Last night Bitcoin bounce was triggered by a new Bitcoin report by Citi. The report was written for (and by?) children under the age of six. FTAlphaville does a good job of dismembering it:
On Monday one of the world’s top investment banks, Citi, put out a report called “BITCOIN: At the Tipping Point”, which has been causing quite a stir across the crypto-net and beyond. “Absolutely fantastic birds eye view of the bitcoin phenomenon from Citi,” tweeted crypto VC Nic Carter. “It’s incredibly well done and very fair. Highly recommend giving this one a read”.
We have read this report, in which it is claimed that “bitcoin’s global reach and neutrality could spur it to become the currency of choice for international trade” (!), and quite frankly we feel the idea that it is either well done or fair is absurd. We would highly recommend giving this one a miss (unless of course you want to share some ROFLs with a mate over the plethora of chart crimes it contains, which we will publish a separate post on).
The report comes from Citi’s “GPS” division, standing for Global Perspectives & Solutions, which the bank describes as its “premier thought leadership product”, helping customers to “navigate the global challenges, identify future themes, and prosper in a fast-changing world”.
So one might, as a result, expect some compelling visual aids. Instead, we get this graphic (do spend some time pondering that first stat):
Do the six Citi strategists who wrote the report really believe that 36 per cent of small-to-medium businesses accept bitcoin in the US? We really don’t believe that they possibly could.
And where does that stat even come from, we hear you ask? Luckily Citi points to a source: 99bitcoins.com, a site that “translates bitcoin into plain English”. Excellent. Later in the 108-page report we are told the statistic “seems wildly optimistic”. Still though, makes a nice graphic doesn’t it? Bung it in, why not?!
They also tackle the tricky subject of Tether, the company that issues an eponymous dollar-pegged “stablecoin” that last week agreed to pay a $18.5m settlement to the New York attorney-general’s office after the latter found that the company had “recklessly and unlawfully covered up massive financial losses to keep their scheme going and protect their bottom lines”. Here’s Citi on Tether (emphasis ours):
Just as a high profile breach of security and theft of Bitcoin or other cryptocurrencies might undermine confidence in the system and lead to a reversal of the virtuous circle of institutional participation, a regulatory crackdown triggered by rumors of a broadly owned stablecoin not being fully backed could also cause a loss of confidence.
To that point, an anonymous blog circulated in mid-January 2021 described Tether as a possible “doomsday machine”. More telling than the arguments presented in that post, most of which were recycled and readily disputed, was the amount of attention that it received outside of the crypto industry. Unlike its nearest competitor, USDC, Tether is not fully transparent and does not allow for the audit of its collateral reserve.
OK we are going to pause here. Apart from the fact that the whole 108 pages of Citi’s report are made up of readily disputed claims and absurd statistics that are recycled from websites like 99bitcoins.com, many of the arguments in this blog post were confirmed last week by the NYAG. Why is the amount of attention the post received “more telling” than the arguments themselves? They continue:
This lack of transparency has helped cast doubts on the solvency of Tether, but there are many established market participants that see no issue, a point underscored by the record amount of Tether minted in the early part of 2021 as discussed in Section IV.
Oh well, if many established market participants see no issue with Tether’s solvency and murky relationship with the truth, why should anyone else?! And they’ve printed billions of lookalike dollars in Q1 so . . . so . . . who cares? It’s almost as if the authors of this “March” report hadn’t seen the NYAG’s ruling from six days ago. Indeed, as they continue:
As also noted, Tether’s issuer is already being investigated by the New York State Attorney General. In relation to that inquiry, the group admitted to temporarily lending some of its cash reserves to a sister exchange as a type of bridge loan that has since been fully repaid, and the stablecoin’s Bahamian bank is adamant that every token is fully backed.
The firm’s top-notch Bahamian bank is ADAMANT, guys. Who can argue with that!?
Citi also tackles illicit transactions:
Concerns about illicit or illegal activity due to the anonymous nature of transactions on the public blockchain are another point of consideration for institutional participants that have a fiduciary duty to protect their clients’ assets. Figure 35 shows that Bitcoin along with a slew of other cryptocurrencies have indeed been subject to the illicit transfer and receipt of coins with such activity topping $20 billion in 2019 before falling back to only $10 billion in 2020. However, the extent of such activity can often seem overblown based on news headlines alone. In total, just over 2% of the activity in the cryptocurrency space was linked to illicit activity in 2019 and that total was down to only 0.3% in 2020.
To put that figure in context, a payments study commissioned by the Federal Reserve found that fraud represented 13.46% of aggregate credit and debit card network activity in the U.S.
Woah that’s a good stat isn’t it? That’s a lot of fraud! And for this stat the source is the Federal Reserve of America so we can trust this one, right? Let’s see exactly what the Fed says on that then, in the link they so helpfully provide:
The overall fraud rate, by value, for cards was stable. From 2015 to 2016, the overall fraud rate, by value, for cards was nearly flat, dropping slightly from 13.55 basis points to 13.46 basis points.
It seems that six strategists at Citi don’t know that there is a 100-fold difference between basis points and percentage points. SAD! After we pointed this out to Citi in an email, they said they were correcting it, but at this point the mistake still seems to be there.
The problem with this truly horrifyingly bad report is that its “bitcoin could become the currency of choice for international trade” line is good for headlines, and it has already made several in the mainstream press, including CNBC, Reuters, Bloomberg, and Yahoo Finance, all of which have written up the report without the slightest question over its legitimacy.
And news of it is now being spread across the internet by the likes of the Mooch himself:
Someone is shamefully wrong on the internet. Citi should retract this report immediately, not that they will. Citi declined to comment for this article.
