🍿 Tether (USDT): A Nearly $70 Billion Time Bomb
Happy Monday and welcome to Popcorn - internet’s most interesting crypto newsletter. 🍿🍿🍿
We have a problem.
On December 4th, 2021 Tether created $1,500,000,000 worth of USDT out of thin air. That’s $1.5 BILLION.
Nowhere it is documented where the money which was just created comes from and where it actually went.
What’s actually happening?
They are creating a dollar substitute and basically running a banking and payments business but without the oversight that anyone else doing a similar kind of business would have.
Tether says its reserves are backed by cash to the tune of . . . 2.9% Tether’s reserves analysis confirms what many people have said for a long time, namely that Tether has almost no cash dollars on its balance sheet.
How much of it is actually backed of the $1,500,000,000 they somehow created in less than 24 hours? You can probably guess.
Why is this important?
As k3eb22 explains on Reddit:
Everyone says "oK I jUsT wOnT hOlD TeThEr" and then acts like it isn't a massive f*cking problem that can't hurt their investments.
All of that Tether is counterfeit money that is being used to buy OTHER CRYPTO CURRENCY.
That means that the price of nearly every coin in the crypto space is being driven up by fake dollars.
Due to the fake dollars purchasing the crypto, the prices you see for all your favorite coins are fake too. If a significant number of people were going to try to cash out, there would not be enough liquidity to in exchanges to do so. There would be essentially a bank run of epic proportions and the entire crypto space would plummet to almost nothing again.
A few people have asked "Why is this happening?"
I think that Paulo (CTO on Tether) and Tether/ Bitfinex WANT it to be legitimate. However people are greedy and they have got carried away. They are acting like the FED. Every time the crypto prices stagnate, they print more to pump the price. They hope the pump will cause a frenzy of real money into the system at a rate higher than what they are printing in order to get them out of the hole.
It isn't working out for them.
It tells me the goods aren't backed.
If the goods aren't backed that is a huge existential problem to every crypto market.
The questions are :"How much is backed?" and "At what point do we have a bank run?"
With every print a bank run gets closer…
Who is Tether enriching?
Owners of Tether Limited. Tether places funds in interest bearing instruments like commercial paper and loans with returns. These returns become fully owned by Tether Limited since tether’s price is pegged to $1. So when investors invest in tether, investors get no returns but Tether Limited earns from the USD investors invested in tether.
UPDATE:
Tether froze three Ethereum addresses on Thursday, holding over $160 million worth of USDT, according to data from Etherscan. "Today, Tether has frozen three addresses on the Ethereum blockchain containing $160m USDt upon a request from law enforcement. At the moment we are unable to disclose any further details," a Tether spokesperson wrote in an email.
Further reminder that centralised stablecoins can and do freeze accounts, just like a bank.
Might be a good idea to diversify exposure with decentralized alternatives.
Short Term Technical Analysis
On a daily BTC chart, MACD signals of a possible reversal of the current bearish trend.
However, there is still risk of going to $37,500 short term.
If the reversal continues from today’s values the next main levels are $45,500, $50,000, and $53,500.
Overall market sentiment seems bearish. Some alt coins have shown a nice growth past week, however I would still wait until increasing positions in alt coins due to a bigger possible correction. Unfortunately, Bitcoin still has a huge influence over the alt coin market and is holding/pulling everything else back.
In the next email I will outline the top 5 coins for 2022 I am buying and the price levels I am waiting on to increase my positions.
Interesting Links I Stumbled Upon:
🍿 Link: ICODrops - ICO (Token Sale) database. Not a fan of buying ICOs but it is a handy tool to keep an eye on what’s getting released and then to watch the projects I like.
Here are some of my tips before you invest in anything.
Look into:
The development team - are they real people with footprints on several social media accounts. Were they a part of another successful project? If so, they are more likely can do it again. If not, do they have the credentials or qualities for this project to succeed?
The white paper.
The technology - is it really possible and do you understand it?
The purpose of the innovation - is it solving a real problem or provides a real utility?
How long the project has been in motion - is there a real progress and something to show for it?
Go on their Twitter and Discord. Check engagement on posts, retweets, likes, shares.
🍿 Article: My first impressions of web3 by Moxie Marlinspike.
The founder of messaging service Signal talks through some potential problems with web3 and crypto. The big one is how web3 is starting to rely on centralised companies with big servers (like MetaMask, Infura, OpenSea) to process all the information (the Google-style central control that web3 was meant to get away from. There’s one freaky bit where he shows how he designed an NFT that looks different depending on what platform it’s on:
Snippets:
🏦 Solana Can Be 'Visa of Crypto,' Bank of America Says
In a research note, analyst Alkesh Shah argued that Solana's value lies in how it can handle thousands of transactions per second — with real-time data from the project stating that each transaction commands fees of $0.00025. He wrote:
"Its ability to provide high throughput, low cost and ease of use creates a blockchain optimized for consumer use cases like micropayments, DeFi, NFTs, decentralized networks (Web3) and gaming."
🍣 Would You Pay $8,250 for Sushi?
It looks like some people already have. A new private dining club — Flyfish Club — will be opening in New York City and charging its members entry through NFTs. Their membership tiers range from 2.5 ETH to 4.25 ETH ($8,350-$14,200), and give these NFTs holders access to fresh sushi flown in daily from Japan, a cocktail lounge and private events.
GameFi Pick Of The Week
DeFi Kingdoms is a game, a DEX, a liquidity pool opportunity, a market of rare utility driven NFTs, and it all plays out seamlessly in the incredibly nostalgic form of fantasy pixel art.
DeFi Kingdoms aims to be a whole ecosystem of features that includes the JEWEL token, the DEX, the Gardens, and our NFT assets (Heroes, Equipment, and Kingdoms), as well as the game activities that can be performed with those NFTs.
DeFi Kingdoms is a browser-based game, so all you need to set up your system is a compatible browser with the MetaMask extension installed.
Additionally, you will need Harmony ONE tokens for gas fees, and to convert to JEWEL within the game.
Once you're in the game, you can spend as much or as little as you'd like by adding to the liquidity pools in the Marketplace and staking LP Tokens in the Gardens or JEWEL in the Bank.
You can also spend JEWEL to purchase Hero NFTs in the Tavern. They can be used to collect resources through their Professions, and can be paired with other Heroes to Summon new Heroes from the Inner Grove.
Definitely an interesting game which I am watching closely.
Random Thoughts:
“If I knew everything I know now about this investment when I first bought it, would I still be invested?”
“Life’s too short to stare at a screen all day.”
Tweets and Memes:
One of the reason I am still bearish on the current crypto gaming. The tokenomics and the game concepts are still too vague and the implementation (graphics and gameplay) is lagging far behind. I’ve played better games in 2005.
Just think what will happen to all these projects when Rockstar or Blizzard announces crypto/metaverse games with their level of development.
It is VERY hard to create a game. It is VERY easy to add the blockchain, NFTs and crypto currency into a game. These huge game makers already have the hardest part figured out to the smallest detail. Their graphics are insane, games are stable and entire infrastructure is already built. At this stage, I would be very careful holding any gaming related NFTs or tokens long term. However I am super excited for this space and watching it closely.
Something I really would like at least to see now is a Runescape type of P2E crypto game which I used to play for days back in school in 2001-2002.
Until next time,
Max 🦸🏻♂️
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