Tether, the organization responsible for USDT, a leading stablecoin, has recently made a significant investment in Bitcoin, purchasing roughly 8,800 BTC, valued at $1 billion, during the third quarter. This move has captured attention across the crypto world.
While many investors view this substantial Bitcoin acquisition favorably, some experts are expressing concern. Jacob King, the CEO of SwanDesk, is one such voice, suggesting that Tether’s actions could be fueling what he considers a potential “historic bubble.”
Could Bitcoin’s Real Value Be Under $1,000?
King recently shared his thoughts on X, (formerly Twitter), voicing apprehension about the state of the Bitcoin market. He claims that a significant portion, perhaps 80% to 90%, of the total Bitcoin buying activity is artificially inflated.
King’s argument centers around the idea that Tether essentially generates new money “from nothing” and then injects it into the Bitcoin market, thereby exaggerating the speculative environment. Despite the increasing popularity of Bitcoin exchange-traded funds (ETFs) and institutions holding Bitcoin as a treasury asset, King believes the true value of the cryptocurrency may be “significantly less than $1,000.”
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This debate has been ongoing within the cryptocurrency community for several years, sparking different perspectives. One investor questioned King’s claims, asking why major institutional investors, including sovereign wealth funds and Fortune 500 companies, would continue to invest in Bitcoin if a large portion of the trading volume were indeed fabricated.
This counter-argument implies that either these large institutions are misguided, or the true speculative bubble exists within the realm of traditional fiat currencies rather than cryptocurrencies like Bitcoin.
King disputed this, suggesting that the notion of substantial institutional investment in Bitcoin is largely “a misconception.” He maintains that the majority of inflows into ETFs are driven by individual retail investors, not major institutions.
Skepticism Versus Optimism
Adding to his skeptical stance, King also criticized MicroStrategy, now known as Strategy, which is the largest publicly traded company holding a substantial amount of Bitcoin, portraying it as a “leveraged Bitcoin gamble.”
He alleges that MicroStrategy’s co-founder, Michael Saylor, has a history of inflating figures, referencing similar issues during the dot-com era, and implying that history may be repeating itself.
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Conversely, other analysts, such as Quinten Francois, offer a more positive perspective on Tether’s recent Bitcoin purchase. Francois emphasizes the U.S. government’s encouragement of stablecoin adoption through legislation, which aims to ensure stablecoin issuers are licensed, transparent, and fully backed by U.S. Treasury bonds.
He argues this regulatory system could bring trillions of Eurodollars invested outside the US into US bonds through stablecoins. It effectively creates continued quantitative easing, but it’s managed by these private entities instead of the Federal Reserve (the Fed).
As of this writing, the price of Bitcoin is fluctuating within the lower range of its recent consolidation at $113,200, making future price movements difficult to predict. Data from CoinGecko indicates that the price of the leading cryptocurrency is currently 8% below its historical peak.
Featured image from DALL-E, chart from TradingView.com