Bitcoin’s Artificial Summer Pump Ends; Altcoin Market Pays Price for Recent Gains
Bitcoin continued to plummet on Wednesday, losing 7% over the past 24 hour period. That takes BTC’s weekly losses to 14%, and perhaps signals the end of the current price pump.
That speculative assumption is based on Bitcoin’s failure to clear the double-top formation it posted back in June, and the steadily declining trade volume in BTC markets. Bitcoin trade volume continues to spike on busy days, but has been on the decline for the past two months now.
Likewise, the trade volume being posted by Tether (USDT) has seen a huge decline over the same time period. When Bitcoin peaked at $13,700 at the end of June, Tether volume was at $42 billion. Today it stands at $17 billion.
Bitcoin’s Artificial Summer Pump
What’s more, there’s every reason to believe this entire summer pump was fuelled by the same highly suspicious Tether volume. Tether volume has risen and fallen in line with Bitcoin all year long. Even today BTC and USDT trade volumes are closely aligned – $17.9 billion and $17.8 billion respectively. The same pattern was seen during the recent peak, when trades spiked hand in hand (BTC hit $46 billion, USDT hit $43 billion).
Tether hasn’t been shown to be backed up in its entirety, and is essentially surviving on good faith at this point. On the dark corners of internet message boards there exists a theory that every dollar exchanged for USDT is immediately being used by the good people at Tether/Bitfinex to buy BTC.
Now, if the original purchaser of the USDT also goes out and buys BTC, then the market value of Bitcoin has just been artificially inflated and devalued. One dollar has been used twice to buy the same thing.
With this in mind, it becomes difficult to parse the true dollar value of Bitcoin, or any other given cryptocurrency. The technology which underlies cryptocurrency/blockchain is undoubtedly useful – I use it regularly. But the market manipulation and volatility has to come to an end before we can assign true values to what’s been created here.
Most of the best performing altcoins from the last few months are now suffering the most. Recent gainers such as Litecoin, EOS and Tezos lead the bleed-out among major altcoins, losing between 8-10% on Wednesday.
Small-cap altcoins were also put firmly back in line after outperforming the market in recent weeks. ABBC Coin and XMax both lost close to 20% on the day, taking weekly losses to 50% and 33% respectively.
Unless something changes, I’d expect to see the same coins and tokens surge again on the rebound – particularly EOS, which needs to pump in order to stay solvent.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via CoinMarketCap.