WEEKLY ANALYST THOUGHTS: 6/4/20
BEHIND THE BITCOIN PRICE MOVEMENT OF JUNE 1ST
Last week was momentous for the crypto world. Driven by Bitcoin’s sudden price jump past $10,400 and the subsequent drop to $9,500, investors were left questioning what happened. While Bitcoin has felt price resistance around the $9,500 range throughout May, the sudden price surge to $10,400 was unexpected and unprecedented for investors, shown by the market’s quick correction back to $9,500. So, how can we make sense of the price action last week?
I believe last week’s price volatility can be credited to manipulation by crypto whales using Tether. For those unfamiliar with crypto whales, they are individuals who hold massive crypto wallets and have the potential to create large price swings for cryptocurrencies by transacting with large amounts of crypto. In the case of Tether’s involvement in Bitcoin’s recent price movements, we must keep in mind that Tether is frequently used as a value-transfer crypto considering it is a stablecoin that effectively maintains the value of investor dollars. I suspect that the whales behind the Tether movement are the major crypto exchange Bitfinex, who are minting their Tether (validating blocks of Tether through its’ Proof-of-Stake network) and sending it over to Binance to pump the price, dump their coins, and reap the profits. Below is a graph of this week’s Tether issuance on Coinmarketcap, which is in accordance with Bitcoin’s price upswing.
Tether manipulations like this happen so frequently that they have even been coined the “Bart Simpson Pattern,” shown below.
Source: Crypto Dog (Twitter)
What do we know about Tether? One, Tether is a stablecoin that is not 100% backed by US dollars in the bank. Two, it had an IEO (Initial Exchange Offering) of a utility token on its exchange to help shore up its’ losses in Tether. Three, Tether roughly doubled its market cap from the March lows through minting and staking, giving it the volume it needed to become the current third ranked cryptocurrency on Coinmarketcap.
Readers, please share your opinion: Was this recovery by Bitcoin from $4,000 to $10,000 also influenced by the “money printing” tendencies of the cryptocurrency market, as seen with Tether, in addition to Bitcoin’s halving hype?
Jacob Stelter | Blockchain Analyst