That’s the pump that inflates Bitcoin
Is it the Libra project from Facebook? Is it the Chinese answer? Is it the interest in cloud mining? Are they institutional investors who discover Bitcoin and other crypto currencies for themselves? Is the reason the increasing amount of freelancer getting paid in BTC? You can puzzle for a long time over what is behind the rapid comeback of Bitcoin’s stock market chart in recent weeks. Or take a closer look at the movements that happen on the crypto exchanges themselves.
The most striking feature is the driving force
Tether, another crypto currency, which was originally launched as a so-called stable coin with the promise of being tied 1:1 to the value of the US dollar and covered by real dollars. Whenever large quantities of Bitcoin have been purchased in recent weeks, large, newly created quantities of tether have just come onto the market.
Since the beginning of April, the stock of two billion tether has almost doubled – in the same period as the Bitcoin rate of $4,000 took off. On some days, billions of tethers flow from tether into Bitcoin and other crypto currencies on the leading tether exchange Binance alone.
The digital dollars are issued by the company Tether, Inc. whose management is partially identical with the operator of the controversial crypto exchange Bitfinex. The entity is regarded by some as “the central bank of Bitcoin” – but a central bank that has no interest in financial stability.
Carol Alexander and Michael Dakos from the British University of Sussex write of a “tether bubble“. In an interview with the magazine “Decrypt”, the head of a Bitfinex subsidiary even admitted that there were agreements between Tether and the major investors called “Whales” on how many tether should be created. Therefore, there are often transactions with round, large sums. Minimum stake: 100,000 dollars.
These whales could use the tether to drive the price of Bitcoin and Co. up. If then further buyers come, which speculate on still higher prices, the Coins can be repelled with profit again. “It’s not even a bubble, it’s pure market manipulation,” crypto critic David Gerard told the Financial Times.
- The Bitfinex man quoted by “Decrypt” insists that the tether is not simply drawn from nowhere, but always paid in hard dollars – so the Bitcoin pump is driven by real demand, albeit with a time lag.
- However, Tether/Bitfinex did not want to prove in court the revenues that justify their virtual money creation.
- The New York prosecution is investigating money laundering and fraud. Main accusation: Bitfinex had filled its own financial gap of 850 million dollars with reserves of Tether.
A partner who is said to have been central to the procurement of real dollars with the help of a dubious bank in Panama has already been convicted. In the meantime, Bitfinex also gave up its claim to the tether dollar peg. And again and again, credits of Bitfinex customers disappeared on the stock exchange.
The crypto-pumpers’ defense strategy: they doubt the jurisdiction of the US judiciary. One accepts only the jurisdiction of the British Virgin Islands, says the website of Bitfinex.