By Amy Castor and David Gerard
“Weaseling out of things is important to learn. It’s what separates us from the animals … except the weasel.” — Homer Simpson
Number go up
Why is the bitcoin price over $20,000? The answer is always, always “shenanigans.” It is never macroeconomic actions, regulatory announcements, or the strength of the dollar.
The bitcoin market is tiny, easily manipulated, and utterly unregulated. Internal manipulations swamp all external indicators. [SSRN, PDF]
Bad news is the usual reason for pumps. If holders see the number go up, they’re less likely to be spooked and start heading for the exits. And this past week has seen a flood of bad news — Genesis is likely insolvent, DCG was hit hard trying to cover them, Gemini and Genesis are being sued by the SEC, and Nexo is going down hard.
Someone trying to wreck a long or short margin trader is another reason for a pump. It often costs less to rig the price of bitcoin than you could win on a margin bet. This is when you get a chart with “Bart” formations on it.
The bitcoin price is kept where the large players need it to be. The market is thin and trivially manipulable with the billions of pseudo-dollars in unbacked stablecoins on unregulated offshore exchanges.
The bitcoin price needs to be high enough so the big boys’ loans don’t get liquidated, but low enough so bagholders don’t attempt to cash out and crash the price. It’s a tightrope.
Press and commentator narratives about wider market forces are part of the general delusion that well-behaved markets are natural. They are not. We’ve had nearly a century of a properly regulated US stock market, for example. It’s not a wilderness, it’s a carefully-tended garden.
But people, even finance journalists who should absolutely know better, assume that well-behaved markets are normal, and that you can talk about all markets like you can those few markets.
Bitcoin is utterly not the same sort of creature…
