Bitcoin (BTC) touched $7,500 in the gigantic weekend uplift and is currently priced at $7,113 according to coinmarketcap.
Trading volumes in the top crypto have gone through the roof, to an all-time high of $29 billion yesterday, beating the previous record set on 8 January last year.
An analyst that tells you they weren’t surprised by the strength of the rally would be being less than honest.
The reasons for the breakout have been cited as anything from institutional FOMO to the start of New York Blockchain Week.
For sure there’s also been a lot of money sitting on the sidelines, a fair chunk of it retail, that may be starting to flow in too.
But the one theory that hasn’t really been voiced is market manipulation.
Now Preston Byrne, a lawyer at Byrne & Storm, has thrown the Bitfinex hand grenade into the mix.
In a brief blog, available here, Byrne asserts that the parabolic rally by bitcoin may be connected to the happenings at Bitfinex, the crypto exchange in the eye of a New York Attorney general storm.
Crypto-hater Nouriel Roubini of the New Yoork UniversityStern Business School, aka Dr Doom, is backing Byrne’s suspicions:
Important article by @prestonjbyrne suggesting what may be behind the latest BTC bubble. Most likely Bitfinex leading another manipulative pumping of BTC via new Tether issuance https://t.co/HPUzw05VJk
— Nouriel Roubini (@Nouriel) May 12, 2019
The supporting evidence for this line of thought seems to come down to the coincidence of troubles on exchanges with bullish rallies for bitcoin.
“Dramatic run-ups in the price of Bitcoin strangely seem to coincide with large exchanges having banking, withdrawal, and possibly solvency problems. This was the case with, e.g., Mt. Gox in 2013, and some have argued was also the case with long-suffering crypto exchange Bitfinex in 2017,” Byrne observes.
Being a lawyer, Byrne is not as foolish as to accuse Bitfinex directly of any wrongdoing. Instead he merely points to how history may be repeating itself.
Byrne, with the appropriate hedging, says: “Today, Bitfinex – the largest cryptocurrency exchange in the world – appears to be, allegedly, in a spot of trouble once again. And the price of Bitcoin is rising quickly once again.”
He draws on the work of Tether’s most fulsome critic bitfinexed, regarding Tether issuance and doubts about its dollar backing. In particular he says Tether began issuing large amounts of USDT in April 2017.
See the chart below. The caption Byrne places below it reads: “Tether was created in 2015, but began aggressively issuing new TUSD ‘stablecoin’ tokens in April 2017 and did so throughout the 2017 bull run.”
Just so there’s no confusion, as our learned lawyer has introduced some as he doesn’t seem to know his Tether (USDT) from his TrueUSD (TUSD); Tether typically is assigned the USDT ticker.
Issuing fully backed USDT wouldn’t be a problem, so we must presume Byrne thinks this was not the case.
Why mess with Tether when the Feds are watching?
Documents submitted to the New York court, however, attests to the backing for the coin at 74%, which was probably 1:1 before it lost $850 million down in Panama. It tends o undermine bitfinexed’s longstanding allegations.
And with individuals associated with Bitfinex and Tether indicted by Federal authorities as well as the NYAG investigation, why would Bitfinex management team choose to start manipulating the markets right under the noses of the authorities?
Although the omniexplorer.info is throwing an error at the moment, which will likely feed the critics’ suspicions, there’s no indication to be gleaned elsewhere of Tether mysteriously appearing in Bitfinex exchange wallets.
Etherscan, for example, doesn’t show any unusual transactions. The larger tx sums are exchanges moving USDT, which is the usual state of affairs.
Then there’s the small matter of all the buying action being elsewhere, with huge volumes on BitMEX for example not Bitfinex.
Bitfinex premium has vanished
The much talked about Bitfinex premium has also vanished with prices on Bitfinex at the time of writing in the same ball park as that quoted on coinmarketcap.
Put that another way, the price on Bitfinex has been falling relative to other trading venues which would be a strange form of manipulation.
None of that stopped uber bitcoin critic Roubini from retweeting Byrne’s thoughts.
“Important article by @prestonjbyrne suggesting what may be behind the latest BTC bubble. Most likely Bitfinex leading another manipulative pumping of BTC via new Tether issuance,” states with Roubini.
Here’s one from Bitfinex, moving 1 million USDT from the exchange address to a Tether address.
However, it should be noted that the Bifinex transaction is the only one this author saw that had a round number.
Roubini tweeted on 20 November last year that “the crypot bubble went bust for good”. Turns out he was wrong about that and his endorsement of Byrne smacks of desperation as he seeks to twist reality to fit his erroneous thesis.
With BTC down almost 80% from peak (from 20K to ~4K) & all other cryptocurrencies down 80% to 99% I rest my case that this crypto bubble went bust for good. I feel vindicated. So I will take a break for a few days from this toxic Crypto Twitter. Waste of time to convince zealots
— Nouriel Roubini (@Nouriel) November 20, 2018
Caveat Emptor – buyer beware is always good advice
Byrne does have some advice for traders and investors that is valid– namely the risk to the market from “regulatory developments”.
The possibility of Tether being shut down by regulators seems to be what Byrne is getting at and that would certainly impact the market given that USDT accounts for as much as 20% of volumes in its role as fiat stand-in on the non-fiat exchanges.
The last sentence of his blog implying that investors should tread carefully makes sense.
“If the looming bubble should spin wildly out of control, here’s a timely and healthy reminder to investors to keep their wits about them, don’t propose that a new paradigm is upon us, and be mindful of gravity.”
A nascent and unregulated market with tightly held liquidity, with s small number of “whales” holding a large number of coins (1,000 own 40% of BTC according to one claim), of course demands a caveat emptor label.