Bitcoin’s Tether Problem Explained – Crash Inevitable?

this video is not financial advice and you should never take financial advice from a youtuber least of all me in this video what we’re going to talk about is the current situation facing a Bitcoin specifically to do with a thing called tether now even if you say to me I’m not invested in Bitcoin I don’t care about Bitcoin I don’t hear about any of this that’s perfectly understandable but what we’re about to witness whether it’s tomorrow or next week or the month after or maybe a year from now at some point we are going to witness a gigantic car accident and anybody who’s ever driven past a car accident knows it’s very difficult to look away and what I’m talking about today is a car accident that we get to watch happening in a real-time all recorded on the blockchain so let’s take a look at our three little friends here we’ve got c4 Charlie t4 tether and f4 bit Phoenix and here’s how it works suppose that Charlie here wants to purchase some bitcoins what does he do he would go to a Bitcoin exchange and he would give them his money and they would give him bitcoins but in fact these days that’s not usually how it works places like a bit Phoenix actually only trade for tether coins so suppose this is your Charlie you’re very happy cool looking green dude with your baseball cap backwards what you have to do is go to tether to get your coins before you can trade so basically you walk up and you say hey listen man I want to get some of your bitcoins and this guy says no can do brother first you’ve got to speak to my mate tether coin get some coins from him bring them to me and I’ll give you some bitcoins so that’s what you do so you go over to to the coin and you give them say for argument’s sake 100 dollars of US dollars right he then gives you back 100 us D T now this is a type of crypto coin that is supposedly pegged to the dollar so you give him a hundred US dollars he gives you a hundred tether coins there’s a tether coins then with your tether coins you can go and say here you go friends here are my 100 tether coins and then they can give you $100 worth of Bitcoin so you see by the end of the process you have $100 worth of Bitcoin okay so you get the idea you’ve spent your hundred dollars and you’ve gotten $100 worth of Bitcoin so as far as you’re concerned by the end of the process you’ve gotten what you wanted there was a middleman here but you’ve gotten your hundred dollars worth of Bitcoin and the way the whole process works is that this person the tether coin says that their US dollar tether coin will always be pegged to u.s. dollars at 1 to 1 now you might say well how come this is how bitcoins work now what’s the point well the idea is that if BitFenix or these exchanges trade your US dollars directly the bitcoins then they might come under more regulations or there might be some other loopholes I have to jump through or what have you however by only trading for tether coins which is another kind of crypto currency they can avoid those problems so by employing this middleman they basically externalized their own risks or their own problems so while this might seem complicated it actually does kind of make sense so long as mr. tether coin here with his cowboy hat looking thing so long as he makes sure that he does keep the US dollar tether coins tethered to the US dollar at 1 to 1 which is exactly what they promised they’re going to do now here’s where it gets really interesting for this to be it’s Heather – one for however many tether coins esky issues there must be a US dollar in the bank and this is what they promised is the case if we go to their website we’ll see that they do indeed promise that they’ve got a one to one ratio of Terror coins issued for US dollars in the bank but do they really well let’s take a look at the number of teller coins that have been issued in just the last few months in fact let’s take a look at how many have been issued in just the last few days close to 100 million dollars worth of Terror coins have been issued have they really received that amount of money in u.s. dollars well it would be nice if people could audit these people however you can’t actually audit them and they haven’t even released one of their audits since many months ago back when there was only 50 million dollars worth of teller coins in circulation there’s now over 700 million teller coins in circulation so in other words if it’s actually pegged at one to one these guys should have about 700 million dollars in the bank it gets better though if you check out tethers websites they open this state in their terms and conditions that they don’t have to trade back your tether coins for US dollars now none of this is a problem so long as the Bitcoin price keeps going up because Charlie here he’s happy to keep purchasing bitcoins and going through mr. t here he’s happy to do that so long as his Bitcoin holdings are going up in paper value but there’s another little problem you see and we’ll change our color here these two dudes both happen to be controlled by the same group that’s right very hard to believe but here’s an article from the New York Times these are actually one and the same entity for all intents and purposes so think about what’s happening here this dude is saying I will happily sell you some bitcoins my friends but I want tethers you’ve got to speak to him so are you going to speak to him to get your tethers he is openly stating look man you ever come back with those tether coins they’re useless so effectively this guy can only go one way he can put money in but he is not getting money out so what happens when you get more and more money going in well you get the Bitcoin price going up but will people keep putting money in when the Bitcoin price stops going up it gets even better again you see if these people are controlling the exchanges then they can make money whether the market is going up or the market is going down the only person who’s going to lose when the markets going down is this fellow because he won’t be able to get his money out everything that I’ve just told you might seem too hard to believe that this could possibly be going on we’ve just heard that the Bitcoin price is up to ten thousand US dollars and it’s going gangbusters however if we look at the fact that there are all these tether coins in circulation in they’re only going up and the same group who are responsible for those tether coins are also running the exchanges where the bitcoins are sold then what do you think is going on here let me suggest to you one possibility these tether coins are being spent on bitcoins driving up demand driving up the price and encouraging poor Charlie here or chump which is what this is really for encouraging him to put more money in as well but if and when these people decide that it’s time for the price to go down they will have that information before Charlie or anybody else can get their money out and then a little bit like lyle lammle in that episode of the simpsons they can jump in their plane they can jump in their car and drive off to Tahiti and there will be nothing that anybody can do about it run off to Tahiti see you later boys and Charlie the chump is left we have nothing I hope all of that made sense if it doesn’t make sense I do a much better job of explaining all of this in an article at my website available completely for free at John the bond com so you can go and check that out link in the info box below but for the time being that will do us for today a little side note I am NOT a critic of Bitcoin necessarily I am NOT a critic of cryptocurrency necessarily and nothing I’m saying in this video is new or original people were talking about this months ago and in that time the Bitcoin price has gone up significantly and substantially so for all we know this little charade could keep going for another three months another six months another 12 months who knows so I’m not advising anybody to pull their money out of Bitcoin now while they still can because Bitcoin could be twenty grand in a month it could be a hundred grand in six months who knows when this Murray dance will stop all we do know is that when it’s time for this merry dance to stop these guys will be heading to Tahiti and there’ll be nothing you can do about it just like a game of musical chairs so crypto currency investment all those kinds of things buyer beware take your own risks make your own decisions I am NOT saying to pull your money out of Bitcoin but I will tell you this I personally have began a liquidating my holdings and if it turns out that in six months I look like a fool cuz I got out early that’s fine I’ll wear that but at the same time if it turns out in a month or two this whole house of cards has come crashing down don’t say I didn’t warn you check out the link in the infobox below and until next time you guys take care of yourselves [Music] you [Music]

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