{"id":13281,"date":"2019-05-13T21:45:20","date_gmt":"2019-05-13T21:45:20","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=13281"},"modified":"2019-05-18T23:21:35","modified_gmt":"2019-05-18T23:21:35","slug":"bitcoin-is-going-through-the-roof-its-manipulation-with-tethers-not-organic-demand","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2019\/05\/13\/bitcoin-is-going-through-the-roof-its-manipulation-with-tethers-not-organic-demand\/","title":{"rendered":"Bitcoin is going through the roof! \u2014 it’s manipulation with Tethers, not organic demand"},"content":{"rendered":"

Number go up! This is totally organic<\/em> market activity! People just like Bitcoin 40% more than they did last week!<\/p>\n

I’ve just found a photo<\/a> of the 100% organic material involved:<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

It’s because the price of Bitcoin is a proxy for margin trading \u2014 and rather than investing in the commodity itself, you can make more money by manipulating this thin and ill-regulated market to burn the margin traders.<\/a><\/p>\n

This also allows the large holders \u2014 the “whales,” and the exchanges themselves \u2014 to cash out to whatever little actual-money US dollars are available, in a trading system where the liquidity is mostly fake dollars called “tethers.”<\/p>\n

Willy Woo<\/a> explains how short squeezes work in crypto.<\/a> This is a pattern we see over and over:<\/a><\/p>\n

1) When the market is majority short, there’s too much money to be had to allow them to win.<\/p>\n

2) Whales keep buying up the market until the shorts get liquidated.<\/p>\n

3) At liquidation the short seller has to buy back at market price.<\/p>\n

4) A tidal wave of buys cascade through the orderbooks, a chain reaction, the price goes vertical.<\/p>\n

5) Whale payday. The whales that bought up the market sheparding the price up now dump their positions at profit.<\/p>\n

6) Blow-off. The price comes down to its organic levels.<\/p><\/blockquote>\n

(The short seller doesn’t always have to buy back at market price \u2014 when the OKEx exchange had its margin trading disaster last year,<\/a> they socialised the losses onto other traders. But the basic outline still holds.)<\/p>\n

Per Preston Byrne<\/a> \u2014 “Dramatic run-ups in the price of Bitcoin strangely seem to coincide with large exchanges having banking, withdrawal, and possibly solvency problems.”<\/p>\n

I just don’t believe we have a pile of new interested traders piling into Bitcoin. What we do, visibly, have piling into Bitcoin is 800 million tethers in the past month<\/a> \u2014 each acting like a dollar.<\/p>\n

Tethers are dollar-substitute tokens \u2014 each a $1 liability on the books of Tether, Inc., hypothetically redeemable on demand for an actual dollar. The idea is that these are pretty-much-dollars \u2014 compare Eurodollars<\/a> in the real financial markets \u2014 but move at the speed of crypto. Tether is owned and run by the same people as crypto exchange Bitfinex.<\/p>\n

There is the minor detail that nobody has ever<\/em> verifiably confirmed being able to redeem a Tether for a dollar.<\/a><\/p>\n

But don’t worry about it! These tethers supply desperately-needed liquidity in the crypto trading system.<\/p>\n

In particular, tethers supply liquidity for those exchanges who claim to trade in dollars, but have extensively-documented problems with getting US dollars off the exchange and into customers’ bank accounts \u2014 such as Bitfinex.<\/p>\n

And tethers are\u00a0strongly<\/em> favoured by the sort of exchanges that can hardly get real banking \u2014 such as Binance, the largest tether exchange.<\/p>\n

By the way \u2014 Binance got hacked<\/a> recently, and suspended all deposits and withdrawals for a week. I predicted the exchange and\/or insiders would continue to trade themselves, even as their customers couldn’t \u2014 and look at those flows of tethers<\/a> from Binance! And there’s the Bitcoin price going nuts!<\/p>\n

 <\/p>\n

https:\/\/twitter.com\/Heisenberg3828\/status\/1127749823153758208<\/p>\n

 <\/p>\n

It’s frankly implausible that someone spent $800 million of actual US dollars buying tethers in the past month, on the assumption that Tether constitutes a trustworthy financial institution.<\/p>\n

Why? Because this last month was when it came out that there was an $850 million hole in Tether’s accounts. Because they were using a blatant money launderer as their payment processor<\/a> \u2014\u00a0without a signed contract<\/em> \u2014 and the money was either seized by the authorities, or stolen by the company in question.<\/p>\n

How did this come out? Because Bitfinex finally admitted this to the New York Attorney General, who is suing Bitfinex<\/a> to stop them ransacking Tether’s accounts whenever they have a liquidity problem.<\/p>\n

Their hugest liquidity problem right now is that a substantial proportion of the US crypto-to-actual-money system turns out to have been literally one guy, Reggie Fowler, and he got arrested.<\/a><\/p>\n

As their biggest critic, “Bitfinex’ed,” has pointed out \u2014 every time Bitcoin is pumped higher in the past few years, it later comes out that Bitfinex or Tether just received a subpoena.<\/p>\n

And there’s a bank run in progress on Bitfinex \u2014 traders are taking their bitcoins off the exchange as fast as they can.<\/a> Increasingly, they don’t trust it to be there tomorrow.<\/p>\n

(See chapter 8<\/a> of Attack of the 50 Foot Blockchain<\/em><\/a> for how the 2017 crypto bubble started with Bitfinex losing their US dollar banking.)<\/p>\n

 <\/p>\n

https:\/\/twitter.com\/Bitfinexed\/status\/1126841882791882752<\/p>\n

 <\/p>\n

But, Bitfinex\/Tether are patching up the hole in their accounts. Bitfinex claimed today to have sold $1 billion worth of its LEO exchange tokens<\/a> \u2014 see Friday’s news post<\/a> \u2014 in ten days, for $1 billion worth of cryptos. Perhaps they did!<\/p>\n

 <\/p>\n

https:\/\/twitter.com\/Bitfinexed\/status\/1126926140688482305<\/p>\n

 <\/p>\n

By the way, I just raised $1 billion for my tweets<\/a> \u2014 the finest vintage in crypto Twitter, and worth every penny.<\/p>\n

Don’t believe me? I’ve supplied just as much evidence as Bitfinex!<\/p>\n

(Also, I have the photographic evidence that mine is a stable coin.<\/a>)<\/p>\n

I expect the price to keep going up \u2014 there’s liquidity to be siphoned off, and mainstream media coverage might lure fresh suckers in with actual cash money, not just tethers. I predicted there would be another mainstream crypto bubble \u2014 but I didn’t expect it this<\/em> soon.<\/p>\n

Update:<\/b> I was wrong — number go down.<\/a> From manipulation that no sane observer could deny.<\/p>\n

 <\/p>\n

https:\/\/twitter.com\/karbonbased\/status\/1127999373483413504<\/p>\n

 <\/p>\n

\"Become<\/a>

Your subscriptions keep this site going. Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"

Number go up! This is totally organic market activity! People just really like Bitcoin 40% more than they did last week!<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[568,21,38,84,39,1080],"class_list":["post-13281","post","type-post","status-publish","format-standard","hentry","category-uncategorised","tag-binance","tag-bitcoin","tag-bitfinex","tag-bitfinexed","tag-tether","tag-trading"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/13281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=13281"}],"version-history":[{"count":30,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/13281\/revisions"}],"predecessor-version":[{"id":13393,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/13281\/revisions\/13393"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=13281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=13281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=13281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}