6 ms·

can someone explain to me why USDT's price is related to BTC?

dragonwriter 9y ago
A number of exchanges don't actually trade $/BTC they trade USDT/BTC. This accounts for enough of the market that the apparent $/BTC price is perceived as largely being driven by the USDT/BTC price, such that a correction in $/USDT price would see a similar correction in $/BTC price. (In theory, this could be wrong, and a correction in $/USDT price could instead be reflected in opposite motion in USDT/BTC price, but the theory is that USDT has largely served as a vehicle to inject a bunch of fake dollars into Bitcoin trading, artificially inflating the in-dollars price of BTC.)
- notahacker 9y ago
  Tetherreport.com, for example, suggests about half of BTC's price rises last year resulted directly from newly printed USDT being converted into BTC. If you consider the other half of that price rise from <$1000 to $>10,000 in 2017 includes many inexperienced traders deciding to dive in after seeing big jumps in the BTC price over the course of the year, the overall contribution of Tether market manipulation to BTC's price change might be much greater than half of BTC's current price, of course
  - skybrian 9y ago
    Who takes the other side of the trade? If someone is using a lot of USDT to buy Bitcoin, don't there have to be a lot of people who trade Bitcoin for USDT and then hold on to it? On the other hand, seems like the Bitcoin price would rise due to people being skeptical about this newfangled Tether thing.
    - notahacker 9y ago
      Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot. If you can issue yourself newly minted Tether notionally worth a dollar and exchange your own BTC for it on your own exchange it's also dead easy to start pumping the price with wash trades (in theory you could do this by faking USD transactions on your exchange too, and some exchanges probably have done at various periods in the past, but printing USDT would allow you to actually increase your BTC holdings by buying from real traders at the same time, without having to worry about honouring the dollar payments)
      - lowdest 9y ago
        How does a wash trade pump the price any differently than just using a large buy order?
        notahacker 9y ago
        Much easier to generate a pattern or even a sustained history of price rises and trading volume increases via fake trades than try to nudge the price up by spoofing buy orders. Of course, if you're printing your own dollars you can actually execute large buy orders as well, but if you can pump the price some more afterwards, then why not?
        tim333 9y ago
        Large buy orders are normal and may execute leading to you buying stuff. Wash trades are fakery to make it look like money's being invested when it isn't.
      - skybrian 9y ago
        Hmm. I get that except the part about "without having to worry about honouring the dollar payments." Wash trades aside, as soon as they buy Bitcoin from someone else, they have to give them something. Or really, since it's all accounting entries in the exchange's database, what it means is a number in that trader's account needs to go up. If the Bitcoin price is high, this number has to go up a lot. And they'll expect to cash that out someday. I don't see why Tether makes this any easier or harder? The basic security flaw is using an untrustworthy exchange.
      - vkou 9y ago
        > Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot. This is what I don't get - who on Earth thinks that being long USDT is a good idea. Are they expecting the USD to dissapear? USDT to go to the moon? I understand having to own USDT to get your money out of exchanges that don't deal with fiat... But you need a counterparty on the other side of the trade - someone who will give you perfectly good USD for USDT. How has that ecosystem managed to absorb $2.2bn? Is anyone on Hacker News long USDT? If so, why? Every time Bitcoin/Eth/etc is discussed, there's always people admitting to holding on to it because they expect it to increase in price. I don't agree with them, but that's speculation - you can still make money, even if you disagree with the fundamentals. Why Tether? There's no speculative gains, and there's no fundamentals.
    - makomk 9y ago
      That is the key question, I think - especially since the people trading Bitcoin for USDT would've been doing so at prices which value USDT for slightly above face value. (That is, on all but a handful of occasions they could've got more by selling their Bitcoin for actual USD on Coinbase. The main exceptions were after the Tether hack and during this recent bout of negative news coverage, if I remember correctly.)
- qeternity 9y ago
  > A number of exchanges don't actually trade $/BTC they trade USDT/BTC It's even worse: a number of exchanges use a pegged USDT/USD price of 1 and transparently comingle BTCUSDT and BTCUSD markets.
  - JohnJ71 9y ago
    Once USD Bitcoin buyers will realise that other buyers are buying Bitcoin with (possibly) fake money (USDT), they will SELL and SELL

A number of exchanges don't actually trade $/BTC they trade USDT/BTC. This accounts for enough of the market that the apparent $/BTC price is perceived as largely being driven by the USDT/BTC price, such that a correction in $/USDT price would see a similar correction in $/BTC price. (In theory, this could be wrong, and a correction in $/USDT price could instead be reflected in opposite motion in USDT/BTC price, but the theory is that USDT has largely served as a vehicle to inject a bunch of fake dollars into Bitcoin trading, artificially inflating the in-dollars price of BTC.)

notahacker 9y ago
Tetherreport.com, for example, suggests about half of BTC's price rises last year resulted directly from newly printed USDT being converted into BTC. If you consider the other half of that price rise from <$1000 to $>10,000 in 2017 includes many inexperienced traders deciding to dive in after seeing big jumps in the BTC price over the course of the year, the overall contribution of Tether market manipulation to BTC's price change might be much greater than half of BTC's current price, of course
- skybrian 9y ago
  Who takes the other side of the trade? If someone is using a lot of USDT to buy Bitcoin, don't there have to be a lot of people who trade Bitcoin for USDT and then hold on to it? On the other hand, seems like the Bitcoin price would rise due to people being skeptical about this newfangled Tether thing.
  - notahacker 9y ago
    Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot. If you can issue yourself newly minted Tether notionally worth a dollar and exchange your own BTC for it on your own exchange it's also dead easy to start pumping the price with wash trades (in theory you could do this by faking USD transactions on your exchange too, and some exchanges probably have done at various periods in the past, but printing USDT would allow you to actually increase your BTC holdings by buying from real traders at the same time, without having to worry about honouring the dollar payments)
    - lowdest 9y ago
      How does a wash trade pump the price any differently than just using a large buy order?
      - notahacker 9y ago
        Much easier to generate a pattern or even a sustained history of price rises and trading volume increases via fake trades than try to nudge the price up by spoofing buy orders. Of course, if you're printing your own dollars you can actually execute large buy orders as well, but if you can pump the price some more afterwards, then why not?
      - tim333 9y ago
        Large buy orders are normal and may execute leading to you buying stuff. Wash trades are fakery to make it look like money's being invested when it isn't.
    - skybrian 9y ago
      Hmm. I get that except the part about "without having to worry about honouring the dollar payments." Wash trades aside, as soon as they buy Bitcoin from someone else, they have to give them something. Or really, since it's all accounting entries in the exchange's database, what it means is a number in that trader's account needs to go up. If the Bitcoin price is high, this number has to go up a lot. And they'll expect to cash that out someday. I don't see why Tether makes this any easier or harder? The basic security flaw is using an untrustworthy exchange.
    - vkou 9y ago
      > Well there's a notional $2.2bn worth of Tether that someone's holding on to, which is certainly enough to have got the price of a perceived buy-and-hold asset like BTC moving a lot. This is what I don't get - who on Earth thinks that being long USDT is a good idea. Are they expecting the USD to dissapear? USDT to go to the moon? I understand having to own USDT to get your money out of exchanges that don't deal with fiat... But you need a counterparty on the other side of the trade - someone who will give you perfectly good USD for USDT. How has that ecosystem managed to absorb $2.2bn? Is anyone on Hacker News long USDT? If so, why? Every time Bitcoin/Eth/etc is discussed, there's always people admitting to holding on to it because they expect it to increase in price. I don't agree with them, but that's speculation - you can still make money, even if you disagree with the fundamentals. Why Tether? There's no speculative gains, and there's no fundamentals.
  - makomk 9y ago
    That is the key question, I think - especially since the people trading Bitcoin for USDT would've been doing so at prices which value USDT for slightly above face value. (That is, on all but a handful of occasions they could've got more by selling their Bitcoin for actual USD on Coinbase. The main exceptions were after the Tether hack and during this recent bout of negative news coverage, if I remember correctly.)
qeternity 9y ago
> A number of exchanges don't actually trade $/BTC they trade USDT/BTC It's even worse: a number of exchanges use a pegged USDT/USD price of 1 and transparently comingle BTCUSDT and BTCUSD markets.
- JohnJ71 9y ago
  Once USD Bitcoin buyers will realise that other buyers are buying Bitcoin with (possibly) fake money (USDT), they will SELL and SELL