily in amounts of several thousand dollars — and dribbling a million-dollar balance out a few thousand dollars at a time is not only tedious, it looks like structuring, when someone’s trying to dodge reporting requirements.

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