- By Amy Castor and David Gerard
Bitcoin has set yet another new all-time high — $73,835 on Coinbase BTC-USD on March 14. This means bitcoin is good now! All our past objections are resolved. Going forward, we only deal in Finances U Desire.
Sound and fury, signifying nothing
What’s interesting is that while the price is back up, the bitcoin trading market has not recovered. If anyone says “the market is back!” that’s an incorrect claim.
Market volume is one-eighth of what it was in November 2021, the last time the price was this high.
We get that number from Coinbase retail trading fee income, which is 2% of the volume. Coinbase is the largest actual-dollar exchange and it’s not allowed to lie in SEC filings — so for once in crypto, we have numbers we can trust a bit.
The retail trade volume against actual dollars on Coinbase went down in seven of the past eight quarters. Here’s a table from Q4 2021 to Q3 2023. Q4 2023 didn’t show any improvement.
Even as the price went up through 2023, every day people wanted bitcoins less and less. Coinbase gives us the numbers showing this.
Flash boys
Without trading volume, the bitcoin markets are painfully thin. It doesn’t help that market liquidity is horribly fragmented.
(This is why we prefer to just quote the Coinbase price — the skew between exchanges can be hundreds of dollars when anything interesting is happening.)
BTC-USDT on BitMEX flash-crashed from $66,000 to just $8,900 on Monday, March 18. Starting at around 22:40 UTC, someone dumped 1,000 BTC as fast as possible at whatever the market would pay for it. [CoinDesk; Twitter, archive]
By the time the flash crash flowed through to Coinbase, it was a mere $2,000 drop.
BitMEX has much less bitcoin liquidity than Coinbase BTC-USD or Binance BTC-USDT — so we suspect this was a very urgent seller who felt that FinCEN didn’t need his details.
Remember that after Binance got hit with the compliance hammer, traders’ details are no longer safe from US anti-money-laundering agencies.
We’re not sure why our trader didn’t use OKX, HTX (formerly Huobi), or Bitfinex, which would have had more liquidity and thus less price slippage — hence our impression that they were really in a hurry. And now they have to put all that USDT somewhere.
ETFs will save bitcoin!
BlackRock says its spot bitcoin ETF has reached $10 billion in assets. But Grayscale’s GBTC has seen over $11 billion in outflows because nobody wants to pay their 1.5% fee. (Everyone else is around 0.3%.)
Bitcoin ETFs aren’t hitting the institutions they were hoping for — pension funds and so on. (Thankfully.) For all of BlackRock’s helpful ETF marketing advice, financial advisors are being very careful about recommending these things. [WSJ, archive]
The money flowing into the ETFs seems to be from individual investors. It’s not clear whether these are new investors or just existing holders dumping their bitcoin for ETFs because they’re tired of being their own bank.
This Financial Times article starts with BlackRock talking up its bitcoin ETF and the fabulous future of the blockchain … then details every way in which crypto is utterly incompatible with sane finance and doesn’t work. [FT, archive]
The hot air crypto bubble
Meanwhile, Tether has printed 11 billion tethers just since the start of 2024. It’s at 103 billion tethers and counting.
We very much doubt that most of these billions of tethers are being bought with real US dollars. Why would you send real dollars to an unregulated offshore wildcat bank to buy bitcoins when you could just put them into a US-regulated bitcoin ETF?
We suspect the tethers are being printed out of thin air and accounted as loans — the fresh USDT is “backed” by the loan itself.
This supports our theory that the present pump is not real money flooding into bitcoin. It’s stablecoins on Binance — tethers and FDUSD. The volume on Binance completely swamps the volumes on Coinbase or ETF trading.
The bitcoin price chart looks very like someone’s trying to pump the price. You’ll see the price slowly getting walked up, as if someone’s wash-trading it up … then it hits a round number of dollars, someone tries to cash out, and the price drops several thousand.
Fake dollars going up, real dollars going down.
So we’re not in a bubble. We’re in a balloon, one being pumped full of hot air. It’s fun going up — but the trip down can be very quick.
What do I do with my holdings?
Back in November 2022, when exchanges were suffering urgent unplanned maintenance left, right, and center, we went so far as to say that if you insisted on investing in bitcoins, you should not risk storing your coins on an exchange. Holding private keys is ridiculously fraught and the tech is still unusable trash — but it’s still not as bad as trusting bitcoin exchanges.
If you must hold bitcoins in the hope of getting dollars for them one day, the least-worst option is to buy into an ETF. That way you’re in a regulated market and your only risk is Coinbase Custody getting hacked.
If you’ve bought into crypto, please at least cash out your principal — the cash basis that you paid to buy in. Then everything you make from then on is pure profit. When the price crashes, you won’t have lost anything.
Our real recommendation, of course, is not to touch this garbage.
Back in the snake pit
Bitcoin suffered a year of its media coverage being “Sam Bankman-Fried is a crook.” Crypto pumpers tried to make out that FTX, the second-largest exchange, being a massive fraud was a mere aberration on the part of Bankman-Fried, and everyone else in crypto was a good guy.
Then the first-largest exchange, Binance, got busted too. So price discovery for bitcoin — what determines where the number goes — happens on an exchange that literally admitted a few months ago to being a criminal conspiracy. Binance’s founder and former CEO, Changpeng “CZ” Zhao, is in the US awaiting sentencing.
We find, over and over, that normal people keep assuming that crypto isn’t just a completely criminal snake pit. Because US dollars are able to touch it in any way, so surely it’s regulated. Right?
Finance and finance journalism seem to have collectively forgotten what a hellhole unregulated markets always were.
The way crypto works is:
- Actual dollars flow from retail suckers to a few rich guys;
- There’s lots of fancy bafflegab to obscure the very simple flow of actual dollars.
Crypto is an unregulated mob casino and the regulated exchanges are just the cashier’s desk.
You can absolutely make money in crypto — we would never say that you can’t. But you have to be a better shark than all the other sharks who built the shark pool.
Trade carefully.
Media stardom
Billy Bambrough wrote about the bitcoin price for the Sunday Times and spoke to David. In a rare moment for journalistic coverage of the number, Tether was mentioned! [Sunday Times, archive]
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Amy Castor 