Tether Trouble Blasts Bitcoin – The Bitcoin Bad News Just Keeps on Coming
Tether trouble blasts Bitcoin to the tune of a $1,200 drop in price since yesterday sending Bitcoin below the crucial $10,000 psychological price point. Cryptocoin markets were jolted on the news that Tether’s auditors, Friedman LLP, got up and walked away. Tether’s side of the story is that they dismissed Friedman, LLP (that looks bad) Friedman, LLP has removed any and every trace of Tether from their website (that looks worse).
In a prior life I was a senior accountant on the fast track to making partner at an accounting firm and have been involved in my fair share of audits. And, for the record, I hold a degree in accounting which affords me expanded insights to speculate what happened that led to this relationship being “dissolved”. Accountants are held to high standards as put forth in GAAP (Generally Accepted Accounting Principles) and GAAS (Generally Accepted Auditing Standards). Let’s focus on GAAS.
Learn all about GAAS here. Summary: A completed audit, as reported by the firm conducting the audit, is a very comprehensive document giving a complete picture of the current state of affairs of the company.
An audit is a serious thing. When a respected firm like Friedman, LLP is expected to put their good name on the outcome of a company audit you can be sure that every fact will be there, every number provable with every i dotted and every t crossed. I have no doubt that Friedman, LLP went about this audit with the professionalism and attention to detail one would expect from a large, respected firm in business since 1924.
This seemed to bother the folks over at Tether who said as much….
“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of tether, it became clear that an audit would be unattainable in a reasonable time frame.
“As tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”
Tether trouble blasts Bitcoin pricing makes more sense when you consider they pushed back against the audit. This begs the question – “Do they have something to hide?” This event only adds fuel to the fire of Tether skeptics who doubt they have the cash reserves necessary ($1.6 billion? $3 billion? The opinions and estimates vary…) to back each Tether coin. The smart play here would’ve been to allow the audit to go through, share Friedman LLP’s findings with the public and squash further negative speculation once and for all.
The fact that this isn’t happening only fans the fires of critics and fuels fear.
This article from Bloomberg announcing Bitfinex and Tether have been slapped with subpoenas with the CFTC starting a US Federal investigation is the gasoline on the fire. The other worrisome news they reported is just kindling to keep that fire roaring.
Alas, Tether trouble blasts Bitcoin.
You may be asking yourself “But what’s the connection between Tether news and the price of Bitcoin?”
Good question, Grasshopper. Here’s the answer in a nutshell:
Bitfinex (the majority holder of Tether giving them control over the coin) is suspected of running a virtual printing press to create as much Tether as they want, whenever they want, contravening the stated policy of having one actual US dollar for every Tether coin issued. Why do this? To use Tether to buy Bitcoin without any actual value behind the purchase except for the perceived value of all of these Tether coins. Since Bitfinex can create all of the Tether they want with a snap of their fingers, they can buy all of the Bitcoin they want — without actually paying for it.
This model is similar Bitconnect’s model; they controlled Bitconnect Coin (BCC) and as a result pocketed millions or possibly billions in Bitcoin through BCC which never had any actual value.
If this is true and Tether craters (which would inevitably happen if these circumstances prove true) the price of Bitcoin would likely plunge to record lows not seen in a long, long time.
The New York Times seems to be the first to raise alarms about Tether and Bitfinex.
Moving forward I suggest everyone back out of Tether just in case. In the aftermath of The Bitconnect Bloodbath, investors should be understandably cautious and be conservative in this and all of their cryptocoin investing decisions.
The Bitconnect Bloodbath. The losses are mounting in terms of dollars and lives.
$316,832,344.90. That’s the tally among the nearly 900 people who registered their losses on Bitcoin-Guerillas.com as of today. The Bitconnect bloodbath doesn’t stop there; the human toll could be even higher. While unconfirmed, it seems the first Bitconnect suicide recently occurred with a young Chinese man jumping off of a bridge. The video can be seen right here (WARNING: EXTREMELY GRAPHIC):
What can be confirmed are the suicidal thoughts of many people across Facebook and Reddit groups leading to the widespread posting of suicide hotline phone numbers. Many people, while not suicidal, are understandably depressed in the aftermath of The Bitconnect Bloodbath like this poor chap facing ruined wedding plans…
While many people are sympathetic to Bitconnect victims, there are just as many who show no compassion for the people who had their lives turned upside down by The Bitconnect Bloodbath. When I first learned about Bitconnect my impression of the whole thing wasn’t good so I avoided it. Other people who lacked the insight or the intelligence dove in to claim their fortune having no idea what they were in for. Yet others believed Bitconnect to be a ponzi scheme at the outset but didn’t care; they wanted to claim their own fortune.
Were the victims greedy? Most of them probably were to one degree or another. Were they gullible? Yes in many cases. But did they deserve to be driven to the brink of madness? Or bankruptcy? Certainly not. The Bitconnect bloodbath is the result of just another confidence scheme. Lures of riches and get-rich-quick has haunted human history since the dawn of time.
Now is not the time for ridicule or condemnation of victims of the Bitconnect bloodbath. Now is the time for community unity in the cryptocoin community in educating, inspiring and guiding. Let’s share our collective wisdom and experience so all of our boats rise.
The Coincheck Hack is a Teachable Moment – What we can learn from bank robbers and cryptocoin hackers.
News of one of Japan’s biggest cryptocurrency exchanges lost about $400 million in NEM tokens is spooking investors not only in Japan but across the world. Bitcoin dipped early this past Friday before the hack news became public but after it was announced Coincheck suspended virtually all operations for no given reason – at the time.
After hours of speculation Friday night, Coincheck Inc. said the coins were sent “illicitly” outside the venue. Co-founder Yusuke Otsuka said the company didn’t know how the 500 million tokens went missing, and the firm is working to ensure the safety of all client assets. Coincheck said earlier it had suspended all withdrawals, halted trading in all tokens except Bitcoin, and stopped deposits into NEM coins. We reported this on Friday as cryptocoin pricing tanked yet again.
NEM, the 10th-largest cryptocurrency by market value, fell 11 percent over a 24-hour period, to 87 cents, as of 2:30 p.m. Tokyo time Saturday, according to Coinmarketcap.com. Bitcoin dropped over 3 percent and Ripple plunged nearly 10 percent on Friday, according to prices available on Bloomberg. Late Saturday into this morning Bitcoin started a rebound as it always does with many other altcoins following suit, as they always do.
In Japan, one of the world’s biggest markets for cryptocurrencies, policy makers have introduced a licensing system to increase oversight of local venues, seeking to avoid a repeat of the Mt. Gox exchange collapse that roiled cryptocurrency markets worldwide in 2014. At that time, the theft of Bitcoin was estimated at about $450 million, though the final tally was a bit lower.
All well and good but government supervision won’t stop cryptocoin hackers from stealing crypto currency any more than the FDIC or the FBI can stop a bank robbery.
Cryptocurrency exchanges have suffered a string of outages and hacks amid the trading boom that propelled Bitcoin and its peers to record highs last year. Recently, Kraken was offline for three days and Coinbase has had to suspend various aspects of its platform due to burgeoning client activity brought on through explosive growth.
All over again The Coincheck hack is a teachable moment not only in enhancing security but scaling to meet ever-increasing demand.
Bitcoin Bear Hunting – Bulls Can Kill Bears Every Time. Smart Investors Can Too.
Bitcoin pricing has been in something of a morass hovering around $11,000 for the past tree days which is reason enough to start Bitcoin bear hunting. It was bad enough that Bitcoin values have been more-or-less frozen in a no-man’s land of value but now with the overnight news out of Japan that Coincheck, one of their largest exchanges, abruptly halted Bitcoin trading and are leaving clients high and dry as they cannot make withdrawals out of their account. Bitcoin is down 5% compared to this same time yesterday on the bad news.
The last waves of bad news out of India and South Korea got me Bitcoin bear hunting. At least those sources of bad news were the respective governments which makes FUD more understandable. With Coincheck’s surprising news there shouldn’t be anywhere near this level of FUD. That’s because Coincheck is a private company, not a government agency. Who knows why this is happening at Coincheck? When Coinbase here in the USA has an issue and stops trading any given coin (like BCH) or when a popular exchange like Kraken is offline for three solid days, coin prices don’t plunge on the news.
Bitcoin bulls need to come out of hiding and start Bitcoin bear hunting. There is no better time than now to Bitcoin or other cryptocoins so far as I’m concerned. With Bitcoin sustaining these low prices for a prolonged period of time I see us at the bottom of pricing which means there’s nowhere else to go but up.
Every Bitcoin expert that matters sees Bitcoin hitting all-time highs this year and I happen to agree. When Bitcoin wasn’t in the spotlight it climbed year over year with gains that any bank or stock exchange would be envious of. Now with Bitcoin center stage, bad news is unnecessarily exacerbating downward trends as good news is understandably overlooked. Everyone loves a good scandal, salacious events, intrigue, suspense, etc. These things appeal to aspects of mankind’s darker side. Yet the brighter side is the way to go; Bitcoin will get past this turbulence and I fully expect 2018 to be Bitcoin’s best year ever. Who’s’ with me in going Bitcoin bear hunting? Let the next run of the bulls begin!
Avalon 821 on Sale – Sticker Shock Included at No Extra Charge
Canaan’s long anticipated Avalon 821 Bitcoin miner went on sale last night via authorized distributor Blokforge. Nobody should be surprised to learn The Avalon 821 on sale event was very, very short; they were sold out in minutes. However, everybody should be shocked by the price – $3,599. I predicted a $1500 sticker price back when we announced the 821 relative to the price and performance of the Avalon 741.
Boy was I wrong. I got an email from Blokforge announcing the Avalon 821 on sale and surfed right over — HOURS before the sales window opened at 7:00 PM MST — and already saw it was sold out. WTF? Figuring it might be a mistake or that the eCommerce system didn’t have it entered yet or whatever I hung out at the Blokforge website for hours. No go. It seems their entire allotment of Avalon 821s were gone in record time. While I was waiting to see if I could buy at least one Avalon 821 my mind struggled to understand the price…. $3,599!
The Avalon 821 on sale at $3599 makes it 450% more expensive than the Avalon 741. I purchased two Avalon 741s last fall for $798 each from authorized distributor Minerwarez. Minerwarez was excellent with good communications and fast shipping. The only reason I tried to go with Blockforge is that they were talking about the new Avalon miners (761, 821, 841, etc.) while Minerwarez didn’t even mention them.
IN ANY CASE let’s gain an understanding behind my sticker shock. The Avalon 821 on sale now has a hash rate at 11 TH/s with 1200 watts power consumption. Canaan deserves a lot of credit for building such an efficient Bitcoin miner. The thing is – the Avalon 741 operates at 7.3 TH/s with 1150 watts power and could be acquired at a fraction of the price. On a side-by-side comparison the Avalon 821 delivers 50% more TH/s than the 741 but it costs 450% more.
The math doesn’t work with the Avalon 821 on sale at such a high price. When I did my research last summer on which Bitcoin miner to buy I ended up going with the Avalon miners because they had more bang for the buck and would deliver faster ROI than any other option out there. Canaan has indicated that pricing for the new line of Avalon miners would be based on market demand among other factors. I totally understand the whole supply vs. demand thing but don’t understand the justification of putting the Avalon 821 on sale at a price inordinately higher than it’s predecessor. My initial price estimate of $1500 would make perfect sense and I have no doubt Canaan would make a lot of money at that price. I can even digest a price of $1999 to make it a competition-crushing product relative to Bitmain’s Antminer S9.
Interestingly, the NEXT BATCH of Avalon 821s were priced significantly lower at $2899 — and are also sold out. I can see myself paying $2899 with a frown on my face because I happen to like the Avalon miners quite a lot and anticipate recapturing my investment as Bitcoin is expected to go nowhere but up. Obviously I’m not alone in my thinking.