'Crypto' Illusion: The Hollow Forces Behind Token Price Swings
The annual Ig Nobel Prizes—issued to scientific research that offers dubious value to society—has once again missed the boat by declining to celebrate studies that examine why ‘crypto’ prices go up or down
The forces behind up or down token trajectories remain a mystery to most token holders, so much so that crypto news sites repeatedly run articles attempting to explain why certain tokens are up/down today (before ultimately declaring ‘we have no clue’)
Which brings us to What Drives Crypto Asset Prices?, a new study aiming to “investigate the factors influencing cryptocurrency returns.” Worth noting that one of the three authors works for Uniswap Labs, another works for USDC-issuer Circle
The study says token prices are “significantly impacted by conventional risk and monetary policy factors.” So if the Federal Reserve prints money, number go up. If the printer stops, prices fall. (Rather mundane for an allegedly revolutionary technology, isn’t it?)
Recall that, thanks to COVID stimulus checks, Americans who weren’t staring bankruptcy in the face used their windfalls to buy tokens. When those checks stopped coming, token prices stalled—and a lot of big crypto firms started going belly-up
This study briefly acknowledges earlier studies illustrating the impact of the Tether (USDT) stablecoin and USDT-based “price manipulation” of the BTC token during the 2017 boom. But this view is more or less discarded in favour of other, less pejorative theories
And yet, every major surge in BTC’s fiat value follows spikes in trading volume involving USDT (and, on Binance, the BTC-FDUSD trading pair). Meanwhile, trading BTC for actual USD accounts for low single-digit percentages of BTC-stablecoin volume
Few onlookers have much confidence in the validity of these stablecoin trades, in part because of last year’s revelations that Binance had 300 or so “house accounts” that were exempt from the exchange’s insider trading policies
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The opacity that surrounds most stablecoin issuers—including Tether’s steadfast refusal to submit its fiat reserves to a third-party audit—further fuels suspicions that it’s all smoke, mirrors and wash trading
Tether’s raison d’être was summed up in the title of last week’s Wall Street Journal article—The Shadow Dollar That’s Fueling the Financial Underworld—which builds on previous evidence of USDT’s popularity with all the wrong sorts of people
As some other observers have put it, Tether’s stated goal of ‘banking the unbanked’ could more accurately be described as ‘banking the unbankable’
Terrorist financing, ‘pig butchering’ scams, drug trafficking, sanctions evasion, etc. This is the price ‘crypto’ is willing to pay to ensure utility-free digital Beanie Babies increase in value long enough to lure credulous retail ‘marks’ back into the exit liquidity zone
This has gone on so long most observers just accept it as the way things are. But that doesn’t mean it will go on forever. The wheels of justice may turn slowly but when they roll over you, they often roll you flat as a pancake
For the record, I’ve never been into ‘crypto.’ I got into blockchain because of its potential to improve existing technologies and make possible entirely new technologies. Don’t believe me? Check out the goods here:
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