It’s been three years since the last bitcoin bubble. And as I write this newsletter, I can’t help but feel this is getting so tiring. Where are the regulators? Why did they not step in long ago to put an end to so much nonsense in the crypto space? Things just seem to keep getting crazier.
Tether has now surpassed 26 billion tethers—after minting 1.3 billion last week alone. How does an outfit get away with creating $1.3 billion worth of a stablecoin without being subjected to an audit? Without a cease and desist? It’s been more than two years since the NY attorney general started investigating them.
Bitcoin slipped below $30,000 on Wednesday, but then climbed to $37,800 on Friday after Elon Musk added #bitcoin to his Twitter bio, apparently just for the lulz. The move sparked $387 million worth of short liquidations on Binance, Bitfinex, BitMEX, ByBit, Deribit, FTX, HuobiDM and OKEx.
Today Bitcoin is back down to $32,800.
In general, it’s been a week of madness in the markets. Reddit group WallStreetBets has been pushing up lousy stocks like GME and AMC to squeeze the shorts and wreak havoc on certain hedge funds. And to take the joke even further, they even pushed up the price of dogecoin 800% in a 24-hour period. Unsurprisingly, the DOGE pump was fueled mainly by tethers.
Still sore about that Bit Short story?
Are tethers backed? Nobody will give you a straight answer and certainly not Stuart Hoegner, Tether’s general counsel, who spends all day retweeting tweets and trying to convince folks that tethers are worth real money.
He is apparently still upset about the anonymous “Bit Short” article, which I mentioned in my previous newsletter. He keeps saying it’s all FUD, and now claims it’s not only hurting Tether, but all of bitcoin. Of course, the reason the story is gaining popularity is because it is largely true.
“But beyond its false claims about @Tether_to, this post really amounts to an attack on the entire cryptocurrency ecosystem. Bitcoin has a market cap of above US$600B, and the growing number of major institutions investing in bitcoin is a tribute,” he said in a Twitter thread.
Hoegner keeps complaining. (Also, we already know market cap is nonsense when it comes to bitcoin and the reason institutions have been jumping in is mainly because they see an attractive arb opportunity via GBTC.) But the one thing Tether won’t do is come clean and audit its reserves, which would put the whole matter to bed once and for all. Do those reserves consist of cash that Tether got from real clients? Or is Tether simply buying bitcoin with tethers and selling them for USD on OTC desks and banked exchanges?
Instead of giving out real answers, Stuart and Paolo and their friends at Deltec keep trying to obfuscate, distort, and push the blame on “disbelievers” and “salty nocoiners.”
Gregory Pepin’s disappearing act
Tether is a perpetual PR disaster machine. After delivering a disastrous interview with Laura Shin, where he tries to convince listeners Tether is legitimate, but comes off sounding like a used car salesperson, Gregory Pepin, the deputy chief executive officer at Deltec (where Tether does its off-shore banking), suddenly disappeared from Deltec’s website. But after Twitter noticed and started making jokes, he suddenly reappeared again.
Clearly, Deltec was monitoring Twitter and thought, well, maybe removing Pepin from the website wasn’t such a good idea after all? So they put him back. But his brief disappearance brought up questions: Were Pepin’s colleagues upset with him? Did he even consult with his colleagues before he went on the podcast? Surely they would have worked out a plan for what he would say and all come to an agreement on it. Did he forget to follow the plan?
For the last time, Tether is NOT regulated
Tether keeps telling everyone that it’s regulated. Well, it’s not. No government agency is overseeing Tether and making sure they behave properly, which is why Tether and its sister company Bitfinex have been for years doing whatever they want. They make up the rules of the game as they go along, and put forth whatever nonsense narrative they feel like, simply because they can.
JP Kroning wrote a piece in Coindesk, where he points out that Tether is not regulated. Tether has made numerous claims that it is regulated because it is registered with FinCEN. But “registered” and “regulated” are two different things. “Tether isn’t regulated by FinCEN,” Kroning writes. A registration is not a seal of regulatory approval, and it shouldn’t be advertised as such. “Yet, this is what Deltec and Tether executives seem to be doing on Twitter and in podcasts.”
Ripple responds to SEC; the XRP pump
As I wrote in a recent post, Ripple responded to SEC charges that XRP is a security. They are using the same lame defense that Kik used to try and convince the SEC that kin wasn’t a security. It’s a strategy that is likely to fail miserably, and Ripple will most likely end up settling. It’s just a matter of when.
In the meantime, a group on Telegram called Buy and Hold XRP pumped the price of XRP to its highest number since December. The group’s membership hit Telegram’s 200,000 limit within hours, forcing everyone to head over to a new channel with a similar title. The granddaddy pump is scheduled to start on Feb. 1 at 8:30 EST. (Update: The organized pump turned out to be a miserable failure.)
Is XRP a security? All cryptocurrencies are investment contracts because they pass the Howey test. You can’t buy anything with XRP, BTC, ETH, or any of them. There is virtually no merchant adoption for crypto. For most people, a cryptocurrency is an investment of money in a common enterprise with an expectation of profit to be derived from the efforts of others. But the SEC has accepted the claim of bitcoin fanatics and cultists that Bitcoin is not a security, therefore, putting BTC outside of its jurisdiction.
Coinbase going public via direct listing
Coinbase says it plans to go public via a direct listing. The U.S. crypto exchange confidentially filed its registration with the SEC in December. Now we know for sure they are not going the traditional IPO route.
In an IPO, a block of new shares are created and sold to institutional investors at a set price. The advantage of an IPO is it gives companies a way to both go public and bring in fresh capital at the same time. If a company doesn’t need fast cash, it can go with a direct listing, in which only existing shares are sold.
Direct listings have become popular of late because it gives companies a way to go public without the bank’s help. Palantir, Asana, Slack, and Spotify all went public without a traditional IPO. (Coinbase blog, Techcrunch)
The big question: What will Coinbase stock be worth once Tether is shut down and the price of BTC collapses?
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