Over ten years ago, at the Bitcoin mainnet’s launch, Satoshi Nakamoto hardcoded in the genesis block a strong message that revealed the reasoning behind creating the first-ever cryptocurrency: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
Many bailouts and one economic ‘expansion’ later, the world is on the brink of repeating the process described by Nakamoto in the genesis block.
Haven’t we learned something in these ten years? Actually, the cryptocurrency market, especially the Bitcoin maximalists & whales have learned a lot on how to copy and paste a bankrupt system with no empathy for the many, just greed for the few while cattling the masses to their own demise.
In Fed We Trust
As for the real world where the economic fundamentals should make a difference, the lessons from 2007 – 2009 are long forgotten. Moreover, we seem to have also forgotten our common sense along the way.
The central bank chairmen, the president’s economic advisers, the hedge fund managers, the BIG companies CEOs, they all didn’t have common sense in the first place. What they do have is a particular set of skills best used for deceiving & accumulating wealth. None of them will ever admit a recession is bound to happen, no matter the economic data. All they do is smile & lie as long as everyone dances to their own tunes.
Inverted yield curve? Isn’t important anymore as an ex-chairman of the Fed recently said. Under-delivered promises? Eh, it happens. All-time high debt numbers at all levels? Why so serious?
In fact, let us rephrase our initial statement: all these big players DID learn something about the last economic crisis. They learned no matter their mistakes, no matter the grim environment, the central banks will always be there for them to bail them out. At the expense of everybody else, obviously…
In Tether We Trust
The cryptocurrency market is NOT fundamentally different, unfortunately. While Nakamoto may have had a whole new financial system in mind, egalitarian & free of any predatory central authority, the reality and the greed factor mirrored his/her/their creation to its ‘Big Brother,’ the economy.
Mt. Gox was an experiment on how to pump the price to unimaginable all-time levels. Three years after the bankruptcy of the biggest Bitcoin exchange at that time, Tether took over. Under the radar for much of its existence, Tether lost its main banking partner in the spring of 2017, when the Bitcoin price was around $1,200. Till that point, the total supply of USDT was quite steady, around 10 to 20 million worth of USD tethers.
Ironically, after that point, the USDT total supply skyrocketed to never-seen-before levels. In other words, Tether started its own printing press much like the major central banks of the world, European Central Bank (ECB), Fed, or Bank of Japan (BOJ). We may go even further to our comparison and say Tether started its own version of Quantitative Easing (QE), cryptocurrency version, but in a much opaque way than the real central banks.
What was the result? Just like the Fed & the stock market, Tether’s printing press helped Bitcoin & all cryptocurrency market reach all-time highs.
When the issuing stopped and money became expensive… long & behold, the market dumped.
For all we know, Tether could have started the trend of negative interest rates.
Just think about it: negative rates means the lenders pay the borrowers to take out a loan. As an example, for 1 million USDT loaned to the market, Tether expects to be paid 950,000 USD in the future. Can this situation be equivalent to the assumption tethers are not backed 1-to-1 by the Dollar, but actually 1 USDT is $0.95?
See No Evil, Speak No Evil, Hear No Evil
The company behind the most popular stablecoin even admitted it to its own dubious version of fractional banking (in fact, just 75% of its funds are backed by real dollars, the other 25% are cryptocurrency ‘reserves’), even though the company passionately defended its dollar peg all 2017, when the Tether printing press could have made the Fed, ECB, or BOJ smile.
Obviously, we do not know if the Tether claims are true or not since the company stubbornly refused to publish a complete & transparent audit.
But nobody cares anymore. As a recent CoinDesk article stated, quoting a chief operating officer of Moscow-based crypto derivatives exchange. All trust the mighty Fe… we mean Tether: the cryptocurrency exchanges & blockchain companies heavily invested in the market, the Bitcoin maximalist & yes, even all the small investors dreaming of unimaginable riches in the near future. See no evil, hear no evil, right?
By staying on a silent platform or worse defending an opaque company with the freedom to print as many tokens as it likes, all these BIG cryptocurrency players just showed their cards face up: Tether is the granddaddy that mustn’t fail. Remember, ironically, the same players advocate for transparency (blockchain, right?) and a future without printing presses and central banks (*cough*Tether*cough).
Who knows; maybe separating the Bitcoin anarchists & crypto libertarians (who continue to show remarkable disinterest in Tether) from the mainstream media Fed shills & money mongering disguised as do-gooders is a fallacy. Maybe there are the same. Or maybe the crypto bunch are just the pupils, the next-generation Leonardo di Caprio playing as Jordan Belford taking lessons from Matthew McConaughey in ‘The Wolf of Wall Street.’
Either way, the current system seems to be in good hands because the cryptocurrency market has a central bank and we all know it!
Do you agree with the statement Tether is the central bank of all cryptocurrency market? Why not? Give us your take in the comment section below!
Images courtesy of Tether.to, Wikimedia & Needpix.com