In just a decade’s time, Bitcoin has become a household name. This cryptocurrency is now used as both a store of value and payment method by many people worldwide.
Regarding the latter, numerous gamblers use Bitcoin (BTC) to fund their accounts. They like how their BTC deposits aren’t subject to third-party control and can’t be rejected. Bitcoin’s utility as an online gambling deposit method is just one reason why its value has skyrocketed in recent years. At the time of this post, one BTC is worth:
The Current Value of Bitcoin
But is BTC really worth this much? Especially when it still hasn’t achieved much mainstream adoption as a payment method?
Maybe not. Some signs point to the possibility that Bitcoin’s price was manipulated and driven up by a stablecoin called Tether.
If so, will BTC gamblers’ bankrolls be decimated when or if the potential Tether (USDT) scam is exposed? I’ll answer this question by covering more on Bitcoin’s online gambling usage, Tether, and why USDT could crush the gaming market.
What Are Bitcoin’s Main Uses Today?
Bitcoin has developed an unsavory reputation among the general population because of its main use cases. Here are some of the top reasons why people use Bitcoin:
- Avoid using fiat currencies (e.g. USD)
- Buying drugs
- Cross-border payments
- Hiding assets from the government or a spouse
- Online gambling
- Price speculation
Not all of these uses are nefarious, such as avoiding fiat, making cross-border payments, and investing. But buying drugs, hiding assets, porn, and even gambling are considered taboo or even downright illegal. Regardless of if society approves of its main utilities, BTC is undoubtedly useful in some cases. Its decentralized nature makes it perfect for evading control by banks and governments.
You’re still not allowed to engage in illegal activities just because you’re using BTC. However, you can make purchases and store value with more anonymity thanks to this cryptocurrency.
Why Has Bitcoin Become so Popular Among Online Gamblers?
Some countries treat internet gambling as a gray area and have yet to take a hard stance on it. Certain banks and payment processors aren’t willing to process online gambling transactions for these nations as a result.
Financial institutions may not necessarily be doing anything wrong when they process these deposits and withdrawals. However, they simply like to avoid any future legal headaches by rejecting such transactions instead.
The US represents the perfect use case for gambling with Bitcoin. Its Unlawful Internet Gambling Enforcement Act (UIGEA) bans gambling sites from accepting deposits from states that have outlawed online gaming.
The federal government has never outright banned internet gambling. But the UIGEA scares off financial institutions from dealing in this space.
As a result, banks that issue Mastercard and Visa cards reject around 50% of online gambling deposits. They also try to prevent related transfers and wires when possible.
Again, Bitcoin isn’t controlled by a bank. Your BTC deposits will go through 100% of the time because they’re not subject to third-party control.
Many gamblers from the US and other countries have adopted Bitcoin as a result. They appreciate being able to deposit withdraw money from gaming sites with no hassles.
What Is Tether?
Tether is a cryptocurrency that’s pegged to the US dollar at a 1:1 ratio. It’s known as a stablecoin, because it acts as a substitute for USD when cryptocurrency traders move in and out of coins.
USDT is popular at exchanges that don’t offer fiat onramps (e.g. Binance). At Binance, for example, you need to transfer cryptocurrency to another exchange that deals in fiat before cashing out.
However, you can also simply trade a coin for USDT and keep your funds on Binance. This scenario helps you move in and out of cryptocurrencies without sending your funds to another exchange.
Tether Limited issues USDT. This company has claimed to be its own separate entity. However, increasing evidence points to the Bitfinex exchange being behind Tether.
Bitfinex used to be the world’s largest cryptocurrency exchange before Binance rose to the top. It has been embroiled in a lawsuit with the New York Attorney General since 2018.
Tether Limited previously claimed that its USDT reserves were fully backed at 1:1. However, their lawyers were forced to admit that each tether is only backed by $0.74 in cash.
In November 2018, US federal prosecutors began investigating Tether for market manipulation. These prosecutors believe that Tether Limited played a role in increasing and deflating Bitcoin’s price.
Why Is Tether Such a Threat to Bitcoin?
It might seem like the fate of Bitcoin and Tether should be completely separate by this point. After all, BTC is much more famous than USDT.
However, Tether still has the potential to bring down Bitcoin and all other cryptocurrencies. It’s the subject of a federal case and may have been used to manipulate BTC prices.
Assuming Bitcoin users and speculators alike find out that the latter is true, many will quickly sell Bitcoin. In turn, the price will plummet along with associated gamblers’ bankrolls.
Nobody truly knows what will happen with Tether. However, the future doesn’t look great for crypto’s first stablecoin.
Some within the cryptocurrency community began crying foul regarding Tether as early as 2016. Back then, journalists speculated that trading volumes were being inflated by USDT.
The New York Attorney General’s office claimed that Bitfinex used Tether to mask $850 in missing funds. In late 2018, the US launched a probe into Tether’s potential role in market manipulation.
Tether Limited lawyers have already admitted that the coin isn’t backed 100% by cash reserves. For years, the company had claimed that every coin was backed at a 1:1 ratio.
In January 2018, a report claimed that millions of Tethers were being issued out of thin air. This piece concluded that the unbacked USDT was being used to artificially raise Bitcoin’s price.
In 2019, the New York Attorney General’s office revealed that Tether lent Bitfinex hundreds of millions of dollars. After the loan, Bitfinex transferred $850 million to payment processor Crypto Capital.
The latter failed to return the money and is now facing serious legal repercussions of its own. Meanwhile, Bitfinex used Tether to cover up the stolen $850 million.
Bitfinex’s actions led to the New York Attorney General suing the exchange for defrauding Empire State residents. However, this lawsuit may be the least of the problems for Bitfinex and Tether.
Assuming Tether Limited and Bitfinex truly conspired to fix the Bitcoin market, their founders may be looking at serious prison time.
Professors Amin Sham and John M. Griffin of the University of Texas may have proven that the two parties indeed manipulated BTC. They published a study in mid-2018 showing that there’s a strong correlation between the issuing of USDT and Bitcoin’s price.
Their research notes that Tether purchases often followed downturns in the cryptocurrency market. These purchases helped raise the price for Bitcoin and other cryptocurrencies.
Griffin and Sham conclude that Bitfinex and those associated with Tether used USDT specifically to increase BTC prices.
The Likely Scenario for Bitcoin Gambling If Tether Is Exposed
Between the lawsuit, federal case, and UT study, Tether is on shaky ground. The stablecoin isn’t so stable based on its $0.74 backing for every tether.
Assuming Tether Limited is exposed as a fraud, this event will likely have some impact on BTC gamblers. After all, the Bitcoin price will drop tremendously if its current value is based on a lie.
BTC experienced a sharp rise throughout 2017. It went from being worth $1,000 at the beginning of the year to hitting almost $20,000 in December.
If tether is indeed a fraud, how far will Bitcoin’s value drop? The freefall from the current $9k valuation would be anybody’s guess. I personally don’t believe that it’ll drop back down to the $1,000 price at the outset of 2017. However, $2k or $3k could definitely be in play.
In this scenario, your Bitcoin gambling bankroll would lose anywhere from 300% to 450% of its value. You’d still have the same amount of Bitcoin, just not the same value in terms of USD.
The long-term prospects for BTC may still be good in light of Tether. It still has plenty of use cases due to its decentralized nature.
Odds are, you won’t have to worry about Tether in the immediate future. No breaks have been made in the New York lawsuit or federal prosecution case.
But I wouldn’t tie up thousands of dollars in a Bitcoin gambling bankroll right now. Instead, I advise that you only make small BTC deposits until the Tether situation is resolved.
Bitcoin has proven useful in several regards, including online real money gambling. It offers a perfect way to make gambling deposits when traditional banking options are inconvenient.
Unfortunately, the cryptocurrency market has a dark cloud looming over its head in the form of Tether. Multiple signs point to the possibility that Bitfinex and Tether Limited used USDT to artificially boost Bitcoin’s price.
Certain legal events could expose this fraud and send Bitcoin spiraling as a result. Legal proceedings have already forced Tether Limited to admit that USDT is only backed $0.74 on the dollar.
Bitfinex and Tether Limited may very well be proven guilty of market manipulation next. In this case, you can guarantee that Bitcoin’s price will drop severely.
You don’t want to have a large Bitcoin gambling bankroll in this case. That said, I recommend only depositing what you truly need to gamble with until the USDT drama comes to a close.
Hopefully, the state of New York and federal prosecutors will close out their cases by 2020. The sooner clarity is brought to this matter, the quicker you can get back to gambling Bitcoin without as much worry regarding price.