Is Bitcoin a scam? People have been saying that Bitcoin is a scam for 10-years. During this time, Bitcoin has made a habit of proving naysayers wrong. At least, in the long-term. Now, though, things are changing. — And yes, Bitcoin today is possibly a scam.
Nouriel Roubini, professor of economics at New York University Stern School of Business, is holding back no punches in attacking Bitcoin. Bitcoin itself, though, isn’t really the problem. Instead, Roubini believes that it is exchanges, whales, and altcoins like Tether, which are undermining the legitimacy of BTC.
How Is Bitcoin a Scam?
If you are thinking of buying Bitcoin, you might want to think twice. At least, that is the advice of Nouriel Roubini.
Often referred to as Dr. Doom, Roubini made headlines recently, by sparring with BitMEX CEO Arthur Hayes. Later, a censorship storm ensued, as Hayes took the liberty of removing footage of the spat from recordings of the confrontation. Roubini, though, is refusing to go quietly.
Bitcoin Price Manipulation is Rampant Across Exchanges
According to Nouriel Roubini, Bitcoin price manipulation is rampant across exchanges. Citing a study by Bitwise published in May, Roubini says that 95% of all Bitcoin trade volumes being reported by top exchanges like BitMEX are fake.
Roubini goes on to say that practices such as ‘wash trading’ (an illegal stock trading practice) are commonplace on cryptocurrency exchanges.
“Some of the biggest crypto players may be openly involved in systematic illegality.”
What is Wash Trading?
Wash trading occurs when an asset investor places a sell order but simultaneously buys the same asset. (Or vice versa.) Often, wash trading takes place on different exchanges simultaneously.
The purpose is to create the illusion of misleading market activity. Moreover, for those who wonder why Bitcoin whales love trading in Tether, wash trading and spoofing of BTC trading volumes is the answer.
Tether and Bitcoin Wash Trading / Spoofing Explained
It used to be the case that Bitcoin prices would rise in response to fiat currencies like the USD being exchanged for Bitcoin on exchanges. The more fiat cash pouring into exchanges, the more value one can be appreciated as being stored in coins like Bitcoin.
Sadly, this isn’t how things work in 2019.
As of July 2019, the vast majority of Bitcoin purchases are made using Tether. This is why Bitcoin trading volumes currently match Tether trading volumes almost to the dollar.
How Tether Spoofs Bitcoin Trading Volumes
How Tether spoofs Bitcoin trading volumes and manipulates BTC prices is simple.
Tether Limited prints USDT tokens which according to Tether, are backed on a one to one basis by real USD deposits. These Tether are deposited into exchanges. On exchanges, millions of USDT is then used to buy Bitcoin, thereby making it look like Bitcoin trading volumes are on the increase.
- Tether spoofs (artificially inflates) Bitcoin trading volumes on exchanges.
- Artificially inflating trading volumes result in increasing rates of retail/consumer market investing in Bitcoin and other altcoins.
- As Bitcoin prices rise, traders using Tether to spoof trading volumes exchange Bitcoin back to USDT coins.
- Sudden selling of Bitcoin leaves retail investors with significant losses.
Of course, the same traders using Tether to spoof trading volumes could use fiat cash. Using fiat cash in spoofing and wash trading, though, could see traders fall foul of U.S. and other lawmakers.
Is Bitcoin a Scam? – It is Starting to Seem That Way
Is Nouriel Roubini right? Is Bitcoin a scam? Put simply, yes. Bitcoin is a scam.
The last Bitcoin bull run of 2017, was a direct result of USDT tokens being created to pump prices. Read more here. This year, the recovery of Bitcoin has only occurred as a direct result of millions of new USDT tokens being used to once again spoof trading volumes.
If Tether coins were backed by physical U.S. Dollars, there would be a case to be made that Bitcoin is not a scam. However Tether Limited refuses to be audited.
- Tether Limited does not say where USD funds backing Tether are physically stored.
- It was recently proven that USDT coins are not backed by real deposits. Specifically, by Tether minting $5 billion new tokens by accident. (If USDT is backed by USD deposits, creating $5 billion USDT out of thin air should not be possible.)
- It is notoriously difficult to exchange USDT coins for fiat cash. Kraken is one of the only exchanges where this possible.
What Will Happen When the Tether Bitcoin Bubble Bursts?
In effect, Tether shares many of the same characteristics of Bitcoin Ponzi schemes like Bitconnect. Tether is impossible to audit. It is not possible for anyone to figure out how Tether legitimately works. — And is it possible to pin Tether HQ down to a single geographic location.
Sadly, exchanges love Tether. Binance recently introduced USDT trading pairs on its Binance 2.0 margin trading platform. Some also estimate that Tether accounts for 61% of global cryptocurrency trading volumes.
Make no mistake. When Tether blows, it will take the cryptocurrency market with it. It is also a case of when Tether blows, not if. Moreover, exchanges like Bitfinex, BitMEX, and Binance know this.
Of course, many people will find such a suggestion absurd. Just think about it logically, though. Loathed coin Bitcoin SV was delisted from exchanges in April. This was due to BSV creator Craig Wright deciding to sue someone for liable. By comparison, exchanges fawn over Tether. This is despite knowing that USDT refuses to be audited. This is also despite knowing that USDT is facing multiple lawsuits, and that Tether creates air-money at will, to the long-term detriment of the cryptocurrency market.
Don’t say you weren’t warned…
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