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Until the situation with bitfinex pumping billions of unbacked tether into the ecosystem is resolved, doing anything involving bitcoin right now is insane. The

Until the situation with bitfinex pumping billions of unbacked tether into the ecosystem is resolved, doing anything involving bitcoin right now is insane. They’ve released almost $200 million worth of tether in the last day.

heurist 9y ago
I've been reading about this but still don't understand the scope. The money might all be fraudulent, but it also seems like the most liquid exchange on the market would also have a huge pile of cash to sit on right now after the last few years appreciation of btc. Did Tether fraud kick off this wave?
- jboggan 9y ago
  If you look at Bitcoin, Litecoin, and Ethereum, all three kicked off their current bull market in April after Tether lost their banking relationships and stopped even trying to show that they had funds in reserve. I absolutely think that the Tether fraud kicked off this wave to the point that the general public would come in and hold the bag.
  - shrimpx 9y ago
    There is zero concrete proof, only people sharing their theories and beliefs so far.
meritt 9y ago
My theory on tether is their goal is to absorb as much downward (selling) pressure as possible on the BTC/USD market and encourage only upward movement of BTC (equally applies to any other crypto) 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. This transaction would have zero impact on the BTC/USD price. 2) Tether receives $1M worth of BTC they can slowly disperse back into the market via their own exchange (since Bitfinex owns Tether) in a controlled manner that doesn't push the price down. 3) With USD in hand they can either put it into their reserves (assuming we trust them) or they could also use the cash to further eliminate any selling pressure on the exchange (with a large buy order "wall") or even generate upward pressure. 4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.
- ghostbrainalpha 9y ago
  Thank you for this great explanation. I'm finally getting it.
- krrrh 9y ago
  This is a great analysis, but I’m stuck on this point. > 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. Can you clarify that you mean for the purpose of tax evasion as opposed to tax avoidance? IANATL but it seems very unlikely that the IRS or any tax jusrisdiction that I’m aware of, would consider a trade into USDT a like-kind transaction [1]. It would still trigger capital gains. If lots of people really are operating under a different belief then this is going to get really messy. If there’s a crypto-correction, non-HODLers could be left with tax liabilities they can’t cover. [1] https://en.m.wikipedia.org/wiki/Like-kind_exchange https://en.m.wikipedia.org/wiki/Like-kind_exchange
  - meritt 9y ago
    I've specifically seen folks discussing converting to tether now (on the fear that BTC will fall) and waiting til 2018 to redeem due to pending tax cuts. So this would be an avoidance strategy. I have no idea on the legal specifics or whether or not Tether/Bitfinex are going to be providing reporting to governmental agencies (like Coinbase+IRS are doing). The discussions I've seen often cite Tether as a way to capture profits in USD and holding off on the "real" USD conversion at a later place or time (taxes or restrictive outflows like China's $50k USD/yr limit). Basically viewing it as a way to operate in USD without creating a banking paper trail. If conversion to USDT causes a legally taxable event that's going to remove a significant portion of the proposed use-cases for tether. > If lots of people really are operating under a different belief then this is going to get really messy. I think "really messy" is a given at this point. I was in Starbucks a few days ago and overhead a non-tech savvy man say: "I need to figure out how to buy some of that bitcoin so I can get rich but all the websites I've found are crooks!"
- spookthesunset 9y ago
  The beauty of all of this is Bitfinex, and most other exchanges for that matter, are all black boxes. No audits, no regulations, nothing. To my knowledge all the trading on their platform happens off-chain, only going "on chain" when somebody deposits or withdraws their crypto coins. The only visibility we have is what goes into and out of any known wallet. These exchanges could be pulling all kinds of shenanigans including outright making shit up. What is stopping them from buying / selling more bitcoin then they actually have? If an exchange wanted to pocket some real cash, just sell some bitcoin they don't have. How about just creating fake buy / sell orders to drum up some excitement? Or better, just do real trades back and forth between yourself. Once you add Tether into the mix and abstract away real cash inputs and outputs things get even more exciting. An exchange could start buying bitcoin with unbacked USDT to jack up / stabilize the BTC price--works great so long as everybody doesn't all try to convert their USDT to real cash dollars. Since they are all completely unaudited, exchanges could be pulling this stuff all the time. Tether makes this 10x more exciting though.
dahdum 9y ago
Their audit was a couple months ago, but showed 1-1 backing at that time. Do you believe that was falsified?
- stale2002 9y ago
  That was not an audit. That was a memo. They have yet to release an actual legal audit, by an official auditing company.
  - dahdum 9y ago
    From a NYC law office wasn't it? You believe that was falsified? It could be, sure, I just haven't seen any proof. Seems like no amount of verification will ever be enough for a good chunk of the crypto community. The scars of Mt Gox and BFX socialized loss are too deep. The market seems to think otherwise, you can unload your tether for $1.02 most days if you want.
    - jboggan 9y ago
      I don't believe it was falsified but it was missing a lot of things that an actual audit would include. Not just verifying that money was in accounts but verifying what purpose that money was for and what the banking relationship / terms of use of that money was. I do believe Tether had ~$40M in USD in April but I don't believe that they were 100% honest with their banks about their business model, which is why I think they lost their banking relationships and haven't allowed the public to deposit/redeem Tether since April.
    - FireBeyond 9y ago
      Not falsified. But literally stated "This is not in any way an audit and does not meet the requirements of an audit".
    - stale2002 9y ago
      I believe that the memo released was not an audit. And I believe that if you want to prove to the world that you have a bunch of money then you should do a full, legal, audit. That's the bar. If they have all the money, then a legal audit will prove them right.
eosophos 9y ago
Just 1 Billion so far.
sjy 9y ago
Can you provide a source for this? Is there an easy way to view the transactions that create new USDT? My searches are just turning up old Reddit posts and news articles supported by imgur screenshots. edit: This seems to show that $180 million was issued in the last 3 days: http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3AgWkj9FMo5LsPTW1zBTwXL http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3...
- FireBeyond 9y ago
  Yeah, I'd love to know who the unnamed bank is that's handling $60MM/day in deposits for Bitfinex that they refuse to name except under NDA...
- teemwerk 9y ago
  they issued another $100 million in the last day.
Rmilb 9y ago
Another worrying development on the bitfinex story is that one of its employees has removed the warrant canary from his twitter profile. https://twitter.com/el33th4xor/status/941707765910818816 https://twitter.com/el33th4xor/status/941707765910818816 I think this is a bearish signal until its clarified.
- omgbananas 9y ago
  One of the replies that made say "Oh Sh.." out loud: https://twitter.com/logansease/status/941704416201183235 https://twitter.com/logansease/status/941704416201183235
shrimpx 9y ago
The truth is that nobody knows. We'll have to wait for an audit or a lawsuit to learn the truth. People are sounding alarms based on the amount of Tether being transferred to exchanges, creating theories that they must be printed from thin air. "Look how much they transferred, it must be fake." Really? The large amount is your only "proof?" "There was a Tether hack, it must be an inside job." Really? Based on what? Nothing. The Twitter user Bitfinex'd is pretty much solely responsible for starting this trend, with Emil Gun Sirer retweeting pretty much all Bitfinex'd tweets. Often, if you dig into this evidence, you find mostly FUD signals -- taking various data from the internet and interpreting it into something that it isn't. Basically I don't know nor care if Tether and Bitfinex are fraudulent, but personally I've never seen clear evidence that it is, and people like Bitfinex'd and Emil Gun Sirer seem to push FUD backing their personal anti-Bitfinex agendas without proof.
- FireBeyond 9y ago
  Well, and the more mainstream reporters who asked who Bitfinex's bankers were after Wells Fargo closed their accounts, and they refused to reveal, except under an NDA...

heurist 9y ago

I've been reading about this but still don't understand the scope. The money might all be fraudulent, but it also seems like the most liquid exchange on the market would also have a huge pile of cash to sit on right now after the last few years appreciation of btc. Did Tether fraud kick off this wave?

jboggan 9y ago
If you look at Bitcoin, Litecoin, and Ethereum, all three kicked off their current bull market in April after Tether lost their banking relationships and stopped even trying to show that they had funds in reserve. I absolutely think that the Tether fraud kicked off this wave to the point that the general public would come in and hold the bag.
- shrimpx 9y ago
  There is zero concrete proof, only people sharing their theories and beliefs so far.

meritt 9y ago

My theory on tether is their goal is to absorb as much downward (selling) pressure as possible on the BTC/USD market and encourage only upward movement of BTC (equally applies to any other crypto) 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. This transaction would have zero impact on the BTC/USD price. 2) Tether receives $1M worth of BTC they can slowly disperse back into the market via their own exchange (since Bitfinex owns Tether) in a controlled manner that doesn't push the price down. 3) With USD in hand they can either put it into their reserves (assuming we trust them) or they could also use the cash to further eliminate any selling pressure on the exchange (with a large buy order "wall") or even generate upward pressure. 4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.

ghostbrainalpha 9y ago
Thank you for this great explanation. I'm finally getting it.
krrrh 9y ago
This is a great analysis, but I’m stuck on this point. > 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. Can you clarify that you mean for the purpose of tax evasion as opposed to tax avoidance? IANATL but it seems very unlikely that the IRS or any tax jusrisdiction that I’m aware of, would consider a trade into USDT a like-kind transaction [1]. It would still trigger capital gains. If lots of people really are operating under a different belief then this is going to get really messy. If there’s a crypto-correction, non-HODLers could be left with tax liabilities they can’t cover. [1] https://en.m.wikipedia.org/wiki/Like-kind_exchange https://en.m.wikipedia.org/wiki/Like-kind_exchange
- meritt 9y ago
  I've specifically seen folks discussing converting to tether now (on the fear that BTC will fall) and waiting til 2018 to redeem due to pending tax cuts. So this would be an avoidance strategy. I have no idea on the legal specifics or whether or not Tether/Bitfinex are going to be providing reporting to governmental agencies (like Coinbase+IRS are doing). The discussions I've seen often cite Tether as a way to capture profits in USD and holding off on the "real" USD conversion at a later place or time (taxes or restrictive outflows like China's $50k USD/yr limit). Basically viewing it as a way to operate in USD without creating a banking paper trail. If conversion to USDT causes a legally taxable event that's going to remove a significant portion of the proposed use-cases for tether. > If lots of people really are operating under a different belief then this is going to get really messy. I think "really messy" is a given at this point. I was in Starbucks a few days ago and overhead a non-tech savvy man say: "I need to figure out how to buy some of that bitcoin so I can get rich but all the websites I've found are crooks!"
spookthesunset 9y ago
The beauty of all of this is Bitfinex, and most other exchanges for that matter, are all black boxes. No audits, no regulations, nothing. To my knowledge all the trading on their platform happens off-chain, only going "on chain" when somebody deposits or withdraws their crypto coins. The only visibility we have is what goes into and out of any known wallet. These exchanges could be pulling all kinds of shenanigans including outright making shit up. What is stopping them from buying / selling more bitcoin then they actually have? If an exchange wanted to pocket some real cash, just sell some bitcoin they don't have. How about just creating fake buy / sell orders to drum up some excitement? Or better, just do real trades back and forth between yourself. Once you add Tether into the mix and abstract away real cash inputs and outputs things get even more exciting. An exchange could start buying bitcoin with unbacked USDT to jack up / stabilize the BTC price--works great so long as everybody doesn't all try to convert their USDT to real cash dollars. Since they are all completely unaudited, exchanges could be pulling this stuff all the time. Tether makes this 10x more exciting though.

dahdum 9y ago

Their audit was a couple months ago, but showed 1-1 backing at that time. Do you believe that was falsified?

stale2002 9y ago
That was not an audit. That was a memo. They have yet to release an actual legal audit, by an official auditing company.
- dahdum 9y ago
  From a NYC law office wasn't it? You believe that was falsified? It could be, sure, I just haven't seen any proof. Seems like no amount of verification will ever be enough for a good chunk of the crypto community. The scars of Mt Gox and BFX socialized loss are too deep. The market seems to think otherwise, you can unload your tether for $1.02 most days if you want.
  - jboggan 9y ago
    I don't believe it was falsified but it was missing a lot of things that an actual audit would include. Not just verifying that money was in accounts but verifying what purpose that money was for and what the banking relationship / terms of use of that money was. I do believe Tether had ~$40M in USD in April but I don't believe that they were 100% honest with their banks about their business model, which is why I think they lost their banking relationships and haven't allowed the public to deposit/redeem Tether since April.
  - FireBeyond 9y ago
    Not falsified. But literally stated "This is not in any way an audit and does not meet the requirements of an audit".
  - stale2002 9y ago
    I believe that the memo released was not an audit. And I believe that if you want to prove to the world that you have a bunch of money then you should do a full, legal, audit. That's the bar. If they have all the money, then a legal audit will prove them right.

eosophos 9y ago

Just 1 Billion so far.

sjy 9y ago

Can you provide a source for this? Is there an easy way to view the transactions that create new USDT? My searches are just turning up old Reddit posts and news articles supported by imgur screenshots. edit: This seems to show that $180 million was issued in the last 3 days: http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3AgWkj9FMo5LsPTW1zBTwXL http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3...

FireBeyond 9y ago
Yeah, I'd love to know who the unnamed bank is that's handling $60MM/day in deposits for Bitfinex that they refuse to name except under NDA...
teemwerk 9y ago
they issued another $100 million in the last day.

Rmilb 9y ago

Another worrying development on the bitfinex story is that one of its employees has removed the warrant canary from his twitter profile. https://twitter.com/el33th4xor/status/941707765910818816 https://twitter.com/el33th4xor/status/941707765910818816 I think this is a bearish signal until its clarified.

omgbananas 9y ago
One of the replies that made say "Oh Sh.." out loud: https://twitter.com/logansease/status/941704416201183235 https://twitter.com/logansease/status/941704416201183235

shrimpx 9y ago

The truth is that nobody knows. We'll have to wait for an audit or a lawsuit to learn the truth. People are sounding alarms based on the amount of Tether being transferred to exchanges, creating theories that they must be printed from thin air. "Look how much they transferred, it must be fake." Really? The large amount is your only "proof?" "There was a Tether hack, it must be an inside job." Really? Based on what? Nothing. The Twitter user Bitfinex'd is pretty much solely responsible for starting this trend, with Emil Gun Sirer retweeting pretty much all Bitfinex'd tweets. Often, if you dig into this evidence, you find mostly FUD signals -- taking various data from the internet and interpreting it into something that it isn't. Basically I don't know nor care if Tether and Bitfinex are fraudulent, but personally I've never seen clear evidence that it is, and people like Bitfinex'd and Emil Gun Sirer seem to push FUD backing their personal anti-Bitfinex agendas without proof.

FireBeyond 9y ago
Well, and the more mainstream reporters who asked who Bitfinex's bankers were after Wells Fargo closed their accounts, and they refused to reveal, except under an NDA...