Why cryptocurrencies are falling?

Why are cryptocurrencies dropping?

The December / January rally was artificially manipulated, the reason for the dropping is mainly due to investors panicking. Manipulation, market corrections and FUD all play a part in this and this article will go over a few reasons why I think the markets have further to fall before the trend reverses.

Why Tether (USDT) will cause the markets to tumble.

The original idea of Tether was great, a cryptocurrency that is ‘backed’ by the dollar. Investors loved Tether as it was a safe haven for storing profits. I often used Tether to protect my gains from the markets correcting. To understand entirely why Tether (USDT) will cause the markets to crash let’s first look at what Tether is.

As mentioned before, Tether is a cryptocurrency that is supposedly backed by the dollar. To quote from their website:

‘Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.’

In order for this cryptocurrency to work there needs to be frequent and very accurate auditing, and to begin with Tether did publish their audits monthly. This is where the problem arises…

Tether has not posted their audited accounts for several months, they had a contract with an auditing firm called Friedman LLP that began 8 months ago and was recently terminated for reasons ‘unknown’. Of course, Friedman LLP cannot disclose Bitfinex’s accounts however it does not take a genius to understand that the realistic reasoning is that Friendman LLP have discovered severe flaws in their accounts and do not want reputational damages. To further back this point, all mentions of Bitfinex (who have close ties to USDT) have been removed from their website.

Now that we understand that USDT is not actually backed by the dollar at all. Let’s have a look at the manipulation that has been going on.

Wash Trading

‘A wash trade (not to be confused with a wash sale) is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.’

There is a person / group of people on Bitfinex that go under the name of ‘Spoofy’ and wash trade to manipulate the markets. Many investors believe that this could very well be the team at Bitfinex printing USDT and controlling the price of Bitcoin. Of course, this is very illegal and begs the question again why the auditors were not able to complete their audit. If they were to find even the slightest proof of insider trading / market manipulation this would cause Bitfinex and USDT to crumble.

I really suggest having a read of a few of the articles on here:

He really goes into great detail as to why and how Bitfinex is using USDT to manipulate the price of cryptocurrencies, especially Bitcoin.

Many investors are now begging the questions as to whether or not the December / January rallies were manipulated by Bitfinex or not. I personally believe that it was to a degree and that BTC will drop to at least USD 8,100.

What should you do?

1. Get out of Bitfinex and USDT

2. Potentially step aside and wait for this to play out

3. HODL (Hold On For Dear Life) – this is a wild ride, for some just ignoring events like these are far less stressful.