What?
As CoinDesk’s Muyao Shen reported Wednesday, a buyer or a group of buyers entered an order on a centralized exchange to buy $1.6 billion worth of bitcoin.
Where?
The price of bitcoin on Coinbase relative to other exchanges rose sharply as the trade was underway, leading some to speculate that the regulated U.S. exchange was the platform where the transaction happened. However, a little more digging into the data places the trade in Asia.
Three exchanges saw particularly large volumes in their perpetual futures contracts, according to Ki Young Ju, CEO of data provider CryptoQuant. Those three – Binance, Huobi and ByBit – while not technically based in China, have long had ties to the country, where yet another crackdown on crypto was recently announced.
When?
It’s an eerie coincidence a trade of this magnitude happened on exchanges with ties to Chinese customers in the middle of a week beset by capital market woes in that country.
This is a roundabout way of saying there’s some serious contagion going on in the Chinese real estate market. That’s not good for the country’s economy given that roughly one-third of its economic activity is related to the real estate sector, whereas it’s only one-sixth or so for the U.S.
How? But wait, there’s more!
While the purchase is denominated in the press as $1.6 billion, it wasn’t actually $1.6 billion in greenbacks paid for bitcoin.
For one, if CryptoQuant’s Ki is correct, this was first done in the perpetual futures market, not the cash market. That means actual bitcoin may not have gone to the initial buyer. Nonetheless, it will have an effect on the cash market because the two move in tandem.
Also, dollars themselves were most likely not the currency used but instead the transaction appears to have been largely done using the stablecoin USDT, issued by Tether, which was an on-ramp for many in China to trade on exchanges like Binance or Huobi.
“Most trading volume was from BTC/USDT,” Ki told CoinDesk regarding Wednesday’s trade, “which means buyers already had USDT coins.”
A look at trading volumes on data site CryptoCompare.com shows that at the time the trade occurred, the pair of BTC/USDT outpaced BTC/USD (bitcoin for the U.S. dollar) by roughly 2-to-1.
Another odd coincidence? Remember a minute ago when we talked about Chinese corporate debt? Here’s something interesting: On Thursday, BloombergBusinessWeek released its cover story, “Anyone Seen Tether’s Billions?” Toward the end, author Zeke Faux writes, curiously:
“After I returned to the U.S., I obtained a document showing a detailed account of Tether Holdings’ reserves. It said they include billions of dollars of short-term loans to large Chinese companies – something money-market funds avoid. And that was before one of the country’s largest property developers, China Evergrande Group, started to collapse.”
https://finance.yahoo.com/news/bought-1-6b-bitcoin-wednesday-155000568.html
Correct. Tether backs over 60% of USDT with commercial paper and corporate bonds. This has extensive counterparty risk. It is well known that a very large portion of this is in Evergrande, although the exact holdings by company are not disclosed. (https://blogs.imf.org/2021/10/01/crypto-boom-poses-new-challenges-to-financial-stability/)
Nobody knows what this is going to do to the crypto market when Evergrande defaults on their debts. However, in addition to the value of USDT crashing by 50% or more, it is likely the contagion is going to spread to other coins collapsing their value as well. For this reason, many suspect we are going to see a blow off top on Bitcoin very soon, with insiders exiting near the peak before the value collapses.
It's all speculation though. Unless you are in the inner circle, it is impossible to predict with certainty.
The collapse can't come soon enough.
Tether pumping has been going on since the 2017 pump and it has been keeping the markets on life support, preventing organic correction and growth. Tether is to crypto as the Fedral Reserve is to the dollar.
When the collapse comes, hopefully we embrace Bitcoin Cash, Monero, or other crypto currencies that are trying to be currency for the people.
This part is the most important part. My guess is that there will be a wipeout of all these stable coins with the coming crash and the crypto will ripe for a whole new kind of coins.
This is a good post, thanks for this.
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