Worst case scenario: Bitfinex/Tether hypothesis

[MarquiseMuseum]

I didn't want to make this post since I am exposed in certain related assets but it's important public information incase it turns out that it's true:

https://medium.com/@bitfinexed/the-bitfinex-dilemma-blow-up-now-or-try-a-hail-mary-to-retain-in-business-10b9d989359f

People should make their own conclusions based on this potential critical showstopper, but they deserve to know.

If there is a problem we are looking at 90% correction since a manipulated market starting april would have to be rolled back to prices at the time. After this rollback everything should normalize at around 50% quarterly growth based on april prices which puts us at -80% after initial correction based on todays btc/eth valuation of 630/13000.

all forward looking predictions should also be sliced by 1/5 founded on the discrepancy of this years invalid price increase: 100k becomes 20k and so forth.

correction onset 6 days ago coincides with this post:
https://www.reddit.com/r/Tether/comments/7khga8/1_month_later_still_cannot_withdraw_from_tetherto/

[1714102400]

1714102400

[gentlemand]

Well, lots of extremely certain figures there with exceedingly precise calculations. In reality it's a chaotic free for all and no one knows what would happen. GDAX and Korea have unquestionably been the leaders in this final epic run up. Bitfinex was consistently lagging or doing its own thing.

Confidence would no doubt take a vast knock if any of this was true, but by the far the more likely risk is the US government nailing them to the wall for coming up with a blatant hack of normal regulations. Personally I think all of the dollars are real but the bank holding them has no idea what their purpose is and Ifinex isn't telling them either.

[Enjel]

Too many holes and assumptions in this conspiracy theory. There are 12 other reasons why Bitcoin could go to 0.  

Also, how would this crash the price by 90%? How does one exchange influence everything? Why should the entire price increase be attributed to a single exchange? No answers, just fud.

[gentlemand]

Too many holes and assumptions in this conspiracy theory. There are 12 other reasons why Bitcoin could go to 0.  

Also, how would this crash the price by 90%? How does one exchange influence everything? Why should the entire price increase be attributed to a single exchange? No answers, just fud.

It's very definite that certain exchanges do set the price. Where it goes others follow. So it could be thought that if the long time price leader was basing it off a load of hogwash then the whole market would lose confidence, however other exchanges have been leading BFX price wise at least for quite a while.

This whole runup beyond $1000 was lead by BFX in the earlier phases and it did also start almost to the day of them losing their USD banking...

[jjacob]

I didn't want to make this post since I am exposed in certain related assets but it's important public information incase it turns out that it's true:

https://medium.com/@bitfinexed/the-bitfinex-dilemma-blow-up-now-or-try-a-hail-mary-to-retain-in-business-10b9d989359f

People should make their own conclusions based on this potential critical showstopper, but they deserve to know.

If there is a problem we are looking at 90% correction since a manipulated market starting april would have to be rolled back to prices at the time. After this rollback everything should normalize at around 50% quarterly growth based on april prices which puts us at -80% after initial correction based on todays btc/eth valuation of 630/13000.

all forward looking predictions should also be sliced by 1/5 founded on the discrepancy of this years invalid price increase: 100k becomes 20k and so forth.

correction onset 6 days ago coincides with this post:
https://www.reddit.com/r/Tether/comments/7khga8/1_month_later_still_cannot_withdraw_from_tetherto/

Bitfinex and their association with Tether is a known problem in the Bitcoin world. We will definitely have a correction in Bitcoin if people lose confidence in the value of Tether. But I doubt it will be as dire as you make it out to be. A 90% correction is huge. Even if Bitfinex collapses, it is nowhere close to Mt Gox. There are other exchanges operating purely as fiat-bitcoin exchanges which should support the price.

[Enjel]

Read this and get the other side of the story: https://www.reddit.com/r/Bitcoin/comments/6ypy58/the_truth_about_bitfinex_and_tether/

[Enjel]

Too many holes and assumptions in this conspiracy theory. There are 12 other reasons why Bitcoin could go to 0.  

Also, how would this crash the price by 90%? How does one exchange influence everything? Why should the entire price increase be attributed to a single exchange? No answers, just fud.

It's very definite that certain exchanges do set the price. Where it goes others follow. So it could be thought that if the long time price leader was basing it off a load of hogwash then the whole market would lose confidence, however other exchanges have been leading BFX price wise at least for quite a while.

This whole runup beyond $1000 was lead by BFX in the earlier phases and it did also start almost to the day of them losing their USD banking...

Yeah, that makes sense. But as you implied, there is no reason for a 90% crash, or something even close to that magnitude.

What happens if all this is true? We will get a correction, worst case. Remember when exchanges were getting banned a few months ago? This isn't nearly as severe are that - the market will recover for certain.

[aznboy84]

I think that we all are waiting until Bitfinex decides to do something with the incredible inflation over the Tethers, well, not inflation, just the increase of the supply.

Far as i know they were just able to create only 900 millions of tethers.. there are more than 1200m at the moment.

[MarquiseMuseum]

Too many holes and assumptions in this conspiracy theory. There are 12 other reasons why Bitcoin could go to 0.  

Also, how would this crash the price by 90%? How does one exchange influence everything? Why should the entire price increase be attributed to a single exchange? No answers, just fud.

The subprime crisis originated with a small subset of lenders but spread to the entire sector due to mixing with AAA mortgages, noone knew who was contaminated so the entire system was exposed. Even if the contamination in this case is a few % of volume it would require price rediscovery from the last known non manipulated level which was way back in april. It is the combination of the length of time that this potentially has been ongoing and that it directly distorts market making that makes it a particularly infected problem. a 90% correction with resuming climb over time is lenient, other assets go bankrupt from similar events.

[gentlemand]

The subprime crisis originated with a small subset of lenders but spread to the entire sector due to mixing with AAA mortgages, noone knew who was contaminated so the entire system was exposed. Even if the contamination in this case is a few % of volume it would require price rediscovery from the last known non manipulated level which was way back in april. It is the combination of the length of time that this potentially has been ongoing and that it directly distorts market making that makes it a particularly infected problem. a 90% correction with resuming climb over time is lenient, other assets go bankrupt from similar events.

You're assuming this is a regular market. It isn't. It's a lashed up shitshow. It could choose to do anything it likes. It's also global and 24/7 with a very, very, very short memory.

[Enjel]

"it would require price rediscovery from the last known non manipulated level which was way back in april"

That is where I disagree (even though I think it is wrong to compare the subprime crisis to Bitcoin in the first place).

There is no reason that due to Bitfinex's corruption, that the whole market would have to believe that everything they had believed in was based on that, and was a lie. They can just carry on without Bitfinex - there will be a correction in that case, but no reason to negate everything else.

[fabiorem]

Read this and get the other side of the story: https://www.reddit.com/r/Bitcoin/comments/6ypy58/the_truth_about_bitfinex_and_tether/

Nice article there. This tether issue is just FUD.

[MarquiseMuseum]

Read this and get the other side of the story: https://www.reddit.com/r/Bitcoin/comments/6ypy58/the_truth_about_bitfinex_and_tether/

Nice article there. This tether issue is just FUD.

It's under investigation by law enforcement if you read the entire link.

Investors should take note of this development and position themselves accordingly, if you're fast on the exit if something happens there is atleast a chance of retaining some capital short and medium term. Try to find a way of hedging against crypto, Tether is very good for this purpose but since it is potentially implicated in this affair, need to find something else, I think most big exchanges sell to fiat? Can someone recommend an exchange that easily and quickly sells to fiat?

[TERA2]

Bitfinex is responsible for the rise? Bitfinex has been around for 4 years but it didn't rise until now. Also Bitfinex was hacked in 2016 and we wrote Bitfinex off but it didn't affect the price that much. We've all seen what happens when major exchanges disappear. Maybe 25% decrease on a short term basis. We forget about , move on, and set new highs. Sure when the Chinese stuff happened in 2014 we dropped 80% but that was about an entire nation of billions of people and not just one exchange. Last week's trading was a clue about what would happen in your scenario. Bitfinex started trading $1500 below other exchanges and then large support started appearing on Bitstamp.

[aso118]

Bitfinex is responsible for the rise? Bitfinex has been around for 4 years but it didn't rise until now. Also Bitfinex was hacked in 2016 and we wrote Bitfinex off but it didn't affect the price that much. We've all seen what happens when major exchanges disappear. Maybe 25% decrease on a short term basis. We forget about , move on, and set new highs. Sure when the Chinese stuff happened in 2014 we dropped 80% but that was about an entire nation of billions of people and not just one exchange. Last week's trading was a clue about what would happen in your scenario. Bitfinex started trading $1500 below other exchanges and then large support started appearing on Bitstamp.

Bitfinex has been around for 4 years, but there are 2 important factors to be considered
- Bitfinex had normal banking relationships initially. It is only during the recent year that it has been cut off from normal banking relationships. That is one of the causes of the problems
- The volume of tether which has been issued has exploded in the last 1 year.

[tokeweed]

Too many holes and assumptions in this conspiracy theory. There are 12 other reasons why Bitcoin could go to 0.  

Also, how would this crash the price by 90%? How does one exchange influence everything? Why should the entire price increase be attributed to a single exchange? No answers, just fud.

Even if the contamination in this case is a few % of volume it would require price rediscovery from the last known non manipulated level which was way back in april.

Good blog, keep them coming.  I'm somewhat aware that there are shenanigans going on at Bitfinex...  I even doubt the 72m USD 'hack' was really a hack.

But for your '90% crash theory' because the price has to go back to the 'non manipulated level'...  C'mon, we know it's not that simple, and the market doesn't simply work that way.

Another thing, does Bitfinex really have a Gox-like influence on the market?  I have another theory on why BTC is so relentlessly rising.

Drug Money and the Rise and Rise of Bitcoin
https://bitcointalk.org/index.php?topic=2280648.0

[btcone111]

Very detailed analysis with evidence and support. Love this kind of post.
TBH I personally have been worried about this and have pulled all my money away from bitfin....
We'll see what happens when the whole thing comes down...

[vit05]

There is more stable coins them Tether. And everyday a new project born. I believe Maker is the best one. So if something really stupid happens exchange will just kill Tether and move to something else. We will never see MtGox again because none of the new exchange move the same volume and a lot of trades happens on OTC now.

[NiceSoft12]

What is OTC? Just person to person trades, like I find someone on the street and trade with him?

[MarquiseMuseum]

Tether is in maintenance on bittrex, deposits/withdraws disabled, probably temporary but this is how would play out, had a few thousand dollars yesterday, could have easily been locked in at this point, heads up to heavy Tether exchange users.

[gentlemand]

What is OTC? Just person to person trades, like I find someone on the street and trade with him?

It's basically high rolling localbitcoins. There are full time brokers who match buyers with sellers and take a cut. No fucking around with exchanges. It's P2P with a bit of tinsel. That's how you sell or buy large amounts without moving the market. It never reached an order book to affect.

For instance Cumberland mining, an OTC broker operated by an old wall Street hand, offered a buyer for all of the remaining two hundred and something thousand Gox bitcoins. No way could you do that on an exchange.

[MarquiseMuseum]

Looks like worst scenario is unfolding, wouldn't be surprised to see BTC sub 3000 before reboot. Needs price rediscovery due to Tether issue, probably up after that but on a 1/5 of predicted ratio ie 100k becomes 20k and so forth.

Recommendation: Neither sell nor buy if you haven't sold already. Don't catch the knife.

[Enjel]

Looks like worst scenario is unfolding, wouldn't be surprised to see BTC sub 3000 before reboot. Needs price rediscovery due to Tether issue, probably up after that but on a 1/5 of predicted ratio ie 100k becomes 20k and so forth.

Recommendation: Neither sell nor buy if you haven't sold already. Don't catch the knife.

I agree with the first and last sentence.

However, the price drop is due to China news (again, this time something even stricter) and credit cards.

USDT seems to be holding up OK.