The price of bitcoin went over $100,000 for a few hours on Dec. 5, peaking at $103,400. The financial press can’t resist constructing a hand-waving story of market forces, so bitcoin going past $100,000 has been attributed to a market reaction to President-elect Donald Trump’s lining up a slate of pro-cryptocurrency cabinet, advisory, and regulatory picks after the crypto industry put more money into funding Republican candidates in this last election cycle than anyone had previously put into an election in history.

But crypto trading is thin and almost entirely unregulated—perfect conditions for commodity market manipulation. The public image of cryptocurrency is still shaped by the 2023 trial of Sam Bankman-Fried of the failed FTX crypto exchange, culminating in his conviction—and not to mention the hangover from the NFT fiasco. Crypto is seen as the domain of cheap scammers. Ordinary people are not flocking into crypto.

Coincident with the bitcoin price news was the collapse of the Hawk Tuah crypto token. Haliey Welch, who told an oral sex joke that went viral on YouTube, leveraged her momentary fame into a career as an influencer and podcaster. This culminated in the meme-coin cryptocurrency $HAWK, marketed entirely on amusement value, which crashed on launch in what looked very like a pump-and-dump—tokens were dumped on ordinary buyers soon after launch, crashing the price.

Welch denied that insiders had dumped her token and blamed automated snipers who bought the token the moment it was released, then dumped immediately. The Hawk Tuah-token fiasco only strengthened crypto’s image as a place where fools lose their money being foolish.

The price of bitcoin has recovered since the November 2021 peak of the last bubble—but actual-dollar retail trading volumes have not. Coinbase’s retail trading volumes are $127 billion so far in 2024—much better than 2023’s $75 billion, but nothing like the 2021 bubble’s $545 billion.

Bitcoin remains a strangely useless asset that doesn’t do anything. All you can do with it is buy, sell, or hold. The only use for cryptocurrency other than pure zero-sum speculation is bitcoin’s original use case: evading regulations, most often for illegal purchases, money laundering, or dodging sanctions. One might be justified in evading some regulations in some cases—but most are there for good reason.

The largest actual-U.S.-dollar crypto exchange is Coinbase. But price discovery takes place at the venue with the largest trading volume: the offshore exchange Binance. This exchange admitted a string of money laundering offenses in 2023, was fined over $4 billion, and was placed under stringent compliance monitoring by the U.S. Department of Justice and FinCEN.

But the Binance trading floor itself remains an unregulated free-for-all as long as U.S. entities are not caught trading there. Every market manipulation that would be illegal in the United States happens at Binance and similar unregulated, offshore floating crypto casinos—wash trading, flash crashes, delayed settlements, spoofing, and the exchange trading against its own customers.

Bitcoin trading volume is substantially against two dubious U.S.-dollar stablecoins: tether and FDUSD. These are minted in round billions at a time. It is frankly not plausible that anyone put billions of U.S. dollars into tethers or FDUSD to buy bitcoins on an offshore exchange with above-board intentions. They could have just used the money to buy bitcoins directly at a U.S.-dollar crypto exchange or, safest of all, to buy bitcoin ETF shares from any securities broker. The purpose of buying billions of tethers is to manipulate the price of bitcoin.

Each stablecoin is supposedly backed by a U.S. dollar held in a bank account—except when it isn’t. Tether Inc. has long created tethers out of thin air as loans, with the listed backing asset being the loan itself. Banks do this, too, but banks are regulated. Eighteen billion tethers have been created just since Trump’s election on Nov. 5, bringing the total issuance to 135 billion. How far could you pump the price of bitcoin with 18 billion instant pseudo-dollars?

The other use case for tethers is crime. Zeke Faux’s Number Go Up details the value of tethers as a dollar substitute for those too crooked to get dollars—it’s the favored currency for “pig-butchering” romance scams run by human traffickers. The U.K. National Crime Authority and the U.S. Treasury recently cracked an international money-laundering ring that used tethers to serve drug dealers, ransomware groups, Russian espionage operations, and sanctioned entities; the NCA called tether, not bitcoin, the “cryptocurrency du jour.” The news of the bust came out just before bitcoin hit $100,000. Tether-fueled bitcoin pumps seem to coincide with bad news mentioning tethers.

Tether Inc. is sensitive to the criminal use case for its coin and frequently freezes tainted tethers on the requests of the Office of Foreign Assets Control and FinCEN—but only after the fact. This requires Tether Inc.’s operations to be much more organized than they have been previously—such as during the years when the reserve was tracked, not in proper accounts but in a shared spreadsheet that was often out of date. Despite its compliance efforts, Tether Inc. is the subject of an ongoing federal criminal investigation by the Manhattan office of the Southern District of New York into possible anti-money-laundering and sanctions failures.

Tether Inc. has worked to mend its reputation in the corridors of power. The company does not operate in the United States, but it does keep much of the cash portion of its reserve in U.S. Treasury bills. These are custodied by Cantor Fitzgerald, whose CEO, Howard Lutnick, wanted to become Trump’s new Treasury secretary and will be brought in for commerce. Cantor Fitzgerald recently bought a share in Tether Inc.

After the crypto industry’s success with directing unheard-of quantities of campaign funding to the cause of electing Trump, we should anticipate further such attempts to curry favor. The Trump family’s own crypto project, World Liberty Financial, was set to fail until crypto entrepreneur Justin Sun, proprietor of offshore crypto exchange HTX, dived in and bought $30 million of its WLFI coin—taking World Liberty over the threshold so Trump would get a $15 million payout from the project.

Sun is given to flashy stunts, like purchasing Maurizio Cattelan’s duct-taped banana artwork Comedian (with cryptocurrency) and then eating the banana on stage. These give the media something to talk about other than Sun’s legal and regulatory issues, most recently the U.S. Securities and Exchange Commission’s ongoing suit against Sun for securities violations. Sun looks forward to a more “friendly” U.S. crypto market under the new administration, with the pro-crypto Paul Atkins as Trump’s planned SEC chair.

One of the greatest channels for payback to his crypto allies may be Trump’s proposal at the Bitcoin 2024 conference in June for a U.S. strategic bitcoin reserve, apparently on the basis that the nation needs a store of this speculative commodity largely used for crime. Trump originally proposed that the government hold onto bitcoins that had been seized as proceeds of crime, rather than sell them off.

The current proposal to bolster crypto is Senator Cynthia Lummis’ Bitcoin Act of 2024, in which the Treasury and the Federal Reserve would buy 200,000 bitcoins each year for five years. The U.S. government would become the bitcoin holder of last resort, and the beneficiaries would be the crypto industry—and not ordinary Americans.

The incoming U.S. administration wants to clear “experts” from the bureaucracy. If the incoming executive branch wants crypto to operate freely, it will do its best to force crypto through and remove all possible impediments. Crypto’s perennial issues with fraud and impoverishing retail investors, and regulator’s fears of the risk of contagion from crypto to the wider economy, are likely to be glossed over so as to ensure market opportunities for administration insiders.

But in the end, gravity still works, and a balloon can be inflated only so much. The bitcoin bubble is an artifact of market manipulation and has no more economic substance than the Hawk Tuah coin does. The U.S. government may be ripe for plunder, but other nations need to take steps to shield themselves from the impact of rug-pulling on a global scale.