One of the contributing factors to the crash in the price of Bitcoin back in early February was the suspicion of price manipulations made possible through fraudulent use of Tether.
Tether is a payment system in which tokens are tied directly to underlying currencies such as the dollar and euro. Every Tether is backed by a dollar or euro held in reserve.
However, the suspicion is that some Tethers are in fact unbacked, and that this has been especially the case for Tethers used to buy Bitcoin. This would amount to counterfeiting and price manipulation.
In light of this, it's interesting to note that someone was able to put 400 million dollars on the table to buy Bitcoin just a few days ago. Could the fraud be ongoing even as an investigation is on its way? Could it even be the case that the latest price action in Bitcoin is mainly due to efforts behind the scenes to cover naked Tethers?
As long as Tether remains unaudited, anything is possible.
What Tether is suspected of doing is the practice of fractional reserve banking, which is a type of fraud only legal to those who hold a licence to engage in it. Only banks with a license to practice fractional reserve banking are allowed to generate unbacked currencies in the manner that Tether is suspected of doing.
The irony in all of this is that Tether may have to close down for doing exactly what other banks are doing on a daily basis. It exposes the hypocrisy of the current political order in which fraud is only illegal to those lacking a licence to engage in it.
This was precisely the state of affairs in late 18th century France. The state issued licenses for all sorts of fraudulent practices with the result that ordinary Frenchmen, and especially the poor and needy, got fleeced by the system.
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