Opinion: Does the whale drive the bitcoin bull market on its own?

Foreword: A few days ago, some people analyzed that the bitcoin bull market in 2017 was driven by a big whale. So is it actually so? Welcome everyone to discuss. The author of this article is Elaine Ou, translated by the "TS" of the "Blue Fox Notes" community.

It is not easy to become a cryptocurrency exchange. What you want to do is to provide valuable liquidity services to emerging industries, while at the same time finding the best boundaries in the chaos of regulatory compliance and encryption industries. Once you step into the dark side, you may find yourself in trouble.

Bitfinex has released the digital token Tether, an asset that can be traded on most major exchanges, and despite ongoing criticism and investigations from the Office of the Attorney General of New York, the asset is still running.

Recently, a study from the University of Texas proposed a new statement that an account using Tether pushed more than half of the bitcoin price in 2017. There are a lot of risks here – the study is considered to be key evidence for a $1.4 trillion class action lawsuit against Bitfinex and Tether.

Anyone who has access to cable news, social media, and outdoor activities or any form of interpersonal interaction may remember the crazy speculation of cryptocurrencies in the past two years. Between 2017 and 2018, more than $20 billion in speculative tokens were sold, and they used a half-baked marketing method that even Sun Justice would not be interested.

The idea that a single whale drives a bitcoin bull market for a year is not just stupid. Circle's co-founder and CEO Jeremy Allaire said that the study of Tether made a mistake: treat the escrow account address as a single trader address (although the author insists that this is a personal deposit address). Before netting and bulk trading with partner institutions, the exchange pools client funds into a wallet; the same is true for traditional banks. A single Bitfinex wallet can easily represent the total transaction for many customers.

The authors of the study also examined the top 1% of Tether's circulation, and found that these is usually before the bitcoin price falls. They believe that Tether is issued to provide artificial price support.

Although the release seems to be timed, Tether may only be released in response to user needs. Another cryptocurrency exchange, Kraken, previously pointed out that Tether's issuance is positively related to its own cash deposits. Every time a Tether issue is published on the blockchain, based on this information, the trader uses the robot to trade through the algorithm. Therefore, it is not surprising that the Tether issue can expand the demand for Bitcoin.

There may be a confusing factor. In 2017, China regulated cryptocurrency transactions. According to the research company's chainalysis report, Chinese traders exchanged a large amount of bitcoin in the currency after learning about the upcoming regulation. After the regulatory ban came into effect, traders had no way to convert cryptocurrencies into local currency, so they turned to Tether on overseas exchanges as a substitute for legal currency. A recent study found that Tether was used in 99% of bitcoin spot transactions in China this year, accounting for 60% of all chain transactions.

Tether may even have use cases outside of speculation. According to previous reports, Chinese importers in Russia buy tens of millions of Tether every day, so that the remittance will be in China. The United States threatens to ban Russia from the Swift international payment network, and Tether offers alternatives that can resist sanctions, and there is no volatility in bitcoin.

This does not mean that there is no cause for concern. In regulated financial markets, many activities are considered fraudulent activities, which are not unexpected in cryptographic exchanges, such as washing dishes, pulling up shipments, and so on. Tether is not actually supported entirely by the US dollar reserve, which is possible, although its owners may not care. Our currency of the French currency shows that people will be willing to use a currency without any support as long as there is a practical use.

Those who cannot understand the cryptocurrency may have real use can easily see the price increase as a trick for rogue traders.

When a bank refuses to do business with an encrypted trader, or when the government prohibits trading, it does not prevent the trader from continuing to trade. This will only force them to find creative solutions. If an encrypted exchange is easy to use with a traditional banking system, there may not be a need for Tether.

Another study using contemporaneous data found that the Tether issue had no statistically significant impact on bitcoin prices—the number of Tethers issued at a time was dwarfed by the total amount in the transaction—although its data The particle size is rougher than that reported by the University of Texas study.

From Kraken's website: “We looked at our invoices (deposits) inflows between January 2017 and April 2018 and compared them to the new USDT. Even though we accumulate deposits are a few of the USDT circulations. Double, but we found a positive correlation of 0.78 (61% R^2)."


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