Tether’s $1 Billion Bitcoin Buy Triggers Market Bubble Concerns, CEO Warns

Tether, the issuer behind the leading stablecoin, USDT, has made headlines by acquiring $1 billion worth of Bitcoin—approximately 8,800 BTC—during the third quarter of this year. 

While many investors have reacted positively to this significant investment, caution has emerged from industry experts like Jacob King, CEO of SwanDesk, who warns that this move may contribute to what he believes could be the “largest bubble in history.”

In a recent post on social media platform X (formerly Twitter), King raised serious concerns about the Bitcoin market, claiming that 80-90% of the total buy volume is artificially inflated. 

He argues that Tether essentially creates money “out of thin air,” injecting it into Bitcoin and thereby exacerbating the speculative environment. Despite the growing trend of exchange-traded funds (ETFs) and institutional accumulation of Bitcoin as a treasury reserve, the cryptocurrency’s real value might be “far below $1,000.”

This narrative has been ongoing for years, provoking varied responses within the community. One investor countered King’s assertion by asking why major institutional players, including sovereign ETFs and Fortune 500 companies, continue to invest in Bitcoin if such a large portion of the trading volume is deemed fake. 

His argument suggests that either these institutions are misinformed or that the real bubble lies within traditional fiat currencies rather than cryptocurrencies like Bitcoin.

King refuted this notion, alleging that the idea of significant institutional investment in Bitcoin is largely “a myth.” He contended that most inflows into ETFs are driven by retail investors, not large institutions. 

Further amplifying his skepticism, King criticized Strategy (previously MicroStrategy), the largest publicly traded company holding over 600,000 BTC, describing it as a “leveraged Bitcoin casino.” 

He alleged that the company’s co-founder, Michael Saylor, has a history of inflating numbers during the dot-com bubble, suggesting that the current situation is a repetition of “past mistakes.”

In contrast, other experts like Quinten Francois view Tether’s recent Bitcoin purchase through a more optimistic lens. Francois highlights the US government’s push for stablecoin adoption via the GENIUS Act, which mandates that stablecoin issuers be licensed, transparent, and fully backed by US Treasuries. 

He argues that this regulatory framework could channel trillions in offshore Eurodollars into US bonds through stablecoins, effectively continuing quantitative easing but through these private entities rather than the Federal Reserve (Fed).

At the time of writing, BTC is trading within the lower channel of its consolidation range at $113,200, with no clear indication of where prices will move next. According to CoinGecko data, the leading cryptocurrency is currently 8% below its all-time high. 

Featured image from DALL-E, chart from TradingView.com