The Bitcoin crossing is a myth, the Bitcoin rate is determined by the manipulations of those who control the market

Last night (Friday) the “bitcoin crossing” took place – a 50% cut in the rate of issuance of new bitcoins for circulation. This is an event that occurs approximately every 4 years. In 2012 the rate dropped from 50 to 25 in about 10 minutes. In 2016 it dropped to 12.5, in 2020 to 6.25 and as of yesterday it is 3.125. That is, 450 bitcoins a day, instead of 900 before. According to the myth, the smaller supply, assuming a stable demand, will lead to an increase in prices, i.e. an increase in the Bitcoin rate.

The Bitcoin crossing is a real event, but not particularly important, around which a myth has been woven. According to the myth, the event is loaded with meaning and has dramatic consequences, and is expected to increase the value of Bitcoin in the markets.

In reality, the Bitcoin rate is determined in a horribly manipulative manner, which does not derive at all from the blockchain technology and the Bitcoin code, but from the manipulations of those who have effective control over the market, who are in serious conflicts of interest.

The trick that causes the value of Bitcoin to rise is to remove as much supply as possible from the market and create artificial demand. It has nothing to do with the rate of issuance, or “crossing” events every 4 years.

In the mainstream media, fluctuations in cryptocurrency rates are reported alongside reports from the traditional capital market, which creates the illusion that these are similar things. Such reports help hide the manipulations and scams of the crypto market, which are very easy to do in the absence of minimal regulation.

Millions of coins threaten to flood the trading arenas and collapse the exchange rate

The daily issuance rate has negligible significance on the market, because in the crypto trading arenas today, about 2 million bitcoins are held. Even out of the daily flow of 900 new bitcoins, at the rate that was until yesterday, not all of them reached trading arenas. Accumulators of the new inventory, called ‘miners’, decide from a variety of considerations when to increase their inventory and when to “flood” the trading arenas with new supply.

The main consideration that may incline them to accumulate, instead of selling, is the understanding that there is not enough ordinary money in the market, and a sale will collapse the value of the currency and with it the balance sheet of the mining company. This approach has limited validity, as miners have to buy equipment and pay utility bills with regular money and not Bitcoin.

The Bitcoin hedge funds, which were approved this year, started with an accumulation of about 620,000 coins and accumulated 841,000 Bitcoin coins, an increase of about 220,000 coins that were absorbed out of the market and flowed billions of new dollars that literally rescued the mining companies from a major crisis. These currencies, which are currently in hedge funds, can jump back into the market very quickly.

Apart from them, there are other large stocks of at least tens of thousands of coins that are in the hands of miners, 141,000 coins in the distribution box of the trading arena that collapsed Mt. Gox, and should be distributed soon, 213,000 coins under the control of the United States government and 190,000 under the control of the Chinese government, and about 170,000 more under the control of other countries. Hundreds of thousands more coins are in the hands of commercial companies. There is actually a huge potential supply of Bitcoin, far greater than anything the market can absorb. Any of the big holders, known as ‘whales’, can easily crash the market. Crossing has exactly zero effect on this.

Finance professor: “In the long term, the bitcoin rate will reach zero, it is a speculative asset”

Carol Alexander, professor of finance at the University of Sussex, told the Guardian about the crossing event that “Bitcoin’s rate will probably rise above the record rate, but in the long run the rate will reach zero because Bitcoin has no intrinsic value. It’s just a speculative asset.” Alexander does not say when this will happen, but only points out that, unlike holding a bond or stock, holding Bitcoin does not give the holder any right to a future flow such as interest or dividends.

The Bitcoin protocol itself encourages the waste of electricity on a huge scale to carry out the computerized ‘mining’ of Bitcoin. Because the rate of issuance is decreasing over the years. Combined with mining cost calculations, the ‘flow’ of holding Bitcoin is actually negative. How does this reconcile with an increase of about 300% in a year and a bit?

The answer is that in order to maintain the dynamics of a price increase in Bitcoin, there is a growing need for manipulations – artificial removal of supply from the market and artificial creation of demand. Unlike most assets, Bitcoin is traded in a large number of arenas at the same time, which greatly reduces market liquidity compared to an asset that is traded in only one arena and makes it easier to manipulate the exchange rate at a relatively low price.

Market with conflict of interests built in

All major crypto trading arenas actually operate with a built-in conflict of interest. The most tradable asset in the crypto market is Tether (USDT) which is used as a crypto asset pegged to the dollar. The owners of the company are also the owners of the trading arena BITFINEX. In the past, Tether was caught using Bitfinx customer funds, instead of its own funds, after a series of arrests and freezes of hundreds of millions of dollars of money laundering network led by Jerry Fowler, which Tether used.

Tether has never disclosed a proper book audit detailing its dollar assets, which are said to total 109 billion USDT, but some of which are known to be cryptocurrencies. That is, the company issues USDT, which are used to inflate the value of crypto-currencies and that the company also owns such assets instead of dollar assets. To make the event more picturesque, the company is not at all willing to redeem USDT for dollars, but only for a selection of large customers. There is almost no evidence of anyone successfully cashing out USDT directly from the company.

Many critics think that a significant portion of the 109 billion USDT is not backed by any asset, and is actually fake dollars in the crypto market through which artificial demand can be generated. This does not prevent USDT from gradually becoming the preferred crypto-asset for criminals instead of Bitcoin, as well as for terrorist organizations.

The Ftx arena that collapsed in 2022 also operated in a built-in conflict of interest between it and Sam Bankman Freed’s private trading company, Alameda, which acted as a market maker in a variety of crypto arenas and had unlimited credit in ftx. This credit is actually given from the funds of Ftx’s customers amounting to billions of dollars.

The indictment against Binance, the world’s largest crypto trading arena, also included details of trading operations on behalf of the arena itself, without disclosing to customers that they were ‘trading against the house’.

The American Coinbase arena operates under a little more supervision, but even there actions in conflict of interest have been detected, related to the launch of trading of new crypto-currencies, towards which Inside information is used by company employees. Since it is a public company, it submits financial reports, of which the decrease in trading volumes is noticeable. The company is loss-making, despite interest income, and its share value in 2023 has dropped by 90% from the April 2021 issue date. After this year’s jump, it still represents a loss of about 40% in 3 years. There is also a lawsuit against her by the Securities Authority, for offering investments in violation of the law.

Crypto trading arenas suffer from a high rate of ‘technical failures’ compared to regular exchanges, and situations in which it is not possible to withdraw money or crypto from the content, which causes great damage to customers. Any exchange in the regulated capital market would be heavily fined if it failed in a similar way, but not so in crypto, where there is no relevant supervision.

Therefore, the Bitcoin price is mainly a product of manipulations aimed at separating investors from their normal money such as dollars, euros and shekels, and it will rise or fall mainly according to the more profitable manipulation at a given moment for whoever controls the market. Crypto lobbyists will be willing to tell any story in the world to convince as many people as possible to give up their money for crypto, even if its connection to reality is completely coincidental. Since the media usually give the people of this industry serious and respectable coverage, they also succeed in this quite a few times.