7 ms·

I find it weird that people assume this is intentional market manipulation. If they are in fact fraudulent (I think they are), being able to print money is a bu

by paulgb 9y ago

I find it weird that people assume this is intentional market manipulation. If they are in fact fraudulent (I think they are), being able to print money is a business model in itself; you don't need to intentionally manipulate the market (but could end up doing so accidentally)

gt_ 9y ago
I don't think the accusation is particularly that the market manipulation was intentional but that it was nonetheless an effect of the money printing.
notahacker 9y ago
Easier to pump existing BTC holdings with $2bn of imaginary-dollar backed tokens than exchange $2bn in imaginary-dollar backed tokens directly for dollars and find a bank that'll let you cash them out... And if your plan is to ultimately do the latter, you're going to have to cash out slowly and indirectly anyway, in which case why not pump the price of other assets you stand to benefit from in the mean time.
- paulgb 9y ago
  Why pump assets if you can't cash them out?
  - notahacker 9y ago
    (1) There's more demand for swapping BTC for cash or occasionally even goods/services than USDT period, and even more so when the price of BTC goes up. Offloading $2bn USDT is hard work because it's not a speculator-friendly asset (2) They already had BTC and a belief in its future. Making it worth more, easier to exchange for cash and having more of it looks like a win all round if you don't mind committing fraud. (3) Leverage, provided the BTC price holds up for long enough to cash out. Even if you're printing fake money, you can only print as much of it as people believe you actually have. (4) BTC price rise income looks like it might be a legitimate income stream when auditors ask about it. Income from selling stuff that's supposed to be backed by a dollar for a dollar is obviously the proceeds of fraud. (5) BTC holdings can likely continue to be bought and sold even if nobody wants USDT, bank accounts connected to Bitfinex and Tether end up frozen and a rapid change of address and identity is required Money laundering is often very convoluted and usually costs money, but it's big business.
mahemm 9y ago
Not true. In order to make sure there isn't a run on their fake currency, they need to ensure that the balance tips towards buying bitcoin rather than cashing out holdings. If the price goes too low, people will start trying to convert tethers to real money, triggering a crash.
- paulgb 9y ago
  This assumes that demand for a USD-correlated currency will grow with the price of Bitcoin, I'm not sure I buy that. Seems like when people are temporarily bearish about BTC is when they are most likely to move from BTC to USDT.
- gnode 9y ago
  Or (assuming they're legitimate) they just buy back tether with their holdings, raising the price back to roughly $1. Which is the whole point of it supposedly being backed 1-1 in the first place.
JonnyNova 9y ago
People aren't assuming they are engaging in fraudulent behavior - there is evidence showing that they are. All they have to do to show they aren't is provide an audit.
- paulgb 9y ago
  Yes, I'm responding more to takes like this from the article: > “My personal biases make me inclined to believe that Bitfinex is not using Tether to manipulate the price of Bitcoin,” said Jeremy Gardner, a managing partner at the investment firm Ausum Ventures. “If they have attempted to do so, which would be deeply concerning, it’s hard to imagine that such fraudulent issuance at its current volume could single-handedly buoy the price of Bitcoin.” My point is that being skeptical about their ability to manipulate the market in a meaningful way and make a profit doesn't mean they don't have a profitable motivation for engaging in fraud.
tomtimtall 9y ago
It looks like they might have used the money that should have backed tether to buy bitcoin, and then whenever the market looked like it might be correcting they issued more to stop it from falling and buy the dip.
- paulgb 9y ago
  This is my hypothesis as well, although even simpler: they never sold the USDT for USD in the first place, but used it to buy BTC directly.

by paulgb 9y ago

gt_ 9y ago

I don't think the accusation is particularly that the market manipulation was intentional but that it was nonetheless an effect of the money printing.

notahacker 9y ago

Easier to pump existing BTC holdings with $2bn of imaginary-dollar backed tokens than exchange $2bn in imaginary-dollar backed tokens directly for dollars and find a bank that'll let you cash them out... And if your plan is to ultimately do the latter, you're going to have to cash out slowly and indirectly anyway, in which case why not pump the price of other assets you stand to benefit from in the mean time.

paulgb 9y ago
Why pump assets if you can't cash them out?
- notahacker 9y ago
  (1) There's more demand for swapping BTC for cash or occasionally even goods/services than USDT period, and even more so when the price of BTC goes up. Offloading $2bn USDT is hard work because it's not a speculator-friendly asset (2) They already had BTC and a belief in its future. Making it worth more, easier to exchange for cash and having more of it looks like a win all round if you don't mind committing fraud. (3) Leverage, provided the BTC price holds up for long enough to cash out. Even if you're printing fake money, you can only print as much of it as people believe you actually have. (4) BTC price rise income looks like it might be a legitimate income stream when auditors ask about it. Income from selling stuff that's supposed to be backed by a dollar for a dollar is obviously the proceeds of fraud. (5) BTC holdings can likely continue to be bought and sold even if nobody wants USDT, bank accounts connected to Bitfinex and Tether end up frozen and a rapid change of address and identity is required Money laundering is often very convoluted and usually costs money, but it's big business.

mahemm 9y ago

Not true. In order to make sure there isn't a run on their fake currency, they need to ensure that the balance tips towards buying bitcoin rather than cashing out holdings. If the price goes too low, people will start trying to convert tethers to real money, triggering a crash.

paulgb 9y ago
This assumes that demand for a USD-correlated currency will grow with the price of Bitcoin, I'm not sure I buy that. Seems like when people are temporarily bearish about BTC is when they are most likely to move from BTC to USDT.
gnode 9y ago
Or (assuming they're legitimate) they just buy back tether with their holdings, raising the price back to roughly $1. Which is the whole point of it supposedly being backed 1-1 in the first place.

JonnyNova 9y ago

People aren't assuming they are engaging in fraudulent behavior - there is evidence showing that they are. All they have to do to show they aren't is provide an audit.

paulgb 9y ago
Yes, I'm responding more to takes like this from the article: > “My personal biases make me inclined to believe that Bitfinex is not using Tether to manipulate the price of Bitcoin,” said Jeremy Gardner, a managing partner at the investment firm Ausum Ventures. “If they have attempted to do so, which would be deeply concerning, it’s hard to imagine that such fraudulent issuance at its current volume could single-handedly buoy the price of Bitcoin.” My point is that being skeptical about their ability to manipulate the market in a meaningful way and make a profit doesn't mean they don't have a profitable motivation for engaging in fraud.

tomtimtall 9y ago

It looks like they might have used the money that should have backed tether to buy bitcoin, and then whenever the market looked like it might be correcting they issued more to stop it from falling and buy the dip.

paulgb 9y ago
This is my hypothesis as well, although even simpler: they never sold the USDT for USD in the first place, but used it to buy BTC directly.