Bitcoin is seen by many supporters as the best 'savings account' there is. This new digital currency has increased in value by an average of 200 percent per annum in recent years. Bitcoin, however, is not meant to become dormant rich. It is a means of not becoming dormant poor.
Banks have begun to levy negative interest. On large sums of savings you have to dedicate money. Government bonds of all European countries with a maturity of up to and including ten years also have negative interest rates. Bitcoin is therefore a good alternative to traditional currency. Central banks are pursuing aggressive expansive monetary policy, money supply is increasing, and this is what makes the money of companies and individuals in the Western world rapidly devalued.
https://www.nrc.nl/nieuws/2021/02/25/bitcoin-is-een-middel-om-niet-slapend-arm-te-worden-a4033330
#bitcoin
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The number of bitcoins awarded to maintain the network is also decreasing. So you need to use more and more computing power to 'mine' the same amount of bitcoins. This is the so-called “halving”.
Currently, 900 bitcoins per day are mined. To maintain the price, enough buyers need to be found daily for these new bitcoins. At a price of $40,000 we talk about $36 million a day or more than $1 billion a month. Still not exactly change.
And then I'm just talking about the new bitcoins that were mined. If there are sellers who want to draw the winnings on dry land, then buyers have to be found for those bitcoins.
Hotel California
So the bitcoin community has every interest in keeping as many people as possible in the ecosystem. Only so can the price continue to rise. It is important that the influx of fresh money remains greater than that which flows away.
Specifically, this happens in two ways.
The first is HODLEN. You don't sell bitcoins. You'll keep it forever and ever with. It is typical psychology during a bull-market by the way. We saw that with shares during the 90s. Then it was “buy and hold.”. Buy and put away. Certainly never sell!
So what 'buy and hold' is for stocks is' hodlen 'for bitcoin.
The second way to keep you in the system is a lot more ingenious and runs through Tether. Tether is a so-called 'stablecoin' where 1 Tether has the value of 1 US dollar. If you sell your bitcoins through the more popular bitcoin exchanges, in many cases you will not receive dollars but Tethers.
Only when you actually transfer your money to your bank account will you get your hands on the real dollars.
It's a smart way to keep as much money as possible in the ecosystem. Tether: how fake dollars drive the value of bitcoin higher
In principle, every Tether must be 100% covered by a dollar somewhere in a bank account.
But it has already been admitted that not every Tether is covered by a corresponding dollar. Tethers would also be... hold on... covered by cryptocurrency. Thus, of course, it becomes difficult to guarantee that 1 Tether is also worth 1 dollar in all circumstances.
It is a completely untransparent affair that raises a lot of questions.
The US government has been asking questions for a while, and it is not unthinkable that Tether will become one big fraud..
So what?
Well, if you know that a large piece of bitcoins is being bought with Tether, then you know how important this stablecoin is for the pricing of bitcoin! If a large piece of bitcoins is purchased with a totally untransparent cryptocurrency, then as far as I'm concerned it's a big red flag. And if you remember that these Tethers are printed out of nowhere and that the release of new Tethers strongly correlates with the bitcoin rate, then I still frown the eyebrows. So wait a minute: unsuspecting investors buy bitcoins to protect themselves from money-pushing governments, but at the back the price is driven higher by constant printing of Tethers?
I hope the irony doesn't escape you...
It will be clear by now how important Tether is to bitcoin, and I'm afraid the price may collapse if this fraud is exposed. On the one hand, because we do not know exactly how important Tether is to bitcoin (at least: very important) and on the other hand we do not know how many bitcoins Tether owns to cover the stablecoin. For me at least had reasons to get a lot more cautious with bitcoin after the huge price hike since March 2020.
Maarten Verheyen This article appeared earlier in Beurs Magazine.