PayPal launched Checkout with Crypto, allowing users to use Bitcoin, Litecoin, Ethereum, or Bitcoin Cash to checkout at more than 29 million PayPal merchants.
“As the use of digital payments and digital currencies accelerates, the introduction of Checkout with Crypto continues our focus on driving mainstream adoption of cryptocurrencies,” CEO and President Dan Schulman said. “Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.”
The transactions will be settled in cash by PayPal automatically, and the firm said it does not plan on holding the coins and will likely sell the balance off. PayPal had previously offered to buy, sell and hold cryptocurrencies on their platform through a partnership with Paxos Trust Company.
PayPal said it added crypto purchasing to engage more customers with online merchants and make their purchasing platform more accessible.
How will the transactions be taxed? The terms and conditions state that PayPal will provide 1099 forms and report to the IRS, but “it is your responsibility to determine what taxes, if any, apply to transactions you make.”
A lot of Crypto news happened at once. Yesterday, Visa announced a USD Coin program, aiming to allow transactions to be settled through a stable coin backed by the USD.
Mr. Wonderful, the Shark Tank multimillionaire, recently said that while Bitcoin may be going through an exciting price discovery phase, it is not liquid enough to garner genuine institutional interest.
“If I want to buy a million dollars’ worth of Bitcoin right now, I’ve gotta do a fair amount of work to pull that off,” he said. “I can’t get consistency with any single regulator on endorsing bitcoin for me to actually do a significant transaction.”
The price of Bitcoin grew significantly at the end of 2020, in three months quadrupling to reach $41k at it’s height. Still, as O’Leary explained on the popular finance podcast “The Pomp” and shared on the O’Leary youtube channel: cryptocurrency is nothing compared to other asset classes.
“Bitcoin is still a nothing-burger,” he said, “a giant nothing-burger.”
Before the asset class becomes big enough for the largest whales to sink billions into as an asset class, cryptocurrencies will have to change. It is simply too challenging to put money in and take money out, and unclear how that will be taxed or regulated in a personal or institutional portfolio.
In the future, O’Leary expects major regulation to approach the crypto space, as evident recently with the SEC charging U.S.-based Ripple over its XRP token.
“Give me the top seven cryptocurrencies, put them into an ETF wrapper, and let me invest in it with liquidity,” O’Leary said. “So that if I want to buy a million dollars of it in the morning and sell a million dollars in the afternoon, I can do that in an ETF format.”
But one thing that cryptocurrency proves, O’Leary said, is that traditional asset classes can be sold 24/7 just like digital currencies.
“Maybe what Bitcoin is telling us is we should have liquidy perpetually, pure price discovery because its always breakfast somewhere in the world,” O’Leary said. “It may be the way of the future, and in a way, if that happens, there would be less demand for something like Bitcoin.”
In early 2015, deBanked signed up a customer that was interested in paying with Bitcoin. So we priced it out and we agreed that about one month of advertising on our website combined with an ad in a single magazine issue would cost about 14 bitcoins.
I submitted an invoice via Coinbase and they paid. Pretty soon thereafter, we sold the bitcoins for cash. I thought nothing of it because I’ve never seen Bitcoin as an investment.
We continued to do other advertising deals in Bitcoin in which the contracts were priced in Bitcoin instead of dollars but that was the largest single Bitcoin transaction we ever did. I’ve also done things like pay for hotel rooms for industry conferences in Bitcoin, because you know…that’s how I roll.
As you probably heard over the New Year’s weekend, the price of bitcoin shot up to $34,000. It got me thinking about how I failed to become a Bitcoin millionaire years earlier, but now with this incredible new high, it reminded me of that one deal in particular
Fourteen bitcoins in 2021 is worth approximately $476,000. Almost a half million dollars. That was for just 1 month of advertising on deBanked.
I guess I should’ve held on to them.
Happy New Year.
Spending the previous three and a half months indoors, locked away from others, and sat at homebound desks have had differing effects on everyone. Some have had a period of intense productivity, some have fallen into bad habits, and some have spent an inordinate amount of time on social media. The Winklevoss twins, famous for playing a role in the founding of Facebook, are of the latter sort.
Cameron and Tyler, aged 38, are two entrepreneurs with a particular focus on cryptocurrencies. Having experimented with social media in its early days with Mark Zuckerberg at Harvard, the pair later sued the Facebook CEO in 2008, the same year they rowed for the USA in the Beijing Olympics. From here the twins went into venture capital; led a seed-funding round for BitInstant, a Bitcoin payment processor; claimed to have accumulated 1% of all Bitcoin by 2013 between them; and launched Gemini, their own cryptocurrency exchange, in 2014. Since then, as Bitcoin’s value has surged and fluctuated, the pair have become figureheads for the cryptocurrency, having been proponents of the decentralized currency from the days when it was worth less than $10, to its highest valuation in 2017 at just below $20,000, to its current price of just over $9,000.
And with quarantine providing all the time in the world to ponder the future of Bitcoin, the twins have been posting daily on Twitter about the crypto, relating it to any and all topics that proved popular. Cancel culture? There’s a tweet for that. George Orwell’s magnum opus, 1984? There’s a tweet for that. Vaccinations and their alleged comparability with cryptocurrency? There’s a tweet for that.
Beyond comparing and relating Bitcoin to everything that comes up in the news cycle, the twins brought up an idea a number of times on social media over quarantine: that the pandemic has set the stage for a decentralized world.
While it is clear that this has happened to a point already, given the global move toward working from home, Cameron believes it will go further, mentioning in a tweet that the pandemic will be “an inflection point for Bitcoin and the Metaverse.” Choosing not to expand on this lofty statement, the specifics of Cameron’s claim can’t be known for sure, but the idea behind the Metaverse, a collectivized virtual space based off the setting of a 1992 sci-fi novel which is capable of replacing the functions and opportunities granted by the real world, is one well suited to Bitcoin, or, at least the idealized vision of what Bitcoin could become.
As well as this prophesizing of a virtual utopia, the brothers displayed an intense distrust and paranoia of government, currencies that are regulated by centralized banks, and the role of big tech. With tweets criticizing the Federal Reserve’s decision to inject $1.5 trillion into the economy, YouTube’s ongoing debate over whether the First Amendment applies to a private business, and warnings against the threat of a government willing to grab more power during a pandemic, the billionaires’ tweets appeared at times to reach Elon Musk’s recent anti-government messages via Twitter.
With the twins having noted their disappointment in the US government earlier in the year at a conference in January, that time regarding the government’s slow adoption of cryptocurrencies, it is not so much of a surprise to see these further critiques, especially with them largely taking aim at the government’s employment of federally printed money, or “toilet paper,” as they call it.
All this being said, the twins appeared to be just like everyone else during quarantine: left with not much to do with a stable internet connection and a charged phone. And so conspiracies and cryptocurrencies aside, the brothers also made time for the irreverent and the relatable, posting about the possibility of a Groundhog Day-style scenario during quarantine as well as the importance of “sunsets, the stars, and true friends” in a tweet that wouldn’t be amiss in a Disney film.
Ultimately though, the sooth-saying and future-gazing done by the Winklevii in quarantine will take years, if not decades, to come about, if it ever does. One thing is certain though, the twins won’t stop talking about it until then.
Did You Own Bitcoin Before The 2018 Crash? This Bitter Group of Crypto Plaintiffs Think You May Be Entitled to $1.4 Trillion in DamagesOctober 8, 2019
A group of plaintiffs whose Bitcoins suffered the great crypto crash of 2018, have a rough idea of how much damage was caused ($1.4 trillion) and who exactly was damaged, everyone.
The alleged culprit is Tether, a little understood company that’s supposed to issue fully-backed digital US dollars to make trading in the crypto marketplace easier. Instead, as alluded to in a deBanked May/June issue magazine story, Tether may be the ultimate illicit scheme. The company is under investigation by the New York Attorney General, Department of Justice, and CFTC, but still reigns supreme when it comes to buying and selling Bitcoins.
The plaintiffs, David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein, outline in their 95-page lawsuit filed on Monday that Tether is part fraud, part pump-and-dump, and part-money laundering.
Tether’s digital assets were used to buy up billions of dollars worth of other cryptocurrencies, they say, inflating demand and prices.
“As the cryptocurrency market reached a fever pitch, Tether’s mass issuance of USDT (Its digital asset) created the largest bubble in human history. When it burst, over $450 billion of value disappeared in less than a month. The fallout continues to affect the cryptocurrency market, including by causing prices to be lower than they would have been but for the manipulation.”
Plaintiffs define the class as “all persons or entities that held or transacted in cryptocurrencies, including but not limited to USDT, ether, bitcoin, and bitcoin derivatives, in the United States or its territories at any time from October 6, 2014, through the present.”
Tether had apparently been expecting such a lawsuit. Over the weekend it published a statement on its website saying:
“We want to make clear our position that any claims based on these insinuations are meritless, reckless and a shameless attempt at a money grab. Accordingly, Tether will vigorously defend itself in any such action.
These baseless accusations are an attempt to undermine the growth and success of the entire digital token community, of which Tether is a key part. It is an attack on the work and dedication of not just Tether’s stakeholders, but thousands of our colleagues, too.“
This week, two House Representatives presented Federal Reserve Chairman Jerome Powell with a letter calling for the Fed to seriously consider the creation of a digital currency.
Beginning their letter with, “As you are aware, the nature of money is changing,” French Hill (R-AR) and Bill Foster (D-IL) run through a brief history of money as we know it before relaying their central worry, “that the primacy of the U.S. Dollar [sic] could be in long-term jeopardy from wide adoption of digital fiat currencies.”
Such concern is bolstered by the knowledge that over 40 other countries are investigating the use of digital currencies, with Sweden, Uruguay, and China’s programs each being name dropped by Hill and Foster; as well as by comments by the President of the European Central Bank, Christine Lagarde, who noted that in the absence of digital currencies backed by central banks, private firms will be left to dominate the space, effectively bypassing banks, and ceding control of monetary policy as well as power to combat illegal financial activities such as money laundering.
Before signing off, the authors warn of the troubles that Libra, Facebook’s unlaunched cryptocurrency could release into the world of finance if the tech giant is allowed to run free of regulation; and they finish by asking Powell to consider a number of questions relating to the establishment of a US dollar digital currency.
Not found among these questions is the conundrum of whether a sovereign digital currency would be referred to as legal tender despite it being intangible.
Hill and Foster aren’t the first to raise this issue, in fact former Chairwoman of the Federal Deposit Insurance Corporation Sheila Bair wrote in Yahoo Finance last year urging the Fed to shift its focus. Naming the potential digital currency ‘FedCoin,’ Bair explains the benefits of such a creation, saying that during recessions the Fed could reduce the interest rate on FedCoin in order to encourage spending, while during boom years interest rates could be increased to avoid overheating of the economy. As well as this, Bair proposes that in the case of a downward economic spiral, the Fed could issue time-limited coins that will expire if not spent on consumption.
Although it isn’t all sunshine and economic prosperity in Bair’s assessment, as she also notes that FedCoin has the potential to be a massive disruption to credit availability, with its implementation meaning that the over $10 million which is currently deposited by customers in American banks could vanish overnight if every American moved their savings to FedCoin. Regardless, Bair concludes her article with the warning that “If it does not stay ahead of this technology, not only could banking be disrupted – but the Fed itself could also be at risk.”
Bair’s comments are matched by former Bank of England Governor, Mark Carney, who, at the Economic Policy Symposium in August, discussed how a digital currency backed by a coalition of central banks, or as he termed it, a synthetic hegemonic currency (SHC), could allow for economies to move away from the US dollar as the global hedge currency and, thus, remove themselves from the currency’s domineering influence.
Interestingly, Hill and Foster’s letter comes the same week as news of a sovereign digital currency in Venezuela. President Nicolás Maduro confirmed that his government has plans to develop payment methods based off Bitcoin and that the country would begin stockpiling cryptocurrencies for its international reserves. These developments will accompany Petro, the cryptocurrency issued by the Venezuelan government that is backed by the country’s oil and mineral reserves.
As noted by Decrypt, despite his history of supporting Bitcoin, Juan Guaidó, Venezuela’s other President whose claim to the position has been recognized by Donald Trump, has described his rival’s move toward a digital currency as a show of “desperation.” In true crypto form, Guaidó also lambasted Petro in 2017 for not being a real cryptocurrency as its value is determined by oil.
With the initial promise of cryptocurrency as the herald of a more egalitarian currency free of borders and regulators having been largely undelivered in the developed world, as such currencies are instead used for speculating and turning profits, Maduro is framing his decision to double-down on digital currencies as a return to the original vision.
“Donald Trump and his sanctions are blocking Venezuela from carrying out transactions in any of the world’s banks,” said the president this week. “There’s other formulas to pay, and it’s what we’re using, because our payment system works perfectly in China and Russia … Venezuela is working with the world of cryptocurrencies as a free national and international payments system … The finance minister and Venezuela’s central bank have new instruments which we will activate very soon so that everyone can do banking transactions, as well as national and international payments through the central bank’s accounts.”
Whether or not Maduro’s plan will actually fulfill the original hopes for Bitcoin and cryptocurrencies is unsure, what is certain however is that more and more world leaders and policy makers are beginning to consider digital currencies as an issue to be reckoned with, rather than something to hodl at arm’s length.
Bitcoin’s price might not be all that right now, but Coinbase, a US-based digital currency wallet, wants to pay its customers a reward for holding on to its stablecoin. Unlike Tether, a popular stablecoin that was purportedly fully backed by US dollars but then revealed it wasn’t, Coinbase’s stablecoin is fully backed by dollars on deposit in a bank.
The advantage of a stablecoin, in theory, is the stability and safety of the US dollar combined with the fluidity of cryptocurrency. Coinbase’s stablecoin is called USDC and as of Wednesday, the company will begin paying holders of the coin an annualized reward of 1.25% APY. That’s a little bit less than a high yield savings account. It’s interest but it’s technically not. Unlike a bank, Coinbase won’t be using your funds to facilitate loans to generate income so that it can pay out interest to depositors. Instead, the company claims, “You simply earn while storing your crypto safely on Coinbase.”
Coinbase disclaims the offer by reminding users that their funds are not FDIC insured and that the digital wallet is not a deposit account or savings account.
$176 million of USDC exchanged hands in the last 24 hours as of this post being written.
The crypto faithful, users whose optimism in cryptocurrency has been unwavering, have quietly been looking for an alternative stablecoin to Tether. Tether has been locked in a battle with the New York Attorney General and recently revealed in court documents that its stablecoin was not as well backed as the company had claimed.
UnTethered: How The Entire Crypto Bull Run of 2017 May Have Been a Mirage (And Why Its Resurgence May Be Too)June 24, 2019
In 2017, college bros gathered at a bar in downtown Manhattan. As a journalist from deBanked approaches, a 5’10” young 20-something with long shaggy brown hair is vaping outside on the sidewalk while staring intently at his phone. I stop. He pauses and eyes me up and down. “You here for the crypto meetup bro?” he asks. My age, about 15 years his senior, apparently gives the impression that I’m here as an investor. “There’s a few dudes in there that are gonna change the game,” he says. “We’re talking 10,000x.”
“Sweet,” I reply as I step inside. I locate the others that have gathered here to talk all things cryptocurrency and dive in, but quickly find that I speak a different dialect. Bitcoin, the coin I grew up with, is the uncool parent in an era where Ethereum and ICOs (Initial Coin Offerings) are all the rage. Dozens of tokens and coins are “mooning” (soaring to the moon) in value and everybody that’s in the know, which this group believes themselves to be, is going to be filthy rich.
Here, as with other meetups I had been to, required no understanding of the technology. Who you knew and how rich you got off your crypto investments shaped your standing and identity in the community. If you weren’t achieving at least 100x (A price increase multiple of 100) on an ICO investment, well then, what were you even doing bro?
The across-the-board surge in value at the time was validation to crypto communities like this one. Nobody dared question how the rise in value kicked off or why it was happening 8 long years after the birth of Bitcoin (Bitcoin was created in 2009). All that mattered is that it was happening now and they were fortunate to be a part of it. They weren’t being reckless about it, or at least that’s what they told me. Every time these investment pros wanted to take money off the table and book a winning trade, they’d convert their crypto to dollars.
If only it were that simple.
I would soon learn that when they sold a crypto, like Ripple’s digital asset known as XRP, for example, into dollars, they weren’t actually receiving any cash. Instead they were trading the Ripple asset for another digital asset called USDT. The value of XRP fluctuated all the time, but 1 USDT was always worth $1.
In theory, you could cash out into real money, but withdrawals could take weeks to be processed and those funds would be of no use if another crypto investment opportunity came along. Digital USDT, therefore, solved both problems, stability and liquidity in the crypto markets.
Thousands of crypto trades happen every minute. On Binance, a crypto exchange I log on to for my story, shows traders buying and selling cryptos with others in the market in real time and USDT is one of the biggest movers.
I am tempted to convert the fractions of Bitcoins in my possession to the digital equivalent of a dollar, USDT, but I can’t bring myself to do it. Instead I’m nagged by a strange letter, the T after USD. It stands for Tether and it’s not backed by the United States government, but on Binance and on crypto exchanges across the world, it is a glue that holds the market together. It’s the stable coin, the closest thing that exists to a real dollar in a virtual universe.
What the hell is Tether, I wonder?
My research brings me to an unpopular opinion being pushed on twitter by an anonymous user (@bitfinexed) whose following is growing every day. USDT, the person tweets daily, is all a fraud.
8,000 miles from the bar in New York City, a crypto exchange in Hong Kong named Bitfinex has become flush with a new batch of USDT, $100 million worth. Nobody moved them there. Rather Bitfinex’s affiliate company, Tether, has created them out of thin air. All of this newly minted USDT is soon used to purchase Bitcoin and other cryptos in huge chunks, sending prices soaring. Traders cheer the demand and everyone it seems is getting rich.
The market tolerates this sudden introduction of USDT because Tether claims that all USDT is backed by actual dollars held in reserve in a bank account. So $100 million in newly minted USDT is supposed to mean that a wealthy investor has deposited $100 million in real money into Tether’s bank account in exchange for $100 million USDT to trade with on Bitfinex. That keeps the value pegged at 1:1. Once an investor has access to their USDT on Bitfinex, it is used to buy up other cryptos.
That someone would exchange $100 million in real money for USDT is astounding. It demonstrates to the market that the uber wealthy see the value of crypto. Rumors abound that the investor is Goldman Sachs or a Saudi Prince or an international drug lord. Nobody knows and nobody has time to question it because tomorrow the same thing happens all over again, another $100 million in USDT appears and a buying frenzy of Bitcoin, Ripple, and Ethereum ensues, sending the entire crypto market in a frenzy.
By December of 2017, $1 billion worth of USDT exists. That’s $1 billion of buying power dumped into what was a relatively sleepy niche marketplace. Since market capitalization is not proportionally correlated with what’s actually invested, a billion dollars in buy orders can be enough to potentially drive the crypto market capitalization up by hundreds of billions of dollars in return. And that’s what happens.
Tether’s influence is apparent. Bitcoin, for example, was worth $1,000 at the beginning of 2017 and reached $19,000 by mid-December. Ethereum went from $8 to $1,400 in less than 13 months. Ripple went from 6/10ths of a cent to over $3.00.
At its peak, the market cap of the entire cryptocurrency market was nearly $1 trillion, a stunning valuation that finally caused the investing public to second guess itself and burst the bubble.
And just like that, the market crashed.
But not all at once. On the way down, newly issued USDT continued to flood the market. When they were used to buy other cryptos, prices would suddenly spike and the market would experience brief rebounds. To traders, this anonymous investor was either a white knight trying to save the market or a madman who continued to dump his billion dollar fortune into rapidly declining digital assets at his own peril.
Any short term recovery lost steam, however, and the bulletproof can’t-lose attitude of crypto culture was breached. The same college students touting their previous prowess took to social media to bemoan the irrationality of a sudden bear market and the loss of their fortunes. The meetups that became a staple of 2017 suddenly dried up. Twenty-somethings on Telegram complained that the events might even cause them to find a job. The horror, they half joked.
By April 2019, $2.6 billion worth of USDT existed on exchanges around the world, all brought into existence by Bitfinex’s affiliate, Tether. That meant that somewhere $2.6 billion was supposedly sitting in a bank account as a reserve to guarantee the value. Without it, the dramatic rise or fall of the crypto markets would probably never have been possible.
Tether’s influence and size was enough to attract the interest of American regulators. In December 2017, at the height of the bubble, the US Commodity Futures Trading Commission sent subpoenas to both Bitfinex and Tether. And in November 2018, right after Bitfinex’s Chief Strategy Officer suddenly resigned, Bloomberg News reported that the US Department of Justice was investigating whether Tether had been used to prop up Bitcoin or manipulate the market. Tether’s loyal fans chalked it all up to FUD (Fear Uncertainty and Doubt) and spun the investigations as proof that governments felt threatened by the future new world order.
But that was until April 25, 2019, when the New York State Attorney General bolstered the worst fears that a handful of critics had been screaming for years, that Tether may not be all it’s cracked up to be.
Bitfinex and its affiliate’s long struggle with finding a stable banking relationship had led the company to split its holdings. A significant share was on deposit at a small Bahamian bank while over $1 billion had been sent to a Panamanian payment processor (without a contract) named Crypto Capital for safekeeping, the AG alleges. Those funds were comprised not only of Bitfinex’s client deposits but were also co-mingled with reserves held to back USDT. The arrangement was such that if Bitfinex customers ever began requesting fiat currency withdrawals beyond what they had on hand, Crypto Capital was supposed to send payment on Bitfinex’s behalf to satisfy the request.
As the crypto bear market continued into mid-2018, Bitfinex went calling on Crypto Capital to pay its customers that wanted to be paid out in cold hard cash. Crypto Capital, much to their surprise, refused, putting Bitfinex in the precarious position of not being able to pay customers. As the public began to turn on Bitfinex, Bitfinex executives pleaded desperately with Crypto Capital.
By the Fall of that year, Bitfinex finally learned what the holdup at Crypto Capital was. The money was gone. According to Crypto Capital, $851 million had been seized by governmental authorities in Portugal, Poland, and The United States. Bitfinex says the supposed seizure is all a ruse and that they have been swindled out of the money.
In any case, rather than advise the public of the lost funds, Bitfinex allegedly contemplated borrowing the remaining funds it had on hand in reserve to back USDT to pay out Bitfinex customers and sustain its operations. The arrangement may have been Bitfinex’s only hope to cover its $851 million loss and survive, Tether be damned.
The New York Attorney General was not impressed with Bitfinex’s plan to raid its USDT reserves and successfully persuaded a New York Supreme Court judge to order an injunction preventing Tether from extending a $900 million line of credit to Bitfinex.
But Bitfinex had other plans in the works.
Suspiciously, on April 24th, one day before the New York Attorney General filed its action, $300 million worth of new USDT was created, loaded up on Bitfinex, and used to buy up massive chunks of crypto. No one can be sure that anyone truly deposited $300 million in real money with Tether to make this possible. Regardless, there appeared to be an immediate impact. Bitcoin, Ethereum, and Ripple all rose in value by more than 50%. Several news outlets ran headlines that said “Bitcoin is Back.”
As the situation continued to unfold, Tether revealed that it did not actually hold $1 in currency for every $1 in USDT it created. Proceeds of Tether sales, they admit, are used to fund operations, make investments, and buy assets. The USDT foundation was unraveling in real time.
On April 30th, a little known Arizona Businessman named Reginald Fowler, who once held a small stake in the Minnesota Vikings, was indicted along with an Israeli woman named Ravid Yosef for bank fraud and for running an unlicensed money transmitting operation tied to virtual currency trading. The US Attorney for the Southern District of New York states that “Reginald Fowler and Ravid Yosef allegedly ran a shadow bank that processed hundreds of millions of dollars of unregulated transactions on behalf of numerous cryptocurrency exchanges.” The duo, the US Attorney continues, used the financial system for criminal purposes through lies and deceit.
Fowler’s business is believed to be tied to Crypto Capital, the same company that owes $851 million to Bitfinex. During his arrest, investigators found roughly $14,000 in counterfeit $100 bills in his office and learned that $60 million of client funds had been diverted from his business to his personal bank accounts.
Bitfinex, meanwhile, does not plan to go down quietly. On May 17th, they announced they had raised $1 billion from anonymous investors in just 7 days to recapitalize the company back to sustainable health by selling a new crypto called UNUS SED LEO tokens. Bitfinex called the demand for these tokens “overwhelming” and that the sale represented a “new milestone for Bitfinex and the greater Blockchain community.”
On social media, nobody believes them. The unusual token name and spelling led to them being branded “Unused” Leo tokens. Dozens of users called for their arrest, but most just called their token sale a scam. The jig, in the hearts and minds of the crypto faithful, is up.
Tether’s value on exchanges, meanwhile, goes the opposite way. The value of USDT jumps to $1.01, making it worth more than 1 US Dollar. Traders, in a sense, have no choice but to keep up the lie, because a collapse of USDT might mean a collapse of the entire crypto market.
So as the market’s framework falls apart and may never have been real to begin with, the market itself rallies.
The correlation between USDT and the entire crypto market dawned on executives of Bitfinex in October 2018. When Crypto Capital refused to give back the $851 million, a senior Bitfinex executive wrote, “Please understand all this could be extremely dangerous for everybody, the entire crypto community. [Bitcoin] could tank to below $1,000 if we don’t act quickly.”
Back in New York City, the May 2019 surge in crypto prices, still less than half of the all-time highs, jolts awake a dormant online chat group that used to organize crypto meetups. One user calls attention to a particular gathering scheduled to take place on May 6th. It emphasizes discussion on blockchain instead of trading.
The response from those still following, however, is tepid. One of the group’s original chief proponents calls crypto a “f***ing scam.” Another user ponders if free alcohol is incentive enough to sit through “fools” talking about “blockchain revolution bullshit.”
A joke about losing money prompts another to claim they were never in it for the money in the first place. “I’m in it for the tech bro,” he says.
Yet another, who admits he has been holding onto to his near-worthless crypto through the whole bear market, hopes that the rally this time will finally last.
“To the moon!”
Since this article was first written, more than $900 million worth of fresh USDT has been created and dumped into the crypto market. The value of the cryptocurrency market has soared with it.
Bitcoin: $5,350 on May 1 to $10,696 on June 23.
Ethereum: $162 on May 1 to $309 on June 23.
XRP (Ripple): $0.31 on May 1 to $0.47 on June 23.
However, the correlation between the creation of USDT and the value of Bitcoin remains extremely suspicious.