Bitcoin has fallen out of the public consciousness to such a degree that even the press have forgotten that the BTC price goes up and down like a yoyo for any reason or none. So I’m getting questions I’ve answered before, which means it’s time to make them into a post. [Newsweek; Newsweek]
Donald Trump is talking about bitcoin and crypto a lot of late. You’d almost think he was short of ready cash. Zeke Faux and Muyao Shen have a great article on Chase Herro (a.k.a. Chase Hero), the guy actually running Trump’s crypto company, World Liberty Financial. Herro has gone down in the world from selling colon cleanses. [Bloomberg, archive]
And yesterday Trump bought “crypto burgers” for supporters at a bitcoin-themed bar in New York — apparently paying in bitcoins, though someone else had to make the transaction for him. [USA Today]
So is this why number went up?
No. You don’t need to invoke a Trump speech at Bitcoin 2024, debate performance or buying hamburgers as explanations. Going up or down $5,000 in a day is par for the course in bitcoin.
Cryptocurrency markets just don’t react to what would normally be considered a market signal in the same way as markets in well-regulated high-volume securities or commodities.
These are small, thinly-traded and ill-regulated commodity markets. This means that internal manipulations absolutely swamp broader macro signals.
Here’s a nice study from the New York Federal Reserve. “The key result is that, unlike other U.S. asset classes, Bitcoin is orthogonal to monetary and macroeconomic news.” [New York Fed, PDF]
Binance is where the price of bitcoin is set
The bitcoin price is set by trading, and that’s overwhelmingly trading against the unregulated Tether and FDUSD stablecoins on Binance.
The volumes of just the BTC/USDT and BTC/FDUSD trading pairs on that one exchange swamp all other trading in bitcoins. Coinbase or regulated ETFs aren’t even in the running.
Binance is under severe US monitoring with regard to money laundering compliance and keeping US entities off the exchange — but the trading floor remains completely unregulated.
Every market abuse you can think of — wash trading, manipulation, the exchange trading against its own customers — is standard. And probably not even illegal!
The Tether and FDUSD stablecoins’ backing is also extremely dubious. Tether admits that a large part of their backing is loans of USDT, where they create USDT out of thin air then claim the loan itself is the reserve asset backing those USDT. And I flatly don’t believe FDUSD is meaningfully backed by actual dollars.
Amy Castor and I wrote about all this earlier this year, here and here. Nothing has changed through 2024.
Bitcoin does not react to macro signals — only to internal market shenanigans.
Could there be an outside signal that affected the price of bitcoin?
Sure. Some drastic regulatory or criminal action that changes the shape of the market — say, busting Tether or Justin Sun. That’d probably do things.
Short of that, I expect the present nonsense to continue — the public won’t care, the number will go up and down and journalists will occasionally notice the number and wonder if there’s a story there. But there isn’t, really.
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Incredible Twitter space last week- it needs to go viral esp to those still inside the industry (dwindling actually despite the propaganda- crypto firms are actually shrinking and not admitting it). I have suspected something is deeply and nefariously wrong from working in the industry too and slowly have become horrified and finally realized how crazy this could actually become…. Dave Troy’s findings are especially relevant… keep doing the good work.