It’s September 16, 1992. Black Wednesday. Billionaire investor George Soros’s fund bet against the British Pound Sterling. It forced Britain’s conservative government to pull the Pound from the European Exchange Rate Mechanism. The Pound had dropped so much in value that Britain lost about £3.3 billion.
Soros and his investment funds specialized in targeting overvalued currencies, betting against them, and raking in billions of profits. For example, just before the Asian Financial Crisis, in 1997, Soros’s Quantum Fund bet against a basket of Asian currencies, among others those of Thailand and Malaysia. Within several months, the Thai baht depreciated against the dollar by 60%. Soros maintains he didn’t actually cause the Asian crisis. Asian currencies had been overpriced and their financial systems were inherently unstable.
Which currency would Soros’s Quantum Fund experts be targeting to crash today? Well, what about that virtual currency that has appreciated in value by +246117.09% since 2012 — Bitcoin — with a market cap of over $200 billion USD? That is including the recent drop from a price of nearly $20,000 to slightly over $10,000 per coin.
To say the least, Bitcoin is a ridiculously overvalued asset with wildly fantastical predictions that it may even grow to “$1 million dollars per coin”. Bitcoin is especially overvalued in the sense that it has become an extremely attractive proposition to bet against it.
How would one go about crashing Bitcoin and getting away with a massive profit? Bitcoin can’t be hacked. Its technical security is watertight. The code that secures its transactions has been peer-reviewed by many for nearly a decade. No one has been able to hack its internal security. Certain types of attacks might destabilize Bitcoin, but they would be costly to execute and wouldn’t exactly earn the attacker billions of dollars in return.
Nonetheless, one way to collapse Bitcoin and profit from it involves issuing one’s own cryptocurrency and using it to buy Bitcoin, driving up the price. Like a traditional Central Bank, one could issue a virtual coin with unlimited supply and create this (fake) currency from nothing. It’s the classic scheme that has been used by governments, banks, and ruling elites to steal the people’s productivity for over five thousand years since the beginning of ‘civilization’.
In fact, such a scheme presently exists in the Bitcoin ecosystem: Tether. Tethers are virtual coins, supposedly backed by real USD or EUR currency, but the present rate at which Tether is ‘printing’ new currency leaves some highly suspicious:
The company behind Tether claims on its website, “All tethers are backed 100% by actual assets in our reserve account.” But the company has never disclosed where they actually bank. Which bank under U.S. law would allow one to stash over $2 billion dollars worth of customer funds in order to buy cryptocurrencies?
If Tether is indeed a scam, then it has effectively added (indirect) inflation to the Bitcoin ecosystem. Although there will always be a limited number of Bitcoins in circulation, the Tethers used to buy Bitcoin can be created from nothing. If Tethers are not really backed by fiat currency, but by makebelief, then the entire crypto currency industry stands to collapse, just like the Pound Sterling and the Thai baht.
At this point, I advise no one to invest in any cryptocurrency for as long as Tethers exist. No matter how secure Bitcoin’s technology, it can’t protect its users from (indirect) inflation. Expect a Bitcoin drop down to $200-$300, the price range when Tethers were first introduced to the Bitfinex exchange.
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