a rollicking romp through the wacky world of crypto at the height of the 2020-2022 covid crypto boom and its collapse. on a related note, now that crypto has booming again lately, i wonder if we’re just doomed to rapidly cycle through crypto boom-bust cycles every two years forever now, each one bigger, more depraved and disconnected from reality than the last. it’s a very effective survey, neither laser-focused on one charismatic figure like going infinite nor suffering from the limited access and travel budget that easy money seemed to have. if faux (pronounced like “fox”, incidentally) closes off a chapter tracing something to the bahamas or switzerland or el salvador or the phillippines, you better believe you know where he’ll be when the next chapter opens. his status as a reporter for bloomberg also seems to have opened more doors than it closed, i suppose despite all their anti-establishment bluster, the crypto community is still secretly desperate for recognition from the establishment.

the unfortunate thing is that despite his efforts, faux is unable to penetrate the shadowy heart of crypto he spends the whole book building up, the evil genuises pulling all the strings in the background. it’s known as “tether”, essentially the foundation upon which the modern crypto economy is built and largely responsible for much of its recent growth. tether effectively function like the central bank of crypto, a little ironic considering that one of the main crypto talking points is “decentralization” and i’m sure crypto guys frequently rant about abolishing the US central bank, the federal reserve. tether issues an eponymous cryptocurrency called tether, a “stablecoin” that’s always supposed to be worth exactly $1, basically digital dollars. getting real money in or out of the crypto ecosystem is always the most difficult part, so tether functions as a kind of safe haven for people to store value in a dollar-denominated asset that isn’t exposed to the volatility of crypto, while still remaining within the crypto ecosystem. it also acts as a common medium of exchange between different crypto exchanges and platforms, allowing for seamless transfers throughout the crypto ecosystem. as a result it is by far the most traded cryptocurrency, and most of the money entering or leaving the crypto economy does so via tether.

how does each tether always stay worth exactly a dollar? in theory it’s quite simple: every tether is supposed to be backed 1:1 with dollars in tether’s bank accounts. you give tether a dollar, they squirrel it away and then give you a tether in exchange; in reverse, you give them a tether and then they go in the back and retrieve a dollar for you. in practice this guarantee only applies to a select group of tether partners like big crypto exchanges and other high rollers, and the minimum conversion amount is $100k at a time. but, it’s enough to keep the price stable at a dollar, since those big exchanges will always be happy to give you money for tethers. theoretically, it’s a great business to be in for tether, they are basically just a bank without any of the big expenses like customer service, maintaining branches, or even paying interest. tether is free to take that huge pot of money, invest it in extremely safe liquid assets like US treasury bonds, and pocket all the interest, which even at low single digit percentage rates is still hundreds of millions of dollars on the tens of billions they’re holding. it’s pretty much free money.

the issue is, this organization that the entire crypto economy is built on the back of, crypto’s single weakest point that would probably take down the majority of the crypto economy were it to collapse, is also probably the shadiest and most elusive financial organizations of its size in existence. nobody on the outside knows precisely where they keep the money and they refuse to release detailed balance sheets or be audited in any way, only issuing vague statements of assets that amount to “just trust us bro”. it’s not a small amount of money either, tether should have over $100 billion dollars somewhere, but nobody is exactly sure where. faux even wrote an article for bloomberg about it, tracing the insane history of tether from its creation by a child star from mighty ducks to its sale to a shady italian surgeon who banks in the bahamas with the co-creator of inspector gadget… and in the end, it proves nearly impossible for him to score an interview with any of the handful of tether insiders. the best he’s able to do is briefly encounter tether ceo devasini at his wife’s art opening in switzerland, but nothing at all comes of it.

the obvious conclusion for all this elusiveness (faux memorably describes tether as being “quilted out of red flags”) is that perhaps tether’s money isn’t all there, tether either lost or stole the dollars they’d been given. or maybe they never existed in the first place, and they simply issued a bunch of tether tokens out of thin air and distributed them like a real central bank, thus gassing the crypto economy up to ludicrous highs far beyond all the money that has genuinely been put in…

note: i’m not sure if there’s been any new revelations in the tether investigation since i wrote this 1-2 years ago