The Ugly Side of Crypto. Who Pumps the Market?
No one should be surprised to know that the crypto currency market can be manipulated. The parabolic rise of cryptos in the fall of 2017 was manipulated. What we saw was a combination of FOMO (fear of missing out) and market manipulation. The most effective way to manipulate the market seems to be by having a "stable coin" and an exchange at your finger tips. Who fits that bill? Well there is Tether and Bitfinex. I am not accusing these companies as being fraudulent or have any proof of fraud by them. This is simply an article stating questions of concern and answers that need to be given.
Why do you think both of these crypto currency companies are under the watch of the New York attorney General? Just the other day a court order was issued that prohibited Tether from "loaning" any funds to Bitfinex. What is Tether? It is supposed to be a stable coin. In other words, if you own 1 Tether it is supposed to equal $1 U.S. Dollar. The concept is that when people buy and sell crypto currencies, they can own Tether as a temporary stop station of funds until that individual is ready to go back into investing in the crypto market. Using a stable coins speeds up the trading crypto experience by not having to keep transferring back and forth into U.S. Dollars. This is very helpful for day traders.
One grey area that has always plagued stable coins is, are they legitimately holding a 1 to 1 ratio of U.S. Dollars per coin? How would a person be able to tell if a stable coin really has your U.S. Dollar when you are issued that stable coin. Well, if we look at the banking sector, there are regular audits to make sure your deposits at a bank really exist and that funds are available if you withdraw them. Tether, has never produced an audit from a third party audit firm. Tether and crypto currency stable coins are not regulated or audited by any federal agency or banking system. Crypto currencies are still the wild, wild west. in other words, buyer beware.
Bitfinex is one of many global crypto exchanges. Bitfinex is a computer program platform that allows anyone to buy crypto currencies and tokens. Exchanges make money by charging small fees for every transaction done on their platform. You know like a middleman. This is a great way to make money until decentralized applications come into existence. When that happens, the middleman is eliminated. Decentralized applications will allow buying and selling of cryptos to be done autonomously.
Here is a most likely scenario. If you made up a stable coin and you also had connections to an exchange than a great theft or lie could take place. The exchange could list your stable coin and create the illusion that many people are using your coin. From the outside this would give the appearance that the coin was popular and safe to use. If you own a stable coin and never provide third party independent audits than you could simple "print" your stable coin out of thin air and make billions of dollars. This possible scenario looks like what might be happening. You scratch my back as an exchange and I will scratch your back as a stable coin.
Tether (who may have been making up coins out of thin air with no proof of a 1 to 1 ratio of U.S. Dollars to back it) was "loaning" money to Bitfinex. Bitfinex was possibly manipulating their exchange to make it look like millions of people were using Tether on a daily basis giving the illusion of popularity, success and confidence. Well both companies are in hot water. Check out the news regarding these two companies. Tether recently changed their by laws and have stated that they do not have a 1 to 1 ratio of U.S. Dollars for every coin they produce but have "alternative" investment value that equal $1 U.S. Dollar per coin. What is this "alternative" investment? Bitfinex is having massive liquidity issues. Bitfinex has had around $850 million dollars frozen by several banks in Poland, United States and Portugal.
What is interesting is this latest rise in Bitcoin and alternative coins (alt coins). This recent Bitcoin pump has had a two day sell off. Guess how much profit taking has been made? Yes, over $650 million dollars. Who do you think is cashing out right now? Who needs liquidity and has $850 million dollars frozen? Have two companies conspired to create this mini Bull Run and price rally simply to cash out at the top and raise a fast $650 plus million dollars? Well you be the judge. Time will tell. Once again, I am not making any accusations. I have no direct evidence, I am just writing about my observations and questions that I have.
One last thing. Is there any crypto currency coin out there that perhaps the same players of Tether and Bitfinex are involved in? If so, I would be cautious.
images from: flicker.com