Bittrex CEO announces USD pairings!
Bittrex CEO announced USD pairings on our podcast.
— Rahul Sood 🦄 (@rahulsood) January 31, 2018
— Bitfinex'ed 🔥 (@Bitfinexed) February 1, 2018
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Author’s opinion – it is highly unlikely that Tether is growing through any organic business process, rather that they are printing in response to market conditions.
Tether printing moves the market appreciably; 48.8% of BTC’s price rise in the period studied occurred in the two-hour periods following the arrival of 91 different Tether grants to the Bitfinex wallet.
Bitfinex withdrawal/deposit statistics are unusual and would give rise to further scrutiny in a typical accounting environment.
If there is questionable activity, the author believes a 30-80% reduction in BTC price could be forecast.
Tether is a “stablecoin,” a token on the Omni network (overlaid on the Bitcoin network) seeking to maintain a stable value of one USD per Tether or “USDT”. Tether in its current incarnation is a 2014 rebranding of Realcoin ostensibly functioning by taking USD deposits from customers and exchanging them for an equal amount of USDT. An advantage of Tether is the ability to price digital assets in USD without having USD-denominated bank accounts. Given the extreme difficulty many exchanges have faced in maintaining banking relationships around the world this arrangement is quite attractive. As of the time of writing there are 2,150,000,000 USDT in existence on the Omni network and another roughly 14M Tether denominated in Euro on the Ethereum network as ERC20 tokens. This analysis will focus on the USD denominated Tether on the Omni network.
A number of worrying events have brought attention to Tether throughout 2017. In April they revealed that their banking relationships in Taiwan had been severed; this led to a general suspension of deposits and withdrawals for retail customers. April also saw the beginning of a massive expansion in the number of Tether on the market despite their self-proclaimed inability to accept deposits from non-Taiwanese bank accounts4. Early September brought denials from Tether that they were undercapitalized and promised a historical audit that is still incomplete as of this writing. They produced an internal document in late September purporting to show USD balances backing the then modest amount of ~440M USDT, a figure that had increased ten-fold in only 5 months. The service agreements and institutional names attached to these funds were not divulged to the public internal memo, a reduction of transparency since their April report establishing the names of their earlier banking partners. In November they suffered a hack which was mitigated via an amendment to the Tether network code, allowing them to “freeze” funds worth over 30M USDT. In December they announced that the existing platform would be phased out and no further deposits on the current wallets should be attempted.
The highly correlated growth between Tether issuance and Bitcoin price raises several interesting questions – Is Bitcoin growth driving Tether? Is Tether issuance driving Bitcoin? If one were to assume the worst case scenario, that Bitcoin’s price has been artificially pumped up by Tether issuance, one would expect the market price of Bitcoin to be closer to $2,000 based on the trendline before April 2017 and the marked growth in Tether issuance.