After a precipitous crash, cryptocurrency enthusiasts have been heartened to see a steady climb in the value of frontrunner coins since Tuesday night. What’s driving the rebound in an increasingly harsh regulatory climate might be a so-called “stablecoin” widely suspected to be fraudulent.
In early December, the US Commodities Future Trading Commission sent out subpoenas to the operators of cryptocurrency exchange Bitfinex and stablecoin venture Tether. (Both are owned by the firm iFinex.) Tether in particular has been a source of contention in the crypto community. Unlike the wild value fluctuations standard in coin day-trading, Tether purports to be pegged to the value of a currency—one USDT will always be worth one USD, or so the thinking goes.
“At any given time the balance of fiat currency held in our reserves will be equal to (or greater than) the number of tethers in circulation,” the coin’s whitepaper claims, where that trove of cash acts as kind of collateral. The reason regulators became interested in Tether? The company hasn’t provided proof this money exists and recently ended its relationship with the firm tasked with auditing it.
Critics have posited that the worst is true—that Tether is not being honest about its war chest, but that the entire venture has succeeded in artificially inflating the value of Bitcoin. Hurting Tether’s case further: Key figures in the company were named in the Paradise Papers, the company refuses to name which bank(s) its funds are stored in after Wells Fargo severed ties to it, and almost nothing is known about its CEO. According to Tether’s then-product manager and community manager Zane Tackett, the company was also an investor in Blockstream—the firm responsible for the majority of recent development on Bitcoin.
Which brings us back to Tuesday night.
Tether had posted their intention to begin issuing USDT and EURT—a coin pegged to the euro—over Ethereum, a competing but inter-exchangeable cryptocurrency. Eagle-eyed Reddit users spotted approximately 71 million of the things were minted around 8:30pm GMT on Tuesday. Around the same time, Ethereum—which had been following Bitcoin down its losing streak—started back on an upward trajectory, taking other coins up for the ride.
Nothing is impossible, especially in a volatile market known for extraordinary fluctuation. It could be pure coincidence that an influx of over £62.7 million in potentially unbacked coins was created around the same time the value of almost every one of the top 100 coins began increasing. But it probably isn’t.