Last Sunday I shared the news about a Tether whale in the form of a SICAV held at BOV based on the very detailed and researched investigation of the Tether papers published by Protos. Upon further research, it seems that Heka is an arbitrage fund listed at £200 million, and thanks to the data provided by Protos, at a first glance of the wallet transactions, Heka bought in total $1.5 billion in Tether in what seems to be an arbitrage trading operation between different exchanges sending most of this Tether to Bitfinex and Binance wallets.
It is interesting to know that BOV is holding a Tether whale in its books whilst it made, along these years, great efforts to distance itself from the crypto industry to assertively show no relationship with it whatsoever. Our local financial regulator, the MFSA, has never told Maltese banks to put restrictions on retail clients with regard to crypto. BOV has been tough on crypto simply because it does not want to be associated with the crypto market. Yet, this policy of BOV is inconsistent with the fact that it is holding in its books a crypto fund that holds some significant importance in the crypto market.
Currency arbitrage is a common trading practice by funds and traders, but I am still not convinced that Tether’s arbitrage opportunities come exclusively from what arbitrage traders call “market inefficiencies” given that in theory, the price of Tether may actually go down if market participants lose their trust in Tether. This means that arbitraging Tether is a bet on Tether itself. It’s a kind of bet that works until something goes wrong with Tether. What is also particularly interesting is that big institutions and funds arbitrating Tether also contribute to its price stability. One can argue that the market is so big that anyone would come in and take the opportunity of the trade, but the fact remains that a fund buying so much Tether does serve a significant role to keep its price up.
No one cares if investors want to make or lose money out of this, but BOV should come clean on its policy with regards to crypto and start being more consistent. If it is holding Tether whales in its books, BOV can not come out and say that they have no relationship whatsoever to the crypto market. They are serving a fund which in a small but important way serves as a price stabiliser of a stable coin which is important for the liquidity of the crypto market. The least BOV could do is stop beating about the bush and draw up a professional and serious position on the crypto currencies. Crypto is here to stay whether you like it or not.
Unless they would be investing in (or creating) another virtual currency, most probably Tether would be used in the form of arbitrage trading. In theory this stablecoin should replicate exactly the USD currency movements, but it doesn’t. Thing is that this bet can go very badly, as you rightly pointed out.