Wha-Tether could be going on with the bitcoin price?

Two-and-a-bit weeks ago, Alphaville moderated a panel at a crypto conference on crypto exchange "market integrity and consumer protection" (which, as we were quick to point out, felt a bit like a contradiction in terms. We're still not sure that was a good way to warm up the crypto crowd).

Two of the panelists had the audacity to wear bitcoin socks. They hadn't even co-ordinated their outfits. They were just wearing bitcoin socks. In 2019. This felt bullish.

Bitcoin socks worn by panelists at the 2019 CryptoCompare conference

The conference itself was also quite buzzy (albeit in the typically slightly unhinged crypto way). One of the offensive-sock-wearing panelists, from crypto exchange Kraken (who was also wearing a #reckless cap) decided to tell the audience, after we'd said a few times that we didn't think exchanges were doing enough to protect consumers, that "bitcoin IS consumer protection". This, unlike our comments about the paradox inherent in the panel's title, seemed to go down very well with the crowd, who broke out into rapturous applause, and then continued to do so at every word the young offensive-sock-and-cap-wearing panelist uttered.

When the panel was finished, the "chief growth officer" at Binance, generally thought of these days as the world's biggest crypto exchange (although it's hard to know for sure because the entire economy is Fyre Festival and exchanges make up report their own volumes), was mobbed by fans wanting selfies with him.

It was almost like bitcoin was... cool again? But yet, outside of this surreal crypto conference and the even more surreal #cryptotwitter-sphere, nobody seemed to be talking about it.

We know it's a bit of a basic -- in the modern sense of the word basic -- move to paste Google search trend charts into articles (particularly because TEEIFF) but here's a Google search trend chart pasted into an article (for worldwide searches for bitcoin over the past five years):

As you can see from the chart, interest in bitcoin has crept up a little in the past month or so, but not that much. Nothing like it did in 2017.

But if you look at a chart of the bitcoin price, things do look a bit like 2017 (screenshot from CoinMarketCap, which aggregates the prices across several exchanges):

Bitcoin hit as high as $13,850 last Wednesday, having surged about 75 per cent in the space of two weeks. It's now fallen sharply again-- it's trading around the $11,000 mark at pixel. But that still represents an almost quadrupling in the price since the start of the year.

So what gives? Could it be, as some have claimed, because of the great invention that is Libra? Well that might be helping a bit on the margins, just because it's helped to get "crypto" back in the headlines, but it's not the main thing going on here. As we have pointed out many times now, Libra is neither a cryptocurrency nor decentralised and neither does it run on a blockchain. Also, bros at crypto conferences might be getting excited at numbers going up, but the retail interest -- from the kind of people who might have got drawn in by "crypto" headlines in 2017/18 -- just isn't there this time.

Or could it be that old chestnut about bitcoin being a "safe haven", as Chinese media declared it to be towards the end of last week? Er, no. Bitcoin shows basically no correlation with "risk-off" market episodes and is also neither safe nor havenish.

Ben Munster of crypto site Decrypt wrote an article last week that offers some clues as to what in the name of Satoshi is going on. Because the other thing that has happened over the past month or so is that almost $1bn worth of Tether, the original "stablecoin", has been printed. Its total "market cap" now at about $3.6bn, having almost doubled since the start of April. This, of course, is the same Tether that is being sued by the New York Attorney General's office for allegedly using its reserves to cover up $850m of funds on sister exchange Bitfinex.

Munster's piece explains in detail how huge orders of new Tethers are made by "whales" (AKA a small group of big-money traders) just before the price starts to go up, and then dumped onto exchanges. But the particularly noteworthy thing about the piece is that the person innocently doing the explaining is Will Harborne, founder of Ethfinex, a subsidiary of Bitfinex, which is being sued alongside Tether by the NYAG. (Coincidentally Harbone was also one of the people on our panel, though obviously as an ETH bro he was one of the two not wearing bitcoin socks.)

From the piece:

When you see a large Tether “print,” said Harborne, it means a handful of wealthy clients have essentially pre-ordered batches of tethers, days in advance, to then dump on the market—often before it’s begun to surge. Tethers are useful to these large holders, who can trade them—paired to Bitcoin, Ether, Litecoin and other coins—on high-liquidity exchanges that don’t accept fiat currencies...

With that in mind, here's another chart that looks a little different to 18 months ago -- one from Blockchain.info, showing bitcoin trading volumes in dollars (the big spike is in late 2017/early 2018):

According to Blockchain.info, about $417m worth of bitcoin was traded on Friday on the main dollar-based exchanges. Which sounds decent until you notice that about $37bn worth of Tether was traded on Friday, according to CoinMarketCap.

A post published on Medium late Friday, by Sussex University Professor Carol Alexander and PhD student Michael Dakos goes into some more detail, and features a nice chart showing the supply of Tether versus the bitcoin price over the past few months:

Bitcoin blogger and Attack of the 50-foot Blockchain author David Gerard indicated to us the manipulation of bitcoin via Tether is so obvious that it's an insult to tulips to compare bitcoin to such phenomena:

This isn't even a bubble. This is just Tether market manipulation.

We have contacted Tether and Bitfinex for comment and will update this story if and when they respond.

In the past, Bitfinex representatives have insisted to Alphaville that the expansion of tether supply is entirely linked to authentic buying interest. In some cases, however, tethers are also originated into reserves in anticipation of demand as well.

Related links:
Has bitcoin come to the end of its Tether? - FT Alphaville
People are freaking out about Tether - FT Alphaville
Tether’s “transparency update” is out - FT Alphaville

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