Topic: [2018-06-13] New Research Blamed Tether for Bitcoin Price Manipulation in 2017 (Read 369 times)

@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?

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.

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.

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

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.

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

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.

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?

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.

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.

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.

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.

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.

Agreed. It was also mentioned that the research paper said that more Tether was issued when bitcoin was falling against the USDT. The researchers might not have considered that when bitcoin falls demand for USDT increases and therefore Bitfinex would have to issue more to maintain the $1 to 1 USDT peg.

It's hard to find more misleading factor than Market CAP.
Daily Trading Volume is something much more informative than just a CAP.

Shit, you're right about that :O I'd always thought Tether was Bitfinex's in house pet (which is sort of true as Bitfinex do manage the supply of Tether themselves)


Still don't find this convincing. Are the authors trying to tell us that the majority of last years market rise can be attributed to people selling falling Tether positions for BTC? To get that information confirming this story, the traders causing the move to $20,000 would all need to have been trading using Omni's platform. And not all Tether is even traded on the Omni platform (therefore Tether's exchange data is not all in the blockchain).

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.

Thanks for this mention. Here is Omni Explorer link so people who are interested can track this mysterious Tether
https://www.omniexplorer.info/asset/31

@Carlton Banks. Tether uses Omni formerly Mastercoin, a bitcoin blockchain token, and therefore its data is in the bitcoin blockchain.

But in any case, I also cannot fathom that any researcher from a university would make up a paper with no evidence of any research done. They would still have to do the research but skew the analysis if really they were paid to spread FUD.

 

ZERO evidence for any of this. Just a bunch of people talking, it could all be completely fabricated from whole cloth.



WHAT BLOCKCHAIN? If any of these people (including those commenting in this thread) had done even the most basic research, they would know that it's impossible to use Tether without using a webwallet of some kind. No evidence exists that these people have any data at all to analyse, they're just writing words in a PDF with zero citations or proof of any sort.



Anyone bolstering unverifiable claims should be treated as suspect, especially a firm like Chainalysis whose mission statement is to erode Bitcoin privacy in any way they can.



The apparent standard for believable claims is "someone said it". Why are there a dozen posts speculating about this story when the (absence of) facts are so easily discovered?

Most people there seem to be confused about what market manipulation entails.  Sure, the "demand from retail investors was very very real", but the whole point of manipulation is that price changes are manufactured to create demand from members of the public, then they cash in.  It's not like market manipulation would just be screwing around with the price for fun.

And then there are people trying to justify it rather than really claiming that it didn't happen:
As if it doesn't matter how they're buying and selling or whether nefarious tactics are used.  Sure, it's hard to make the distinction, but it's still possible to have a subjective view of whether Tether's actions were manipulative and what effect it had on the market.

Or the scientific paper is FUD paid for by the bitcoin haters who call it rat poison squared or maybe from the one who says he will fire any employee caught trading cryptocoins hehehe.

Bitcoin is hot and only getting hotter, so it's the perfect opportunity for every 'forgotten' ego to boost his public status. What is there to report about the boring stock markets? Apple reaching new highs? Tesla being worth billions but not making a single penny in profits? People know that already. Bitcoin is the fresh breeze all these traditional farts have been waiting for. Just browse through the YouTube channels of mainstream news sites, nearly everything with Bitcoin in the title has more views than other financial subjects. They just ride the hype -- once the price is going back up they will start praising Bitcoin again.

New research, old news. New research, same old themes. It's actually something I believe is happening, but as the critics point out, this type of research is hardly scientific and not peer reviewed (not that peer review these days is actually resulting in any better research!). Correlation, as well, is certainly not causation.

I shouldn't be surprised that false scientists are coming up to take their fame, publication is all that matters, and it won't matter if the methodology isn't sound or if this ever retracted.

You've either got the mainstream media which is largely uninformed and interested in spinning whatever truth there may be out there, or you have the crypto media which is maybe a bit less uninformed and even less interested in the truth.

Someone looking for straightforward reportage is fucked no matter where they look. It's a pretty dire state of affairs.

@Thadeous. That is nothing but mainstream news creating FUD no matter if the news itself is true or not. As far as we should be concerned, all of them should be treated as fake news until the articles are verified.

Also you have to understand that making FUD is good business hehehe.

As for me nowadays crypto media became very ambiguous and chaotic:
- yesterday Bitcoin was banned and overregulated,
- today Bitcoin is accepted and praised all over the world,
- another day - Bitcoin claimed a bubble and a piramid.
All this crypto noise becomes more and more boring and senseless.

John McAfee, the Crypto Crusader, who has always fought for all crypto enthusiasts, was opposing this theory from the researchers via Twitter and had this to say to his faithful followers:

"The mainstream media - controlled by the existing power structure - price manipulation reports are involved in the bitcoin price increase last year. The manipulation has taken place, but it's a conspiracy to push the price of Bitcoin to not How much less you see today. Wise up! "

@BitHolder. I reckon the mainstream news media will start to shift their attention and FUD from ICOs to fiat tokens in conjunction with the efforts of the regulators to stop them, now that Ethereum is declared not a security.

@Thadeos. Yes because when bitcoin is falling, that is when USDT is in high demand. The issuer has to issue more to keep the price to the $1.00 peg.

There is no point in rehashing Tether speculation without any new indications of suspicious activity. Don't forget that the Tether tokens are distributed throughout the whole world and crypto market.

The spike of last year might have been fake, but it is bought up with a combination of a shitload of Tether and actual USD. If authorities think something is wrong with Tether, then FORCE them to be open.

Since when have authorities become this soft? If nothing happens, we'll be seeing the same nonsense pop up in the next few years. Fiat is being converted to token, isn't that serious enough to play hard game?

Yeah, probably clickbait took place. But many sources mentioned suspicious Tether behavior during price fluctuations.
And it's obvious that Tether sells most of USDT when price is falling.

The Cointelegraph article is clickbait FUD. Read this one.

https://www.pymnts.com/blockchain/bitcoin/2018/bitcoin-rise-tether-exchange-crypto/

From that article it said one important detail. The authors found that Tether was used to purchase bitcoin at pivotal points when the price of the cryptocurrency was falling.

Maybe this is what happens when bitcoin's price is falling, users sell bitcoins for USDT, and the outcome is USDT price increases because of high demand versus the US dollar, so the solution is to issue more USDT to peg the price back to $1.00.

Some quality discussion here - https://www.reddit.com/r/BitcoinMarkets/comments/8qr0fd/new_york_times_university_of_texas_at_austin/?sort=confidence

Dunno what to think myself. If there'd been zero glimmers about Tether's backing it would be one thing, but BFX is now back to USD withdrawals and there was ING's grudging admission that BFX banked with them.

Anyway it's doom season so let's sit back and feel gloomy.

Research: Tether, Bitfinex ‘Manipulation’ Reason Behind 2017 Bitcoin Price Highs

Tether (USDT) has once again become the source of criticism after a new study blamed it for Bitcoin price manipulation in 2017, The New York Times reports Wednesday, June 13.

A paper released June 13 by John M. Griffin and Amin Shams of the University of Texas suggests that transaction patterns show Tether was “used to provide price support and manipulate cryptocurrency prices.”

Half of the Bitcoin price rise in December 2017, when the cryptocurrency reached all-time highs around $20,000, was explicitly due to Tether and issuer Bitfinex, the researchers claim.

“Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices,” the paper’s abstract summarizes.

   “Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.”

Tether has routinely fallen under suspicion since late last year after repeat releases of coins onto the market had an immediate knock-on effect on Bitcoin prices.

Griffin and Shams’ hypothesis has this time also become fodder for mainstream media, publications seizing on the information to demonstrate the allegedly opaque nature of Bitcoin markets.

According to the New York Times, the research “likely to stoke a debate about how much of Bitcoin’s skyrocketing gain last year was caused by the covert actions of a few big players, rather than real demand from investors.”

Nonetheless, some industry figures appeared to agree, fellow research firm Chainalysis claiming the results “seem credible.”

This week, Tether passed both Monero and Dash to become the cryptocurrency with the twelfth-largest market cap.

Source: https://cointelegraph.com/news/research-tether-bitfinex-manipulation-reason-behind-2017-bitcoin-price-highs