Number go up! This is totally organic market activity! People just like Bitcoin 40% more than they did last week!

I’ve just found a photo of the 100% organic material involved:

It’s because the price of Bitcoin is a proxy for margin trading — and rather than investing in the commodity itself, you can make more money by manipulating this thin and ill-regulated market to burn the margin traders.

This also allows the large holders — the “whales,” and the exchanges themselves — to cash out to whatever little actual-money US dollars are available, in a trading system where the liquidity is mostly fake dollars called “tethers.”

Willy Woo explains how short squeezes work in crypto. This is a pattern we see over and over:

1) When the market is majority short, there’s too much money to be had to allow them to win. 2) Whales keep buying up the market until the shorts get liquidated. 3) At liquidation the short seller has to buy back at market price. 4) A tidal wave of buys cascade through the orderbooks, a chain reaction, the price goes vertical. 5) Whale payday. The whales that bought up the market sheparding the price up now dump their positions at profit. 6) Blow-off. The price comes down to its organic levels.

(The short seller doesn’t always have to buy back at market price — when the OKEx exchange had its margin trading disaster last year, they socialised the losses onto other traders. But the basic outline still holds.)

Per Preston Byrne — “Dramatic run-ups in the price of Bitcoin strangely seem to coincide with large exchanges having banking, withdrawal, and possibly solvency problems.”

I just don’t believe we have a pile of new interested traders piling into Bitcoin. What we do, visibly, have piling into Bitcoin is 800 million tethers in the past month — each acting like a dollar.

Tethers are dollar-substitute tokens — each a $1 liability on the books of Tether, Inc., hypothetically redeemable on demand for an actual dollar. The idea is that these are pretty-much-dollars — compare Eurodollars in the real financial markets — but move at the speed of crypto. Tether is owned and run by the same people as crypto exchange Bitfinex.

There is the minor detail that nobody has ever verifiably confirmed being able to redeem a Tether for a dollar.

But don’t worry about it! These tethers supply desperately-needed liquidity in the crypto trading system.

In particular, tethers supply liquidity for those exchanges who claim to trade in dollars, but have extensively-documented problems with getting US dollars off the exchange and into customers’ bank accounts — such as Bitfinex.

And tethers are strongly favoured by the sort of exchanges that can hardly get real banking — such as Binance, the largest tether exchange.

By the way — Binance got hacked recently, and suspended all deposits and withdrawals for a week. I predicted the exchange and/or insiders would continue to trade themselves, even as their customers couldn’t — and look at those flows of tethers from Binance! And there’s the Bitcoin price going nuts!

It’s frankly implausible that someone spent $800 million of actual US dollars buying tethers in the past month, on the assumption that Tether constitutes a trustworthy financial institution.

Why? Because this last month was when it came out that there was an $850 million hole in Tether’s accounts. Because they were using a blatant money launderer as their payment processor — without a signed contract — and the money was either seized by the authorities, or stolen by the company in question.

How did this come out? Because Bitfinex finally admitted this to the New York Attorney General, who is suing Bitfinex to stop them ransacking Tether’s accounts whenever they have a liquidity problem.

Their hugest liquidity problem right now is that a substantial proportion of the US crypto-to-actual-money system turns out to have been literally one guy, Reggie Fowler, and he got arrested.

As their biggest critic, “Bitfinex’ed,” has pointed out — every time Bitcoin is pumped higher in the past few years, it later comes out that Bitfinex or Tether just received a subpoena.

And there’s a bank run in progress on Bitfinex — traders are taking their bitcoins off the exchange as fast as they can. Increasingly, they don’t trust it to be there tomorrow.

(See chapter 8 of Attack of the 50 Foot Blockchain for how the 2017 crypto bubble started with Bitfinex losing their US dollar banking.)

Everyone seems to forget that when Bitfinex received CFTC subpoenas the price went up 40% in two days, ultimately the price of Bitcoin doubled before crashing. It wasn't good news. — Bitfinex’ed (@Bitfinexed) May 10, 2019

But, Bitfinex/Tether are patching up the hole in their accounts. Bitfinex claimed today to have sold $1 billion worth of its LEO exchange tokens — see Friday’s news post — in ten days, for $1 billion worth of cryptos. Perhaps they did!

Bitfinex: Over 30,000 BTC withdrawn from cold wallet.

Also Bitfinex: 30,000 BTC mysteriously shows up in a possible IEO address. No really, people are really buying into the IEO. It's amazing! We're definitely not just washing Bitcoins and making it look like there's demand! pic.twitter.com/nKNSvGfVJL — Bitfinex’ed (@Bitfinexed) May 10, 2019

By the way, I just raised $1 billion for my tweets — the finest vintage in crypto Twitter, and worth every penny.

Don’t believe me? I’ve supplied just as much evidence as Bitfinex!

(Also, I have the photographic evidence that mine is a stable coin.)

I expect the price to keep going up — there’s liquidity to be siphoned off, and mainstream media coverage might lure fresh suckers in with actual cash money, not just tethers. I predicted there would be another mainstream crypto bubble — but I didn’t expect it this soon.

Update: I was wrong — number go down. From manipulation that no sane observer could deny.