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The market cap of Tether affects tether, not bitcoin. Only when value flows from tether to bitcoin is when the former affects the latter (and this flow would ma

by knocte 6y ago

The market cap of Tether affects tether, not bitcoin. Only when value flows from tether to bitcoin is when the former affects the latter (and this flow would make tether actually decrease its market cap, not increase it). (NB: I'm not defending Tether, IMO there are way better stablecoins, like DAI, but I disagree about this bullrun being caused by it.)

arcticbull 6y ago
To your point we can’t know for absolutely certain until the lawsuit resolves but studies do point in this direction. “By mapping the blockchains of Bitcoin and Tether, we are able to establish that one large player on Bitfinex uses Tether to purchase large amounts of Bitcoin when prices are falling and following the printing of Tether. Such price supporting activities are successful as Bitcoin prices rise following the periods of intervention. Indeed, even 1% of the times with extreme exchange of Tether for Bitcoin have substantial aggregate price effects. The buying of Bitcoin with Tether also occurs more aggressively right below salient round‐number price thresholds where the price support might be most effective. Negative EOM price pressure on Bitcoin in months with large Tether issuance points to a month‐end need for dollar reserves for Tether, consistent with partial reserve backing. Our results are most consistent with the supply‐driven hypothesis.” “Overall, our findings provide support for the view that price manipulation can have substantial distortive effects in cryptocurrencies. Prices in this market reflect much more than standard supply/demand and fundamental news. These distortive effects, when unwound, could have a considerable negative impact on cryptocurrency prices.” They print tether, backed by nothing, which increases its market cap, and use it to buy Bitcoin which increases its price, which increases its market cap. Win-win! Haha. It’s like the accounting on arrested development — take a banana, take a buck. https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903 https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903

by knocte 6y ago

arcticbull 6y ago

To your point we can’t know for absolutely certain until the lawsuit resolves but studies do point in this direction. “By mapping the blockchains of Bitcoin and Tether, we are able to establish that one large player on Bitfinex uses Tether to purchase large amounts of Bitcoin when prices are falling and following the printing of Tether. Such price supporting activities are successful as Bitcoin prices rise following the periods of intervention. Indeed, even 1% of the times with extreme exchange of Tether for Bitcoin have substantial aggregate price effects. The buying of Bitcoin with Tether also occurs more aggressively right below salient round‐number price thresholds where the price support might be most effective. Negative EOM price pressure on Bitcoin in months with large Tether issuance points to a month‐end need for dollar reserves for Tether, consistent with partial reserve backing. Our results are most consistent with the supply‐driven hypothesis.” “Overall, our findings provide support for the view that price manipulation can have substantial distortive effects in cryptocurrencies. Prices in this market reflect much more than standard supply/demand and fundamental news. These distortive effects, when unwound, could have a considerable negative impact on cryptocurrency prices.” They print tether, backed by nothing, which increases its market cap, and use it to buy Bitcoin which increases its price, which increases its market cap. Win-win! Haha. It’s like the accounting on arrested development — take a banana, take a buck. https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903 https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903