The co-founder of crypto data and insights firm Coin Metrics has fired back at yet another article in mainstream media claiming that the “Bitcoin bubble” has been driven by Tether.
Nic Carter, a former Fidelity crypto asset analyst and Castle Island Ventures partner, slammed the Wall Street Journal article titled “Behind the Bitcoin Bubble” by Andy Kessler, alleging that it verged on “journalistic malpractice”.
“Normally, if you are a columnist writing in one of the most respected financial publications, you might try and evaluate the data behind that claim, instead of just uncritically accepting it. But Mr. Kessler did no such thing. He just blindly repeated a fanciful claim from an anonymous blogger in order to imply that Bitcoin’s price was somehow dependent on Tether.”
The award-winning WSJ writer based some of his fairly extensive criticism on the work of a blogger called “CryptoAnon” in a viral post called “The Bit Short: Inside Crypto’s Doomsday Machine”. Kessler wrote the blogger had "found that as much as two-thirds of Bitcoin buys on any given day were purchased with Tether" based on CoinLib data.
Raising questions over Tether and its lack of audits and the idea USDT was being employed to buy Bitcoin to "jack up its price," Kessler added;
“Normally I wouldn’t care. Bitcoin is nothing, it’s vapor, a concept of an idea. Transactions using Bitcoin are few and far between. It’s not a store of value—anything that drops 30% in a week can’t play that role.”
Kessler said he must also note that "wallet provider Coinbase, the largest holder of Bitcoin, says it 'does not support USDT.' Do they know something? (Coinbase offers its own stablecoin USDC, in partnership with Circle.)
Carter, who is now board chair at Coin Metrics, wrote that assessing trade between USDT and Bitcoin using data called CoinLib was “indefensible” as it included tens of billions of wash trading data from exchanges that reputable data sources ignore.
He said any serious trader knows that “many of the exchanges composing the CoinLib sample are not credible, and that the resultant data was thus completely unreliable.”
“As I will demonstrate, this data is not sufficient to make the case that Bitcoin liquidity is dominated by Tether, and relying on it is liable to mislead. Unfortunately, the mainstream financial press is now amplifying these erroneous claims.”
Carter stated that CoinLib is taking the data outputs from marginal and often non-fiat connected Tether based exchanges as face value, and “unsophisticated analysts like CryptoAnon” are using it to disseminate FUD about Bitcoin’s liquidity.
He argued that highly regulated exchanges and institutional fund providers do not rely on or even support Tether in some cases and they all facilitate an on-ramp to Bitcoin and support the price.
“Other entities like Cash App, Paxos, Paypal, BlockFi, Robinhood, Bitwise, and Grayscale all facilitate various forms of exposure to Bitcoin and are connected to the commercial bank system and in some cases publicly-traded companies. No Tether present.”
Carter concludes that Kessler needs more research and called for a retraction and a correction by the WSJ:
“Wild theories relying on data that everyone in the crypto industry knows to be erroneous do no one any good.”