As I have said recently, I think Bitcoin is a bit bubbly and may be vulnerable for a sharp correction, even simply from the technical perspective. It is actually healthy this way but can be very painful for those late comers who are just recently chasing it. Now I just saw another "warning" not directly related to Bitcoin but indirectly via a stablecoin, Tether as Tether is being widely used for many people to trade Bitcoin (about 70%). Per this author (anonymous), if Tether collapses due to the fraud charge, Bitcoin will suddenly lose about 70% of the daily trading volume, which will cause a huge run for Bitcoin as well. Do I know for sure this must happen if Tether is indeed a fraud? Surely not as no one has any clear idea about how this may impact on the Bitcoin market but it sounds logical. In any case, it is better to be prepared for the worse while hoping for the better for anything including Bitcoin.
Here is the excerpt: The Bit Short: Inside Crypto's Doomsday Machine
Because Tether sounds exactly like a currency fraud, it may not surprise you to learn that Tether Ltd. is currently under investigation by the Office of the Attorney General for the Southern District of New York. That investigation was announced to the public on April 25th, 2019...
Beginning in September, Tether Ltd. begins to issue multiple large blocks of Tethers per day. The pace accelerates, with $2.3 billion worth of Tether issued in the first week of 2021 alone.
This was consistent with the possibility that, as Tether Ltd.'s various legal challenges failed one after another in the New York courts, Tether Ltd. was choosing to issue Tethers faster and faster to maximize the amount of value it could extract from the crypto ecosystem before being shut down. The pace accelerates closer to Tether Ltd.'s final disclosure deadline – January 15th, 2021...
The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that's true! Tether Ltd.'s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month.
The answer was – at least up to the end of September 2020 – not nearly enough...
From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million – going from $4.7B to $5.3B...
But during the same period, total issued Tethers increased by almost $5.4 billion – going from $4.6B to $10B!
The implication was shocking: there weren't nearly enough dollars in all the domestic banks in the Bahamas to back the Tethers that were floating around in the crypto market.
So this was crypto's big short: Tether Ltd. was short of U.S. dollars – to the tune of about $25 billion.
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