The 'Central Bank of Bitcoin': Tether slows its fall with 2,000 million 'cryptodolic'

1. Víctor Ventura

One of the great attractions of Bitcoin for many users is that he has neither Central Bank, an issuer, nor intermediaries that can give the 'printing machine tickets' and cause inflation.At least, so it was at the beginning.But in recent years, in the heat of cryptocurrency, those same elements have appeared precisely.On the one hand, the exchange houses, such as Binance, Coinbase, Bitfinex or Kraken, which basically act as banks, putting intermediaries again in the heart of the currency.And, on the other, Tether has revealed himself as the true central bank of the cryptocurrency.Yesterday was able to stop the fall of its price with massive liquidity injections, worth 1.620 million dollars, and this Thursday continues to push at the price by printing 300 million more 'cryptodolic'.How does the entire parallel financial framework that has emerged in the heat of Bitcoin?

Los Criptobancos: exchange houses

In theory, according to the original vision of its creator, the mysterious Satoshi Nakamoto, the Bitcoin would be exchanged from person to person, without intermediaries or anyone who controls operations.For this, the blockchain would be, the chain that records all transactions openly, in which any user can add a new one, without having to ask for anyone permission or depend on a centralized entity to register the movement.

That vision jumped through the air about a decade ago, when Mt appeared.Gox, the first Bitcoins exchange house, a sector to which dozens of new entities have joined, with Binance, Huobi, Coinbase, Bitfinex and Kraken at the head of the list by volume of daily operations.Your work, on the one hand, is useful: they allow connecting buyers and vendors around the world, increasing system liquidity.In return, they add precisely what Nakamoto did not want: intermediaries that control who sells and who buys.

In addition, the vast majority of the operations of the exchange houses are not carried out in the blockchain, but in the internal books of the entities themselves, such as a normal and current bank.And since the majority are not regulated, or have a more lax regulation than a normal bank, the risk is double: that they decide to manipulate the operations or that the owners decide to steal the bitcoins or flee with the user money.Or both at the same time, as recently happened in Turkey.

The 'Tetheral Reserva' to the rescue

But the biggest problem of exchange houses is the risk of lack of liquidity.Bitcoin works with 'miners', which keep the blockchain with a mechanism that spends huge amounts of energy, equivalent to that of every Holland, and that even Elon Musk has criticized.That energy is paid in real money: dollars, euros or yuan, to the electric companies of each country.So the miners have to sell the bitcoins they receive for keeping the blockchain to get money with which to pay their bills (and take benefits).

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So the exchange houses have guaranteed a minimum amount of money withdrawal every day.Normally, if there are more people who inject new dollars than those who withdraw them, no problem.But what happens if there are more people who want to withdraw their money from which they enter it?A normal bank would go to the central bank corresponding to requesting liquidity in exchange for assets -treasure boon, for example-.But Bitcoins exchange houses are not normal banks, nor do they have access to the FED or the ECB, or active to lend them.In that case, the only solution is to close its doors, in the purest 'Corralito' style.Without going any further, on Wednesday, in the middle of the sinking of Bitcoin, many exchange houses suffered simultaneous falls, leaving users without being able to withdraw their money for hours.

The solution to this problem came from the hand of Ifinex, owner of the fifth most used changes in the world, Bitfinex.In 2014 he created a cryptocurrency, called Tereher, which says equivalent to a dollar.The 'exchanges' treat it as such, and, in many cases, they give tethers to people who sell their cryptocurrencies, instead of dollars.The most recent data, last October, pointed out that 70% of cryptocurrency operations were made with tethers, while the dollar barely represents 10% of the total.And the tether is the most used by volume cryptoc.

And this currency is no longer alone.To the list of 'stablecoins', coins that say a dollar, have joined others such as Trueusd, Usdcoin, Binanceusd or Terrausd.Basically, this is the equivalent of delivering promissory notes or fair chips to people who try to withdraw dollars.In other words, it is as if the owner said: 'No, money we don't have, but if you are going to stay here to do operations, take this file, that within the enclosure we do accept it as a real dollar'.

Tether's key argument is that all the 'chips' he prints are backed up for real money in their reservations.But the data published last week, in a very summarized format and without any auditor verify them, create many doubts: in April it was just 2.100 million in cash or US Treasury bonds, compared to 41.000 million tethers in circulation.Most support would be, in his words, in "commercial paper", that is, debt of companies.If that were true, that would mean that Tether has 3% of the entire US business debt market, and that he would have acquired 1% of that market only in last month.It is enough to say that such a thing would have made all the alarms of American regulators sound, or at least he would have shaken the market, so his statements are more than doubtful.

Printing 'cryptodolic' to cause inflation

The greatest risk - and what is increasingly cryptocytic cryptocus is that Tether is broadcast.The new tethers that enter the system, after all, they only use to operate in the exchange houses, and the only thing that can be done with them is to buy more bitcoins (or Ether, or Dogecoin...).If those tethers have no support, all they would do is cause the Bitcoin rise artificially.

The image is clear: the price of Bitcoin has triggered just while the issuance of Tethers reached parabolic levels.In the last 12 months, Tethers issuance has shot 625%, while the price of Bitcoin at that same time reached a 600% rise in its peak last month.Something similar to how the Caracas bag is the one that has risen in recent years, just because the uncontrolled issuance of money pushes its price to infinity as the currency is devalued, even if the real value of the shares remains the same.

And just this Wednesday there was a very clear example.Bitcoin's enormous jolts occurred when, for a few hours, the price of the tether in the few exchange houses that offer the possibility of exchanging it for real dollars was uncontrolled.First fell to the 90 cents per unit, and then bounced up to $ 1.10 per Tether.

In those hours, the price of Bitcoin sank, taking a large part of the exchange houses to suspend their withdrawals.The shocks lasted until, around 18.00, Tether injected 1.620 million in Binance, which soon reopened, with the stabilized tel and fresh liquidity to attend to the withdrawals.With the most urgent sales orders, the cryptocurrency touched soil and began the comeback that has been seen today, encouraged by a new injection of 330 million tethers in recent hours.

The big question is what will happen if one day the parity cannot be maintained, or if the demands for retreat of dollars are so high that Tether cannot find enough reservations to satisfy them.In the worst case, Argentina appears on the horizon: when the Argentine Central Bank was not able to sustain the parity of the peso and the dollar, the corralito arrived.The currency devalued to 50% of its value in a matter of days, and many citizens lost their savings.Bitcoin was designed to avoid this type of crisis.But no one can say that the financial framework that has been created around can endure such a situation.