Kraken CEO: Bitcoin price animated by real demand not Tether manipulation
By Christopher Attard
There have been many accusations made towards the quasi-U.S. dollar-backed stablecoin Tether over the years, ranging from Bitcoin price manipulation to outright fraud. Most recently, Tether also admitted to fractional reserve banking, at which point U.S. regulators subpoenaed Bitfinex – the exchange behind Tether issuance. As one can imagine, this ruffled more than a couple of feathers in the cryptocurrency ecosystem.
Having said that, Tether is currently trading at $0.9898, which if anything at all indicates a sign of market approval, which is arguably never wrong when it comes to price-action. Lately, several sceptics have been alleging that the cryptocurrency’s recent bull mark is based purely on Tether’s manipulation and Bitcoin on exchanges rather than organic demand. Online commentators and anonymous personalities like Bitfinex’ed and others have spearheaded criticism on questionable practices within the exchange space.
As is to be expected, this chicken and the egg scenario leaves the door wide open for animated debate and conversation. When asked for his opinion on Monday, the CEO of crypto asset exchange Kraken, Jesse Powell, said the supposed price manipulated powered by Tether looks different from his perspective behind the scenes.
A more transparent version of normal exchange activity?
When asked specifically about any connection between the huge increase in the supply of Tether over the last few months and Bitcoin’s rocketing price, Powell was quick to point out that this correlation is also seen at every Bitcoin exchange that uses normal bank deposits.
Powell said: “I don’t have inside knowledge of what’s happening at Tether, but I can tell you that, historically, when you’ve seen growth in the supply of Tether, we’ve seen growth in the supply of U.S. dollars coming onto Kraken. And other exchanges would report the same.”
Powell went on to say that Tether is simply a much more transparent version of what’s happening on every exchange when Bitcoin’s price is booming, crypto price headlines are taking centre-stage, and retail investors are rushing onto the exchanges. As opposed to Tether, normal USD deposits via bank accounts do not show up on a public blockchain for the entire world to see.
He added: “Recently, we’ve had massive inflows of fiat currency, so I believe the Tether prints are a result of new fiat coming in.”
Alternative theories behind Bitcoin’s recent price action point towards Facebook’s Libra impacting the price. Blockchain Capital’s Spencer Bogart also shared his hypothesis about the recent wild price swings with Bloomberg last Friday.
Is Tether overrated?
According to Powell, Tether is also a smaller part of the Bitcoin exchange ecosystem than it might appear to outside observers.
Powell said: “I don’t feel like Tether is artificially inflating the price of Bitcoin. I think Tether is actually a small part of the total fiat supply among all the exchanges.”
In his view, Tether is just one of many ways new dollars find their way onto exchanges, and that freshly minted cash on exchanges has a tendency to drive the Bitcoin price.
“There are days when you see the price going up ten percent a day. You can bet all the exchanges are onboarding fifty to a hundred thousand new users a day [when that happens]. That is what is driving up the price. It’s huge retail demand and all the media attention on it. It’s not Tether,” Powell explained.
It remains to be seen whether the market has already priced-in Tether’s admission of fractional reserve banking, which could potentially look like another disastrous MtGox debacle. At the end of the day, it must be said that Bitcoin’s 250% blast out of a long and dreadful crypto winter is a breath of fresh air for crypto enthusiasts and investors, for whom the Bitcoin party has only just begun.
This is not financial advice.