Until the situation with bitfinex pumping billions of unbacked tether into the ecosystem is resolved, doing anything involving bitcoin right now is insane.
They’ve released almost $200 million worth of tether in the last day.
They’ve released almost $200 million worth of tether in the last day.
1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. This transaction would have zero impact on the BTC/USD price.
2) Tether receives $1M worth of BTC they can slowly disperse back into the market via their own exchange (since Bitfinex owns Tether) in a controlled manner that doesn't push the price down.
3) With USD in hand they can either put it into their reserves (assuming we trust them) or they could also use the cash to further eliminate any selling pressure on the exchange (with a large buy order "wall") or even generate upward pressure.
4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.
> 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes.
Can you clarify that you mean for the purpose of tax evasion as opposed to tax avoidance? IANATL but it seems very unlikely that the IRS or any tax jusrisdiction that I’m aware of, would consider a trade into USDT a like-kind transaction [1]. It would still trigger capital gains.
If lots of people really are operating under a different belief then this is going to get really messy. If there’s a crypto-correction, non-HODLers could be left with tax liabilities they can’t cover.
I have no idea on the legal specifics or whether or not Tether/Bitfinex are going to be providing reporting to governmental agencies (like Coinbase+IRS are doing). The discussions I've seen often cite Tether as a way to capture profits in USD and holding off on the "real" USD conversion at a later place or time (taxes or restrictive outflows like China's $50k USD/yr limit). Basically viewing it as a way to operate in USD without creating a banking paper trail.
If conversion to USDT causes a legally taxable event that's going to remove a significant portion of the proposed use-cases for tether.
> If lots of people really are operating under a different belief then this is going to get really messy.
I think "really messy" is a given at this point. I was in Starbucks a few days ago and overhead a non-tech savvy man say: "I need to figure out how to buy some of that bitcoin so I can get rich but all the websites I've found are crooks!"
These exchanges could be pulling all kinds of shenanigans including outright making shit up. What is stopping them from buying / selling more bitcoin then they actually have? If an exchange wanted to pocket some real cash, just sell some bitcoin they don't have. How about just creating fake buy / sell orders to drum up some excitement? Or better, just do real trades back and forth between yourself. Once you add Tether into the mix and abstract away real cash inputs and outputs things get even more exciting. An exchange could start buying bitcoin with unbacked USDT to jack up / stabilize the BTC price--works great so long as everybody doesn't all try to convert their USDT to real cash dollars.
Since they are all completely unaudited, exchanges could be pulling this stuff all the time.
Tether makes this 10x more exciting though.
This sounds extremely foolish. Why would anyone intentionally wish to hold such a large amount of a token that all evidence points towards being actually worthless? (Tethers can only be used to purchase cryptocoins in Bitfinex, which is most likely insolvent -- it is not possible to redeem them for USD).
> 4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.
I think this is the most likely explanation for Bitfinex's behavior. They know that there will inevitably be a bank run when Bitcoin's prices show a sign of going down and that will unravel the scam they have been running so at this point the only thing they can do is continue to push up the price at all costs.
Yep. Which makes the "institutional investors are handing Bitfinex hundreds of millions of real dollars in exchange for Tether" claims people are pushing even more ridiculous.
The Twitter user Bitfinex'd is pretty much solely responsible for starting this trend, with Emil Gun Sirer retweeting pretty much all Bitfinex'd tweets. Often, if you dig into this evidence, you find mostly FUD signals -- taking various data from the internet and interpreting it into something that it isn't.
Basically I don't know nor care if Tether and Bitfinex are fraudulent, but personally I've never seen clear evidence that it is, and people like Bitfinex'd and Emil Gun Sirer seem to push FUD backing their personal anti-Bitfinex agendas without proof.
https://twitter.com/el33th4xor/status/941707765910818816
I think this is a bearish signal until its clarified.
edit: This seems to show that $180 million was issued in the last 3 days: http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3...
They have yet to release an actual legal audit, by an official auditing company.
Seems like no amount of verification will ever be enough for a good chunk of the crypto community. The scars of Mt Gox and BFX socialized loss are too deep.
The market seems to think otherwise, you can unload your tether for $1.02 most days if you want.
And I believe that if you want to prove to the world that you have a bunch of money then you should do a full, legal, audit.
That's the bar. If they have all the money, then a legal audit will prove them right.
They may be fraudulent; they may be not. Regardless, they have a lot to lose by revealing their banking partners to the world. The United States probably used the Bank Secrecy Act to force large American banks to not send money to accounts associated with Bitfinex. If Bitfinex reveals its banking partners for Tether, then they risk getting cut off from those partners or those partners getting cut off from western banking.