In mid-January FT Alphaville's Jamie Powell linked to a story on Bitcoin and Tether and the crypto exchange Bitfinex [just checked, only one explicit mention] that I thought was pretty damn important. The Bitcoin market did not see it that way.
Now Jamie's boss, Alphaville's editor Izabella Kaminska has a followup:
NY attorney lasers Bitcoin’s key funding mechanism
The NY Attorney-General’s ruling on Tether and Bitfinex stands to
destabilise the way dollars flow into the bitcoin value system. But
Bitcoin’s meme warriors are buffering up their defences.
It’s been a volatile and stressful week in cryptoland.
First Elon Musk, the electric boss of eccentric car company Tesla (or was it the other way round) and one of bitcoin’s most high-profile supporters, tweeted on Saturday that the cryptocurrency’s price “seems high”.
Then, after bitcoin hit a record high of $58,354 on Sunday, US Treasury secretary and former Fed chair Janet Yellen dismissed bitcoin as an “extremely inefficient way of conducting transactions”, as she lamented its staggering energy consumption, a comment that helped bitcoin fall more than 22 per cent from its peak. At pixel time, Bitcoin was trading around $47,500.
And then on Tuesday, the New York District Attorney’s office moved to suspend Bitfinex and Tether’s “illegal activity” in the state. The connected entities will now be prohibited from servicing New Yorkers, on the basis that they deceived the market by overstating reserves and by covering up approximately $850m in losses around the globe.
The move could be a major blow for the value of bitcoin, due to the role that Tether, a dollar-tracking crypto stablecoin, plays in supporting dollar-denominated inflows into the bitcoin ecosystem. Tether’s transparency page puts its current dollar assets at $34bn. But regulators and critics have always worried about the shape and liquidity of the underlying assets used to peg Tether’s tokens to the dollar. Many believe a huge chunk of bitcoin’s value may as a result have been synthesised by overly depending on this only partially funded asset pool....
....MUCH MORE
Previously:
