Some ANTI-FUD for you on this day of much FUD from the "market"
This first part is not crypto related, but it is important to give you some context on how markets react to news outside the crypto space.
Linked here is an article exploring the recent developments that CBA (Big 4 Australian Bank), is facing civil lawsuits from two financial regulators is Australia for:
- THOUSANDS of serious breaches of the AML/ATF (anti money laundering / anti terrorism funding) legislation
- Manipulating the bank bill swap reference rate (BBSW) between January and October 2012.
Cost of these legal battles is estimated to be between $700 Million and $1 Billion AUD...
Let's Do Some Basic Math:
As of writing this article CBA's market cap is roughly $112 Billion AUD.
Their estimated cost here being circa $1B is roughly 1% of their current market cap. BUT, their profits in 2017 were circa $10B so..., They stand to lose 10% of their annual profit in just these two lawsuits.
As you can see by this chart..., CBA share price has been largely unaffected by the news.
Now Let's Translate This to the Tether "Issues"
I'm sure you've all heard today's news that the CFTC (Commodity Futures Trade Commission) in the US has subpoenaed Bitfinex over Tether as they seek to understand IF there are any looming issues there.
There have been widespread concerns in the crypto space about Tether as people struggle to understand how they have gone from $10M USD worth of Tether in early 2017 to over $2B in early 2018.
A fair question indeed however we've seen the entire crypto market go from under $50B to almost $1T (yes trillion) in that same time. What's more, in times like these where the market has been down / sideways for a month or so, traders seek refuge in Tether to wait out the dip and then they re-buy.
So, in a time where demand for Tether would be at an all time high, and the liquidity in the market is higher than ever before, the only crypto safe haven is so popular it caught the attention of the regulators (keep in Mind Bitfinex isn't even a US company and they no longer accept US customers).
Not only is this not a big deal, it is to be expected... Absolute storm in a tea cup from a whole of market perspective.
So how do the crypto markets respond? > CRASH!!!!
Now Let's Put the "News" Into Context:
- Tether has a $2B market cap
- Regardless of the %, Tether have LARGE reserves
- Even assuming total fraud and a complete loss of all Tether tokens, the $2B represents less than 0.5% of the crypo market cap and it would ONLY impact Tether holders.
- If Tether were to have a real issue, everyone holding Tether would have to come back into BTC or ETH to either get back to USD or to shift their investment into other crypto
- The movement of $ out of Tether and INTO other cryto will create more demand and higher prices for the rest of the crypto space!!
So Why the 10 - 20 % dip across the board (higher in many cases) based on this "news"?
One word. Experience.
The traditional share markets are full of professional traders and there are almost no complete amateur investors (complete opposite of the crypto demographic).
Experienced traders also read the news, but they apply layers of logic to any potentially market shifting news or events BEFORE they dump their bags and run to their bedrooms to cry.
In this case, they would be recognising the fact this will not impact the whole market even in the unlikely event Tether goes to $0.
They would take note of other concurrent news like Robinhood (a trading platform for traditional equities), entering the crypto market and having over 1 MILLION pre registrations from people wanting to trade crypto on their platform...
This combined with the fact that ALL major exchanges have recently been forced to drastically increase their infrastructure due to extreme growth and demand for their services...
Looking at things with a balanced view it becomes clear we are not going to see crypto crash and burn, regardless of what happens with Tether.
So..., it's another opportunity to buy the dip and stock up on your fav's while everyone else dumps their bags at a loss for no good reason.
I'll end this with a quote from Warren Buffet. Not my favourite person but undeniably intelligent when it comes to long term investment strategies. "Be fearful when others are greedy, and be greedy when others are fearful'.
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