The Problem With Bitcoin At $20,000

Bitcoin hit an all-time high today at $20,000 and “hodlers” have been rejoicing. However the upswing this year leaves consistent questions about the issuance of Tether, the stablecoin (USDT) that seemingly has a limitless ability to print money. The flow of Tether into Bitcoin generally correlates to the rise in price particularly over the past year – whenever Bitcoin seems to fall, a load of new Tethers are created (often over $50m at a time) and buys BTC, taking the price of BTC back up. You can see the Tether creation posted realtime on twitter here and via CoinMarketCap:

Tether market cap

Screen capture – coinmarketcap.com

This staggering increase of over $4b of new Tethers implies that someone paid $4b into Tether to purchase Bitcoin in just the past three months. Tether has a somewhat of a checkered past with its policy not to publish any kinds of audits nor show proof of funds. Whether or not they are the recipient of $4b of cash is not known but it raises questions especially when Tether is created over the weekends and other times when other markets wouldn’t normally trade.

You can see the Bitcoin market cap correspondingly over this period:

Bitcoin market cap

Screenshot via coinmarketcap.com

Some academics have also researched this and find a correlation between the issuance of Tether and the price and corresponding market cap of Bitcoin.

So if you’re a Bitcoin believer, just follow the Tether printer and watch the printing. But if they stop printing be wary of the downside if there isn’t that injection of USDT coming so regularly.