Somethings up. I smell a Rat.
Bitfinex (the largest crypto exchange), incorporated in the British Virgin Islands, CEO of no fixed abode, also the CEO of Tether.
Tether is a crypto that has one coin backed by "audited" reserves of 1 dollar, so in theory for every coin Tether holds 1 dollar. You see the price of coin listed in USDT on many exchanges including Bitfinex which is how Tether is mainly used. So on these exchange you don't swap USD for Bitcoin, you swap Tether for Bitcoin. Your gateway into purchasing bitcoin necessarily involves you purchasing Tether. This obviously means your clean dollars are used to buy Tether, which then lets you buy whatever is priced in Tether.
Now, what if Tether company are producing USDT which are not back by USD?
A virtual equivalent of an empty Fort Knox, and with the federal reserve like powers to "mint" virtual dollars.
[Side story: Bitfinex got hacked a few times with coins stolen but are still alive and kicking and very recently
Tether got hacked and 31millon USDT was taken, but on discovery the Tether company hard forked their blockchain and isolated the stolen assets (which are not backed by $)]
So Bitfinex and Tether already have imperfect records and are, to say the least shadowy - but who cares right?
Those in the know could massively pump the price by buying coin with free money.
This wont come to light though until people want to redeem their coin for Tether and by then all the money will probably be gone!
If Tether cant provide dollars and people catch on, then you will smash all the exchanges that use it to trade against the USD. They will block withdraws!
What could trigger that? So far as I can see practically ANYTHING at this point.
If this all plays out as my hunch suggests, the consequences will be disastrous.
The lure of easy profits right now is driving people to selling altcoins to buy Bitcoin or buy bitcoin with real dollars. All at pumped bitcoin prices. So all the eggs are going in the bitcoin basket - BAD IDEA!! Diversify. Keep some other Cryptos like Litecoin, Dash, Ripple, Ethereum, Monero etc - they may be the only survivors.
If this is a scam like I suspect, then it is a pretty big one, one of the biggest ever.
If Bitfinex and/or Tether crash. It will be like MtGox on steroids - with the market capitulating within hours as people try to sell - but there will be no dollars - all stolen.
When this happens the transaction load on the Bitcoin network will be massive and people will have to wait for days to move their coins or pay exorbitant fees for the transaction, consequently exchanges will block withdrawals and increase peoples angst further. Lots of people will loose lots.
Furthermore, if Bitfinex crashes as part of this scam, then I expect that all the Bitcoin held on that exchange's hot and cold wallets will be stolen making it easier for someone to acquire such a large amount that the markets can be manipulated further later on.
Also Bitcoin and other cryptos will crash to very low values - practically worthless (this is when I will be buying more!)
If true, objectives to this scam are obvious:
- Steal laundered USD
- Steal bitcoin and other alts
- Specifically destroy and undermine the value of bitcoin in the mother of all market corrections and/or frauds and damage confidence in crypto currency generally for a long time.
Counter measures for your portfolio:
- Consider any crypto or dollar assets you hold on an exchange as being at high risk of total loss.
- Only keep on the exchange what you can afford to loose.
- Diversify your crypto holdings.
- Learn how to transfer crypto off your exchange while you still can and into a safe wallet where the keys to the crypto are under your exclusive control.
When this correction or crash happens, and it will at some point even if I am wrong about the above, Bitcoin will recover, but it will take a time. This has happened before, it will happen again.
IMHO "Bitcoin" is something we will need for the future, but it is being abused in the present.
Be careful out there.
Thanks
Anchor..