[2018-06-13] New Research Blamed Tether for Bitcoin Price Manipulation in 2017

[XFlowZion]

I'm sure you guys does not really care if you have made profit at that all time high of bitcoin. A lot of us made a fortune just like me except if you are one of those newbies whho bought it at $20k because of FOMO.

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[1Referee]

Plus, Tether even now only has a $2 billion monetary base, and that's after a big rise recently. Bitcoin is a ~ 100 billion dollar market. It's completely implausible that Tether was the reason for last years ATH.

Market cap doesn't say anything.

If we look at how thin the orderbooks of exchanges are, you can move the market cap up or down with $10 billion by only pumping or dumping the market with 10,000BTC worth $65,000,000.

Right now, in order to tank Bitcoin below $5000 on Bitfinex, you only need to dump around 9500BTC. If we also look at the possibility of stop loss orders triggering each other, then the damage will be even more severe. The market cap of a coin in no shape or form represents the orderbooks of exchanges. You only need to manipulate the orderbook of a leading exchange and you are good to go. We need way more liquidity in order to change the situation.

[Carlton Banks]

Plus, Tether even now only has a $2 billion monetary base, and that's after a big rise recently. Bitcoin is a ~ 100 billion dollar market. It's completely implausible that Tether was the reason for last years ATH.

Market cap doesn't say anything.

If we look at how thin the orderbooks of exchanges are, you can move the market cap up or down with $10 billion by only pumping or dumping the market with 10,000BTC worth $65,000,000.

Right, but you're talking about using BTC or USD to move the market, not Tether.

If you dump 10 million Tether (or pump with 10 million USDT instead), can you expect the market to respond as if USD equivalent was used? Tether has to balance it's own value when such events take place; Bitfinex reacts to large amounts of Tether trade by adding or removing USDT bids or asks from it's own orderbook.

Tether is designed to be a peg, and pegs don't lead, they follow. Otherwise, what is compelling actual USD to fall or rise against BTC when Tether does? Tether cannot behave independently of how USD behaves, as it ceases to behave like a peg.

[1Referee]

Right, but you're talking about using BTC or USD to move the market, not Tether.

If you dump 10 million Tether (or pump with 10 million USDT instead), can you expect the market to respond as if USD equivalent was used? Tether has to balance it's own value when such events take place; Bitfinex reacts to large amounts of Tether trade by adding or removing USDT bids or asks from it's own orderbook.

Tether is designed to be a peg, and pegs don't lead, they follow. Otherwise, what is compelling actual USD to fall or rise against BTC when Tether does? Tether cannot behave independently of how USD behaves, as it ceases to behave like a peg.

Bitfinex's orderbook doesn't differentiate between actual USD or USDT, it is mixed. For that reason it's impossible to find out what percentage of Bitfinex's liquidity and volume consists of USD or USDT. In other words, dumping 10 million USDT or USD makes no difference.

If I deposit 1,000,000 USDT, what should happen is that somewhere Bitfinex will need to make sure that I at any time can withdraw the same amount in actual USD (regardless of USDT's value since nothing can change the fact that 1USDT is backed by 1USD), but we don't know if that is actually happening.

Bitfinex knows how to apply a proper smokescreen to hide their *potentially* fraudulent activities.

[Carlton Banks]

Bitfinex's orderbook doesn't differentiate between actual USD or USDT, it is mixed. For that reason it's impossible to find out what percentage of Bitfinex's liquidity and volume consists of USD or USDT. In other words, dumping 10 million USDT or USD makes no difference.

None of that trade is visible on the Omni layer therefore. Bitfinex are balancing supply and demand for Tether somewhere publcily, otherwise the peg wouldn't be reliable. The report cites blockchain based trade information to back it's hypothesis, and what you're saying is that an even smaller amount of Tether trade is happening publicly than exists overall. Relatively small amounts of surrogate USD still can't move the market significantly in comparison to real USD on exchanges that aren't (or weren't) questionably solvent.

[Thadeous]

Right, but you're talking about using BTC or USD to move the market, not Tether.

If you dump 10 million Tether (or pump with 10 million USDT instead), can you expect the market to respond as if USD equivalent was used? Tether has to balance it's own value when such events take place; Bitfinex reacts to large amounts of Tether trade by adding or removing USDT bids or asks from it's own orderbook.

Tether is designed to be a peg, and pegs don't lead, they follow. Otherwise, what is compelling actual USD to fall or rise against BTC when Tether does? Tether cannot behave independently of how USD behaves, as it ceases to behave like a peg.

Bitfinex's orderbook doesn't differentiate between actual USD or USDT, it is mixed. For that reason it's impossible to find out what percentage of Bitfinex's liquidity and volume consists of USD or USDT. In other words, dumping 10 million USDT or USD makes no difference.

If I deposit 1,000,000 USDT, what should happen is that somewhere Bitfinex will need to make sure that I at any time can withdraw the same amount in actual USD (regardless of USDT's value since nothing can change the fact that 1USDT is backed by 1USD), but we don't know if that is actually happening.

Bitfinex knows how to apply a proper smokescreen to hide their *potentially* fraudulent activities.

This discussion makes me wonder what should happen if:
1) Huge amount of USDT (let's say 500M) bought via BTC?
2) Huge amount or USDT sold for BTC?
How such USDT/BTC trades will affect BTC price?

[1Referee]

This discussion makes me wonder what should happen if:
1) Huge amount of USDT (let's say 500M) bought via BTC?
2) Huge amount or USDT sold for BTC?
How such USDT/BTC trades will affect BTC price?

It shouldn't act any different from USD/BTC.

Tether isn't special in that regard. Everything that you trade on exchanges isn't anything other than a few numbers in a database that change based on the trades people execute.

USDT isn't pegged to the USD in the way people think it is. It's just a promise.

I can create XUSD, and sell you 100,000 for $1 a pop and promise that at any time you can exchange it back to fiat for the exact same rate.

On Kraken you have a USDT/USD trading pair, which just points out how meaningless the connection between the two currencies is. If you're a whale, you can dump USDT's value down to $0.50 or pump it to $10 if you so wish. Regardless of the price you buy it at, the promise is that you can exchange it for an exact rate of $1 per USDT.

[Carlton Banks]

If you're a whale, you can dump USDT's value down to $0.50 or pump it to $10 if you so wish. Regardless of the price you buy it at, the promise is that you can exchange it for an exact rate of $1 per USDT.

So, what you're saying is that Bitfinex will happily buy USDT from all their customers at 1:1 with USD, despite traders buying it a couple of seconds before from other traders on Bitfinex at $0.50? Are you sure? Because that's a pretty easy way to suck every $ out of Bitfinex, and leave them bankrupt with 50% of their USD obligations to customers still outstanding

[1Referee]

So, what you're saying is that Bitfinex will happily buy USDT from all their customers at 1:1 with USD, despite traders buying it a couple of seconds before from other traders on Bitfinex at $0.50? Are you sure?

Yes. That's exactly how it works in that scenario.

Because that's a pretty easy way to suck every $ out of Bitfinex, and leave them bankrupt with 50% of their USD obligations to customers still outstanding

It's a major flaw in how everything works, and I am sure that Bitfinex doesn't like the fact that USDT/USD pairs exist. If on any exchange the value can be different from 1;1 it directly takes away the core utility of Tether, and deems it worthless instantly.

On WEX (BTC-E previously) USDT keeps spiking over $1.05 and is currently trading at $1.024 while Kraken's rate is just under $1.

[richardsNY]

So, what you're saying is that Bitfinex will happily buy USDT from all their customers at 1:1 with USD, despite traders buying it a couple of seconds before from other traders on Bitfinex at $0.50? Are you sure?

Yes. That's exactly how it works in that scenario.

That's pretty hardcore. If I can buy up Tether for anything below the $1 base value point, then Bitfinex can do that too. What if Bitfinex tries to slowly buy back the cheaper Tethers to make itself look like its fully backed? I know about the recent 'audit' stating that Tether is fully backed by $2.5 billion USD, but it's not done officially and I don't believe any of it. Let's even assume they have $2.5 billion in their bank accounts, it may have been the result of them selling coins in their personal reserves combined with the USD deposits that are not meant to buy Tether. It stinks and they can't convince me that they do anything of ethical nature.

[Carlton Banks]

Does anyone still believe the claims that major market moves corresponded to direct trading of Tether on the Omni meta-chain? I didn't before, and I certainly don't now. How can there possibly be enough liquidity in the market for Tether/BTC when Bitfinex must control a majority of the Tether in the Tether/USD market to avoid big traders using Tether to bankrupt them?

Another issue with this research is: Omni uses Bitcoin's blockchain, and during the timeframe this was supposedly happening, Bitcoin transactions were the most expensive they've ever been. Is it in any way realistic that traders were doing enough Tether/BTC trade to move the entire BTC market, paying the high fees needed to settle the trade ASAP, and making a profit? It's far more likely traders would use off-chain settlement on exchanges, the argument is that people were afraid of losing out on Tether's failing peg, and overbought the entire BTC market to get out of Tether. Really? I think not.

[bbc.reporter]

@Carlton Banks. There is paid FUD circulating in the mainstream news media and what also appears to be hired corrupt scientific researchers.

Whoever is behind this, they certainly are pushing to make bitcoin look like a manipulated ponzi scheme. I wish the people who read those lies use critical thinking and ask why?