57 ms·

Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

574 points by Osiris30 8y ago

albertwang 8y ago
Link to the research paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 From the abstract: 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. 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. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.
- galaxyLogic 8y ago
  What if most BitCoin owners know that buying Tether this way is a way to bump up Bitcoin. Therefore they decide to do their part. They don't need to agree on anything with anybody they just understand this is THE way to bump up the price of BitCoin. Is it still a conspiracy?
  - kadenshep 8y ago
    Yeah, in the same way people might understand how MLM's work but don't need to explicitly agree to take part in the less savory aspects of why it might be lucrative. You can understand the game and play it with other actors without any set of well defined rules, as long as you're all working towards relatively the same outcome and you all have the same assets that need to be treated in a particular way to get that outcome ("I'll get mine"). But, I don't think that's sufficient to explain what's been happening in cryptocurrency markets. There's a reason analogous regulations exist in Real (TM) trading. As it stands, it's too easy for bigger (or sufficiently pocketed) entities to manipulate the markets. There's no way to stop them, no way to REALLY track them, and there's every reason for them to do it as long as people keep buying into these coins/exchanges. I'd wager that people who don't think this is happening are blindlingly optimistic about what's going on.
  - deleted 8y ago
    [deleted]
tedeh 8y ago
Any ideas on why "they" appear unable to keep the price up at this point in time and continue fueling the hype? Already cashed out or just impossible to stem the tide of disillusioned people taking their losses and exiting?
- rtkwe 8y ago
  Maybe they realized people were getting really suspicious of Tether and they couldn't keep creating tether ex nihilo?
  - paulie_a 8y ago
    The people behind tether need to be put in handcuffs
- empath75 8y ago
  They got subpoenas from us regulators.
- CyberDildonics 8y ago
  They stopped printing tether when they came under investigation.
- tim333 8y ago
  The amount of tethers issued ($2bn or so, none since March) is small compared to the trade volume of bitcoin ($3 to 7bn per day recently). They only really have enough to effect things at the margin.
ejstronge 8y ago
Could we change the title to that of the article, "Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say"? It currently implies that the New York Times did independent research ("NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex") which does not seem to be the case. I think this is a subtle point but, with the tension surrounding 'fake news', it's critical to distinguish reporting on another's research from disclosing one's own results.
- lallysingh 8y ago
  Do people take the 'fake news' claims seriously? Even here in HN?
  - compcoffee 8y ago
    >Do people take the 'fake news' claims seriously? "Fake news" is now an argument against anything you disagree with. Trump pioneered the strategy, but now even Elon Musk is doing it.
  - tomrod 8y ago
    Yes. Clarity is important.
  - Larrikin 8y ago
    Active measures show up on here, this is a pretty big forum with a larger than average number of influential users after all. But typically those posts are down voted pretty quickly.
  - ataturk 8y ago
    The financial types who flocked to these cryptos had one goal in mind: Pump and dump in an unregulated market. Buyer beware.
  - mrep 8y ago
    It does seem to be getting pretty paranoid here. Another ny times post got flagged this morning after receiving 25 points in an hour for god knows what reason (i thought it was an interesting read): https://news.ycombinator.com/item?id=17302371 https://news.ycombinator.com/item?id=17302371
chx 8y ago
And this is news how? That Tether is a nothing has been painfully obvious to anyone paying attention. Of course, anyone paying attention has been avoiding comedy gold...
- ufo 8y ago
  The news is that now we have a detailed 66 page economics paper written about it.
paulgb 8y ago
What I don't get about the theory that Tether was used to intentionally manipulate markets, is that if you have a money-printing machine, you don't need to manipulate markets as a business model. You can just print money, that's the business model. Of course it's possible that that influx of capital will move a thin market. But Occam's razor seems to imply that that's a side effect rather than the intent.
- seibelj 8y ago
  By printing money to prop up the price, you accomplish 2 things. One is that you can sell your crypto for USD if you are a large holder. The second is that you can acquire crypto for free because you created dollars (tether) out of nothing, and hold for the long term.
  - mkirklions 8y ago
    >The second is that you can acquire crypto for free because you created dollars If someone pays bitfinix for tether, what makes this 'created'? I dont use tether because it is fiat currency which is exactly why I bought Bitcoin- but I dont see the big deal either. Its easier than cashing out to USD. Is tether real or fake? Who knows, I only trust Bitcoin.
    - Nursie 8y ago
      > If someone pays bitfinix for tether, what makes this 'created'? If someone pays actual USD for tether than that's how it's supposed to work - tether puts the USD in the bank, that person gets the tokens. However if someone wants USDT for their BTC (or whatever) and tether whip up a bunch of USDT to satisfy that, then they are creating an unbacked token to buy other crypto currency with, inflating the market. > Is tether real or fake? Who knows That's the problem, they claim transparency, audits and all sorts of other stuff, but they're lies. So nobody knows. But if it is all fake, then fake money could represent a large proportion of the money flowing into cryptocurrencies.
- ceejayoz 8y ago
  > You can just print money, that's the business model. That is not Tether's stated business model. To issue 1 USDT, Tether is supposed to take in 1 USD from someone, and hold it safely in an account. Their stated business model is taking a 10 basis point or $20 fee (whichever one is higher) when someone buys USDT with USD. https://tether.to/fees/ https://tether.to/fees/ The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains. Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have. Maybe at that point they'll finally complete their first audit. Their site still makes the shocking claim "subject to frequent professional audits" despite having been fired by their auditor.
burger_moon 8y ago
They seemed to have stopped posting in April but this person on Twitter was very active during the bull market in calling out the market manipulation by Bitfinex, https://twitter.com/bitfinexed https://twitter.com/bitfinexed I cannot speak to the credibility but at the very least it was entertaining to read the tweats and responses.
dustingetz 8y ago
Real central banks share an incentive to inflate asset prices just as much as Crypto exchanges do (altcoin exchanges take profits in crypto and thus are exposed). The parallels to central banking are astounding to me. Except in crypto this happened at internet speed instead of over 50 years. (I am not talking about money printing and interest rates, I'm talking about actual assets in bubbles like houses and stocks and cryptoassets. Central banks = nation states and nation states want growth in assets)
- ceejayoz 8y ago
  Real central banks regularly raise interest rates to prevent over-inflation of asset prices.
  - tom_ 8y ago
    Well, they used to...
    - ceejayoz 8y ago
      Rates in the US were raised 3x in 2017, and we're reportedly getting the second of 2018 today.
  - Consultant32452 8y ago
    I think banks have an equal and opposite position. Our debts are their assets. Inflation reduces the value of their assets.
    - compcoffee 8y ago
      >Our debts are their assets. Inflation reduces the value of their assets. And our assets are their debts.
      - mishad 8y ago
        So for states which have net debt position (including the US), it is to their advantage to have steady price inflation (i.e. currency value steadily being worth less and less in purchasing power), so that the debt is steadily reduced in "real terms" size. And this is in fact exactly what many/most governments seek to do, using a combination of fiscal policy levers, including issuing debt (government bonds) and also measures such as QE. Note the "steady" in the above - part of the value of a fiat currency is in its price stability (which is linked/coupled to the confidence people have in it and in the issuing government). In both direction (inflationary Vs deflationary) and in stability, this is markedly different from what is happening with BTC.
craigc 8y ago
I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims: > This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past. I haven’t read the entire 66 page report yet, but assume for a second that the relationship between Tether and US dollars is 1:1. This would mean that during a bull market, when the price started to decline, big players invested money to buy up the available supply. Nothing about that seems suspicious to me. They may have chosen to use Tether instead of US dollars for any reason. Perhaps because there are more exchanges that have USDT trading pairs than there are with USD pairs. Or perhaps because it made arbitrage easier (transferring USDT from one exchange to another is much simpler than USD where you would have to first move it to a bank account then wait days for a new transfer to take place). There is a chart at the end of the report that shows that the Tether issuance continued to increase even as the BTC price was falling. Also it shows that less than 25% of BTC trading volume came from Tether while over 60% came from USD (page 38). It is funny that claiming that the price decline in BTC since December is manipulation will lead to you getting flamed here and people will tell you that it is just going to its “natural value of zero”, but the idea that there was a conspiracy to pump up the price last year is greeted with open arms, and everyone latches onto it (The reality is probably somewhere in between). The math regarding Bitcoin’s price increase is actually pretty sound, and I encourage anyone who disagrees to read this article: https://medium.com/the-crypto-times/why-is-everyone-investing-in-bitcoin-1e8d88fe6b3 https://medium.com/the-crypto-times/why-is-everyone-investin... --- As a side note, I think if you said this exact same thing about the stock market, it would not be big news at all: “US dollars were used to pump up the stock market after it experienced big dips”. And meanwhile BTC is 0.3% the size of the stock market.
- yifanl 8y ago
  The issue with using Tethers to pump up the price is that it implies there's billions of U.S. dollars backing up that Tether. If there isn't billions of USD to be found then... what? The USD pumping up the stock market is undeniably there, but if the Tether pumping up BTC isn't real (real being defined by the 1 USDT = 1 USD), then the price is essentially being pumped up by nothing.
kgwgk 8y ago
Today Matt Levine talks about this paper in his daily column: https://www.bloomberg.com/view/articles/2018-06-13/judge-rules-at-amp-t-merger-will-be-fine https://www.bloomberg.com/view/articles/2018-06-13/judge-rul... "of these two explanations— 1) Bitcoin’s rapid and sustained rise is due to the fact that it satisfies a real economic need in an elegant way, and people have responded to that; or 2) Bitcoin’s rapid and sustained rise is due to a magical fountain of fake dollars that everyone just decided to treat as real dollars, and that can be used to manipulate its price any time it’s in danger of falling— the second is possibly more impressive. Like, creating billions of dollars’ worth of value by building a useful thing is relatively straightforward. Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation."
- ceejayoz 8y ago
  > Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. That's silly. Ponzi-style schemes have been around since at least the late 1800s.
  - CyberDildonics 8y ago
    So has caffeine but people still find a way to repackage it.
  - j-c-hewitt 8y ago
    That's also the regular banking system. It's interesting that holders of lots of assets from different angles converged on a similar method for propping up the value of their assets.
  - GuB-42 8y ago
    If anything, Bitcoin is closer to the even older Tulip-mania than to a Ponzi scheme. A Ponzi scheme is a specific kind of fraud based on the promise of an unreasonably high return on investment which is actually payed by late adopters. Bitcoin doesn't make promises and it doesn't have a cover story to hide the source of the money. It may be a bubble, but it is not a Ponzi scheme.
josu 8y ago
I don't know, I followed all the ride very closely, and I don't think that manipulation played that big of a role. Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. Bitcoin needed a protocol update, however, the community couldn't agree on how to proceed, and there was the threat of a contentious fork, where bitcoin would split in 2. In the end, the protocol update was carried out (SegWit) and while there ended up being a fork (Bitcoin Cash) it wasn't the contentious fork everybody feared. So once that all those threats were out of the way, the price of bitcoin started climbing really fast. Korean and Japanese people started buying cryptocurrency like there was no tomorrow and the market started to overheat. Koreans wanted to buy crypto so badly, that they were paying premiums of more than 40% compared to the rest of the world. Taxi drivers in the US were promoting ICOs, EOS had huge billboards in Times Square and the euphoria that goes hand in hand with every bubble started settling in. But everybody knew that the price growth was outpacing the increase in usage of the technology, so once the CME futures launched in December, there were no more huge news in the horizon, and the price started deflating. So was there some kind of price manipulation going on? Probably. But looking back there is really no need for price manipulation, you can explain the price increase using any economics textbook.
- paulpauper 8y ago
  Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. how could such a determination be possible?
  - josu 8y ago
    Perspective. We didn't know it at the time, but looking back it's pretty obvious. Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. And I'm talking in relative terms; it was undervalued relative to what happened next.
    - Jasper_ 8y ago
      > Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. Yes, we know the ship is unsafe because otherwise the front wouldn't have fallen off! We know the price rose. This article is suggesting that the price rose not because it was undervalued, but because it was manipulated upwards by people pumping it up with fake numbers.
asdfman123 8y ago
Wow, who would have thought that crazy things could have happened in the absence of a centralized authority?
hellbanner 8y ago
https://hackernoon.com/meet-spoofy-how-a-single-entity-dominates-the-price-of-bitcoin-39c711d28eb4 https://hackernoon.com/meet-spoofy-how-a-single-entity-domin...
paulpauper 8y ago
It's worth noting, SSRN is not peer reviewed, but the NYTimes by omitting this important fact, one can mistake this paper for having the same credibility and soundness as a peer-reviewed paper. Anyone can submit to SSRN. The editorial standards are almost non-existent.
- rayuela 8y ago
  Yeah it's like you omitting the fact that it was published by two reputable finance professors who's research specializes in financial market manipulation.
  - billions 8y ago
    Are you saying they are biased because they see the world through the lens of their studies?
  - zerostar07 8y ago
    Which is a major reason why peer review exists, to prevent authoritative people pushing their agenda.
martin1975 8y ago
It's kind of amazing to me that to this day Tether has yet to release an audit that proves a 1 to 1 relationship between USD to Tether.... We might not have seen the real bottom yet, if suspicion about Tether's insolvency eventually turns out to be true.
fortythirteen 8y ago
In other news, water is wet.
kerng 8y ago
So, the Bitcoin price rose because people bought it (via Bitfinex). The price fell when it was sold. I imagine doing a similar study on transactions from Coinbase (which has a big user base and volume) might reveal similar results. Is there evidence that this was orchestrated or was done maliciously by a small group of actors. The headline is written like there is more to it.
- jonknee 8y ago
  You missed the part about the owners of Bitfinex running a pretend currency and bidding up BTC with it. That's why Bitfinex is different than Coinbase. It was like clockwork, you'd see a dip, a huge amount of Tether's would come online and boom huge volume at Bitfinex buying the dip and surging to new heights.
fixermark 8y ago
... as opposed to all other times, when its value is finding a natural balance and not at all driven by speculation, no sir. ;)
shreybear 8y ago
don't big whales have a lot of power in the Bitcoin market?
mythrwy 8y ago
Every time a bubble pops it seems people look for someone to blame that isn't the themselves, (i.e the people who rushed out and put more than they could afford to lose on a risky FOMO decision). I don't know about Tethers involvement, but that is what makes a bubble at the end of the day, not sure how much "manipulation" is needed once it gets started. Expecting these types of articles will sell pretty well in coming weeks/months as people nursing their wounds look for the "people responsible".
glbrew 8y ago
No. Fucking. Shit.
deleted 8y ago
[deleted]
Noxmiles 8y ago
No Shit Sherlock.
thewordpainter 8y ago
love to know how much of the HN community suspected this -- when can we get an instagram poll?? :)
yuhong 8y ago
This reminds me of paying off debts using Bitcoin, where the dollars have to come from somewhere.
mrybczyn 8y ago
Shocking. I mean, a monetary system based on gambling, drugs, and smuggling can't be all bad?
AzzieElbab 8y ago
I wonder how soon they are going to draw a connection between this and sec approved bc futures
emilfihlman 8y ago
Surprised were _, _ and of course _.
gcatalfamo 8y ago
Omg, no shit? (If you downvote it’s fair, I just couldn’t resist it)
rblion 8y ago
Called it. I tried to tell this petroleum engineer from Texas last December that this whole thing, as awesome as blockchain is, is very suspect and that the market will crash unless the energy solved is solved simultaneously. The concept is brilliant but human beings are involved, so greed will be a factor too. There you have it.
ibmocy 8y ago
Both Ethereum and Bitcoin mining is very centralized, with the top four miners in Bitcoin and the top three miners in Ethereum controlling FAR FAR more than 51 % of the hash rate.
- victor22 8y ago
  Can you back that up?
lend000 8y ago
This all rests on the assumption that Tethers are not backed by dollars as they are supposed to be. If they are backed, it is just a form of liquidity which is in no way manipulating the market, just creating ease of capital transfer between exchanges.
- pimmen 8y ago
  They have not completed any audits, and that astronomical dollar value backing up Tether is an extraordinary claim lacking extraordinary evidence. So, I would say it rests on the assumption that Tether is lying and have something to hide, backed by the fact that they haven't completed an audit. The alternative, that this is not market manipulation, rests on blindly trusting that Tether is backed up by the dollars they claim.
ethn 8y ago
Ridiculously terrible analysis. The obvious assessment is that when people use their tether to buy coins, thereby leaving exchanges, the price goes up as there is more demand. This generally occurs when investors believe they can get an asset for a steal, such as when the Bitcoin price goes down.
arisAlexis 8y ago
this is simply not true. the causation and correlation was biased. Tether needs to print when there is volatility is just how the system works to keep the peg
mirimir 8y ago
> The new paper helped push down the already sinking price of Bitcoin and other cryptocurrencies on Wednesday. The price of Bitcoin fell as much as 5 percent after the report was published, approaching its lowest point of the year. Bitcoin is now down more than 65 percent from the highs it hit late last year. Well, then. An obvious question is who involved in this paper has just sold Bitcoin short. Maybe there's a disclaimer. But I've had no luck getting the paper. I've tried to get it from Sci-Hub, but they don't seem to have it yet. And Elsevier doesn't seem to accept Bitcoin. Anyone know a source?
- grafporno 8y ago
  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
  - mirimir 8y ago
    Nope. I clicked "Download This Paper" several times, and nothing happened. But then, I don't have an SSRN account, so that's not too surprising.
jpatokal 8y ago
What continues to weird me out here is that Tether's price is still basically $1, and there's basically no risk premium for those exchanges that trade BTC against Tether instead of actual USD. But when the two start spreading, the shit will really hit the fan... http://www.untether.space/ http://www.untether.space/
FundThrowaway 8y ago
One part of the article I really don't understand, "The researchers relied on the millions of transaction records that are captured on the public ledgers of all virtual currency transactions, known as the blockchain, to spot patterns." Why is he looking at the blockchain for trading irregularities? Nearly all of the big exchanges just use a database to record trades and no actual cryptocurrency is transferred around except at withdrawal and deposit, so how can the blockchain possibly provide any insight?
jamesrom 8y ago
In other news, water is wet.
arisAlexis 8y ago
The biggest bank of the Netherlands is holding an account of Tether. Do you think they are holding billions of fraudulent money without doing due diligence?
whoisninja 8y ago
wall streeters are liars, opinionated and biased bunch, if there was any manipulation in unregulated crypto markets because they were nascent shouldn't surprise you, why? ponder upon the following: home prices were not artificially inflated during 2008 crisis usd or other fiat currencies are not artificially inflated (hint: negative interest rates) stock buybacks are not artificially inflating stock prices negative interest rates and bond buyback programs are not inflating economies hedge funds are not inflated, they just market themselves with buzz words like quant investing, alpha etc. yet most of them can't beat S&P and charge 2-20 business of banks are not inflated, they use 50 year old technology like mainframes and are overstaffed and charge $50 to wire $10 internationally tech companies are not inflated, they sell your freaking data and sell you ads so that you can buy $hit you don't need ---- where there are humans involved, there will be greed
blablablabla3 8y ago
NYTimes, Washington Post, NPR, all have turned into propaganda outlets. Seriously, listening and reading these things makes you less creative and more misinformed. And they are spamming HN. Please block these sites.
fiatjaf 8y ago
Tether is just like a normal bank creating fake dollars. Nothing new or unexpected here.
psyclobe 8y ago
No shit sherlock
arisAlexis 8y ago
statistical study finding no correlation with Bitcoin prices here. http://forklog.net/so-have-we-got-tethered/ http://forklog.net/so-have-we-got-tethered/ Since both of them appear quite well researched you can deduct why one got 500 upvotes and the other one 98. Power of emotions..
hulton 8y ago
You don't say? That wasn't obvious at all or anything. Good thing the nytimes was able to let us know in this hard-hitting report!
od320 8y ago
“The stock market — the daytime adventure serial of the well-to-do — would not be the stock market if it did not have its ups and downs. (...) And it has many other distinctive characteristics. Apart from the economic advantages and disadvantages of stock exchanges — the advantage that they provide a free flow of capital to finance industrial expansion, for instance, and the disadvantage that they provide an all too convenient way for the unlucky, the imprudent, and the gullible to lose their money — their development has created a whole pattern of social behavior, complete with customs, language, and predictable responses to given events. What is truly extraordinary is the speed with which this pattern emerged full blown following the establishment, in 1611, of the world's first important stock exchange — a roofless courtyard in Amsterdam — and the degree to which it persists (with variations, it is true) on the New York Stock Exchange in the nineteen-sixties. Present-day stock trading in the United States — a bewilderingly vast enterprise, involving millions of miles of private telegraph wires, computers that can read and copy the Manhattan Telephone Directory in three minutes, and over twenty million stockholder participants — would seem to be a far cry from a handful of seventeenth-century Dutchmen haggling in the rain. But the field marks are much the same. The first stock exchange was, inadvertently, a laboratory in which new human reactions were revealed. By the same token, the New York Stock Exchange is also a sociological test tube, forever contributing to the human species' self-understanding. The behaviour of the pioneering Dutch stock traders is ably documented in a book entitled “Confusion of Confusions,” written by a plunger on the Amsterdam market named Joseph de la Vega; originally published in 1688, (...)” — John Brooks, in “Business Adventures” (1968)[32]

574 points by Osiris30 8y ago

Link to the research paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 From the abstract: 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. 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. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.

galaxyLogic 8y ago
What if most BitCoin owners know that buying Tether this way is a way to bump up Bitcoin. Therefore they decide to do their part. They don't need to agree on anything with anybody they just understand this is THE way to bump up the price of BitCoin. Is it still a conspiracy?
- kadenshep 8y ago
  Yeah, in the same way people might understand how MLM's work but don't need to explicitly agree to take part in the less savory aspects of why it might be lucrative. You can understand the game and play it with other actors without any set of well defined rules, as long as you're all working towards relatively the same outcome and you all have the same assets that need to be treated in a particular way to get that outcome ("I'll get mine"). But, I don't think that's sufficient to explain what's been happening in cryptocurrency markets. There's a reason analogous regulations exist in Real (TM) trading. As it stands, it's too easy for bigger (or sufficiently pocketed) entities to manipulate the markets. There's no way to stop them, no way to REALLY track them, and there's every reason for them to do it as long as people keep buying into these coins/exchanges. I'd wager that people who don't think this is happening are blindlingly optimistic about what's going on.
- deleted 8y ago
  [deleted]

tedeh 8y ago

Any ideas on why "they" appear unable to keep the price up at this point in time and continue fueling the hype? Already cashed out or just impossible to stem the tide of disillusioned people taking their losses and exiting?

rtkwe 8y ago
Maybe they realized people were getting really suspicious of Tether and they couldn't keep creating tether ex nihilo?
- paulie_a 8y ago
  The people behind tether need to be put in handcuffs
empath75 8y ago
They got subpoenas from us regulators.
CyberDildonics 8y ago
They stopped printing tether when they came under investigation.
tim333 8y ago
The amount of tethers issued ($2bn or so, none since March) is small compared to the trade volume of bitcoin ($3 to 7bn per day recently). They only really have enough to effect things at the margin.

ejstronge 8y ago

Could we change the title to that of the article, "Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say"? It currently implies that the New York Times did independent research ("NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex") which does not seem to be the case. I think this is a subtle point but, with the tension surrounding 'fake news', it's critical to distinguish reporting on another's research from disclosing one's own results.

lallysingh 8y ago
Do people take the 'fake news' claims seriously? Even here in HN?
- compcoffee 8y ago
  >Do people take the 'fake news' claims seriously? "Fake news" is now an argument against anything you disagree with. Trump pioneered the strategy, but now even Elon Musk is doing it.
- tomrod 8y ago
  Yes. Clarity is important.
- Larrikin 8y ago
  Active measures show up on here, this is a pretty big forum with a larger than average number of influential users after all. But typically those posts are down voted pretty quickly.
- ataturk 8y ago
  The financial types who flocked to these cryptos had one goal in mind: Pump and dump in an unregulated market. Buyer beware.
- mrep 8y ago
  It does seem to be getting pretty paranoid here. Another ny times post got flagged this morning after receiving 25 points in an hour for god knows what reason (i thought it was an interesting read): https://news.ycombinator.com/item?id=17302371 https://news.ycombinator.com/item?id=17302371

chx 8y ago

And this is news how? That Tether is a nothing has been painfully obvious to anyone paying attention. Of course, anyone paying attention has been avoiding comedy gold...

ufo 8y ago
The news is that now we have a detailed 66 page economics paper written about it.

paulgb 8y ago

What I don't get about the theory that Tether was used to intentionally manipulate markets, is that if you have a money-printing machine, you don't need to manipulate markets as a business model. You can just print money, that's the business model. Of course it's possible that that influx of capital will move a thin market. But Occam's razor seems to imply that that's a side effect rather than the intent.

seibelj 8y ago
By printing money to prop up the price, you accomplish 2 things. One is that you can sell your crypto for USD if you are a large holder. The second is that you can acquire crypto for free because you created dollars (tether) out of nothing, and hold for the long term.
- mkirklions 8y ago
  >The second is that you can acquire crypto for free because you created dollars If someone pays bitfinix for tether, what makes this 'created'? I dont use tether because it is fiat currency which is exactly why I bought Bitcoin- but I dont see the big deal either. Its easier than cashing out to USD. Is tether real or fake? Who knows, I only trust Bitcoin.
  - Nursie 8y ago
    > If someone pays bitfinix for tether, what makes this 'created'? If someone pays actual USD for tether than that's how it's supposed to work - tether puts the USD in the bank, that person gets the tokens. However if someone wants USDT for their BTC (or whatever) and tether whip up a bunch of USDT to satisfy that, then they are creating an unbacked token to buy other crypto currency with, inflating the market. > Is tether real or fake? Who knows That's the problem, they claim transparency, audits and all sorts of other stuff, but they're lies. So nobody knows. But if it is all fake, then fake money could represent a large proportion of the money flowing into cryptocurrencies.
ceejayoz 8y ago
> You can just print money, that's the business model. That is not Tether's stated business model. To issue 1 USDT, Tether is supposed to take in 1 USD from someone, and hold it safely in an account. Their stated business model is taking a 10 basis point or $20 fee (whichever one is higher) when someone buys USDT with USD. https://tether.to/fees/ https://tether.to/fees/ The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains. Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have. Maybe at that point they'll finally complete their first audit. Their site still makes the shocking claim "subject to frequent professional audits" despite having been fired by their auditor.

burger_moon 8y ago

They seemed to have stopped posting in April but this person on Twitter was very active during the bull market in calling out the market manipulation by Bitfinex, https://twitter.com/bitfinexed https://twitter.com/bitfinexed I cannot speak to the credibility but at the very least it was entertaining to read the tweats and responses.

dustingetz 8y ago

Real central banks share an incentive to inflate asset prices just as much as Crypto exchanges do (altcoin exchanges take profits in crypto and thus are exposed). The parallels to central banking are astounding to me. Except in crypto this happened at internet speed instead of over 50 years. (I am not talking about money printing and interest rates, I'm talking about actual assets in bubbles like houses and stocks and cryptoassets. Central banks = nation states and nation states want growth in assets)

ceejayoz 8y ago
Real central banks regularly raise interest rates to prevent over-inflation of asset prices.
- tom_ 8y ago
  Well, they used to...
  - ceejayoz 8y ago
    Rates in the US were raised 3x in 2017, and we're reportedly getting the second of 2018 today.
- Consultant32452 8y ago
  I think banks have an equal and opposite position. Our debts are their assets. Inflation reduces the value of their assets.
  - compcoffee 8y ago
    >Our debts are their assets. Inflation reduces the value of their assets. And our assets are their debts.
    - mishad 8y ago
      So for states which have net debt position (including the US), it is to their advantage to have steady price inflation (i.e. currency value steadily being worth less and less in purchasing power), so that the debt is steadily reduced in "real terms" size. And this is in fact exactly what many/most governments seek to do, using a combination of fiscal policy levers, including issuing debt (government bonds) and also measures such as QE. Note the "steady" in the above - part of the value of a fiat currency is in its price stability (which is linked/coupled to the confidence people have in it and in the issuing government). In both direction (inflationary Vs deflationary) and in stability, this is markedly different from what is happening with BTC.

craigc 8y ago

I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims: > This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past. I haven’t read the entire 66 page report yet, but assume for a second that the relationship between Tether and US dollars is 1:1. This would mean that during a bull market, when the price started to decline, big players invested money to buy up the available supply. Nothing about that seems suspicious to me. They may have chosen to use Tether instead of US dollars for any reason. Perhaps because there are more exchanges that have USDT trading pairs than there are with USD pairs. Or perhaps because it made arbitrage easier (transferring USDT from one exchange to another is much simpler than USD where you would have to first move it to a bank account then wait days for a new transfer to take place). There is a chart at the end of the report that shows that the Tether issuance continued to increase even as the BTC price was falling. Also it shows that less than 25% of BTC trading volume came from Tether while over 60% came from USD (page 38). It is funny that claiming that the price decline in BTC since December is manipulation will lead to you getting flamed here and people will tell you that it is just going to its “natural value of zero”, but the idea that there was a conspiracy to pump up the price last year is greeted with open arms, and everyone latches onto it (The reality is probably somewhere in between). The math regarding Bitcoin’s price increase is actually pretty sound, and I encourage anyone who disagrees to read this article: https://medium.com/the-crypto-times/why-is-everyone-investing-in-bitcoin-1e8d88fe6b3 https://medium.com/the-crypto-times/why-is-everyone-investin... --- As a side note, I think if you said this exact same thing about the stock market, it would not be big news at all: “US dollars were used to pump up the stock market after it experienced big dips”. And meanwhile BTC is 0.3% the size of the stock market.

yifanl 8y ago
The issue with using Tethers to pump up the price is that it implies there's billions of U.S. dollars backing up that Tether. If there isn't billions of USD to be found then... what? The USD pumping up the stock market is undeniably there, but if the Tether pumping up BTC isn't real (real being defined by the 1 USDT = 1 USD), then the price is essentially being pumped up by nothing.

kgwgk 8y ago

Today Matt Levine talks about this paper in his daily column: https://www.bloomberg.com/view/articles/2018-06-13/judge-rules-at-amp-t-merger-will-be-fine https://www.bloomberg.com/view/articles/2018-06-13/judge-rul... "of these two explanations— 1) Bitcoin’s rapid and sustained rise is due to the fact that it satisfies a real economic need in an elegant way, and people have responded to that; or 2) Bitcoin’s rapid and sustained rise is due to a magical fountain of fake dollars that everyone just decided to treat as real dollars, and that can be used to manipulate its price any time it’s in danger of falling— the second is possibly more impressive. Like, creating billions of dollars’ worth of value by building a useful thing is relatively straightforward. Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation."

ceejayoz 8y ago
> Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. That's silly. Ponzi-style schemes have been around since at least the late 1800s.
- CyberDildonics 8y ago
  So has caffeine but people still find a way to repackage it.
- j-c-hewitt 8y ago
  That's also the regular banking system. It's interesting that holders of lots of assets from different angles converged on a similar method for propping up the value of their assets.
- GuB-42 8y ago
  If anything, Bitcoin is closer to the even older Tulip-mania than to a Ponzi scheme. A Ponzi scheme is a specific kind of fraud based on the promise of an unreasonably high return on investment which is actually payed by late adopters. Bitcoin doesn't make promises and it doesn't have a cover story to hide the source of the money. It may be a bubble, but it is not a Ponzi scheme.

josu 8y ago

I don't know, I followed all the ride very closely, and I don't think that manipulation played that big of a role. Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. Bitcoin needed a protocol update, however, the community couldn't agree on how to proceed, and there was the threat of a contentious fork, where bitcoin would split in 2. In the end, the protocol update was carried out (SegWit) and while there ended up being a fork (Bitcoin Cash) it wasn't the contentious fork everybody feared. So once that all those threats were out of the way, the price of bitcoin started climbing really fast. Korean and Japanese people started buying cryptocurrency like there was no tomorrow and the market started to overheat. Koreans wanted to buy crypto so badly, that they were paying premiums of more than 40% compared to the rest of the world. Taxi drivers in the US were promoting ICOs, EOS had huge billboards in Times Square and the euphoria that goes hand in hand with every bubble started settling in. But everybody knew that the price growth was outpacing the increase in usage of the technology, so once the CME futures launched in December, there were no more huge news in the horizon, and the price started deflating. So was there some kind of price manipulation going on? Probably. But looking back there is really no need for price manipulation, you can explain the price increase using any economics textbook.

paulpauper 8y ago
Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. how could such a determination be possible?
- josu 8y ago
  Perspective. We didn't know it at the time, but looking back it's pretty obvious. Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. And I'm talking in relative terms; it was undervalued relative to what happened next.
  - Jasper_ 8y ago
    > Once the issue of the forks and the SegWit activation was cleared, the price rose relatively fast. Yes, we know the ship is unsafe because otherwise the front wouldn't have fallen off! We know the price rose. This article is suggesting that the price rose not because it was undervalued, but because it was manipulated upwards by people pumping it up with fake numbers.

asdfman123 8y ago

Wow, who would have thought that crazy things could have happened in the absence of a centralized authority?

hellbanner 8y ago

https://hackernoon.com/meet-spoofy-how-a-single-entity-dominates-the-price-of-bitcoin-39c711d28eb4 https://hackernoon.com/meet-spoofy-how-a-single-entity-domin...

paulpauper 8y ago

It's worth noting, SSRN is not peer reviewed, but the NYTimes by omitting this important fact, one can mistake this paper for having the same credibility and soundness as a peer-reviewed paper. Anyone can submit to SSRN. The editorial standards are almost non-existent.

rayuela 8y ago
Yeah it's like you omitting the fact that it was published by two reputable finance professors who's research specializes in financial market manipulation.
- billions 8y ago
  Are you saying they are biased because they see the world through the lens of their studies?
- zerostar07 8y ago
  Which is a major reason why peer review exists, to prevent authoritative people pushing their agenda.

martin1975 8y ago

It's kind of amazing to me that to this day Tether has yet to release an audit that proves a 1 to 1 relationship between USD to Tether.... We might not have seen the real bottom yet, if suspicion about Tether's insolvency eventually turns out to be true.

fortythirteen 8y ago

In other news, water is wet.

kerng 8y ago

So, the Bitcoin price rose because people bought it (via Bitfinex). The price fell when it was sold. I imagine doing a similar study on transactions from Coinbase (which has a big user base and volume) might reveal similar results. Is there evidence that this was orchestrated or was done maliciously by a small group of actors. The headline is written like there is more to it.

jonknee 8y ago
You missed the part about the owners of Bitfinex running a pretend currency and bidding up BTC with it. That's why Bitfinex is different than Coinbase. It was like clockwork, you'd see a dip, a huge amount of Tether's would come online and boom huge volume at Bitfinex buying the dip and surging to new heights.

fixermark 8y ago

... as opposed to all other times, when its value is finding a natural balance and not at all driven by speculation, no sir. ;)

shreybear 8y ago

don't big whales have a lot of power in the Bitcoin market?

mythrwy 8y ago

Every time a bubble pops it seems people look for someone to blame that isn't the themselves, (i.e the people who rushed out and put more than they could afford to lose on a risky FOMO decision). I don't know about Tethers involvement, but that is what makes a bubble at the end of the day, not sure how much "manipulation" is needed once it gets started. Expecting these types of articles will sell pretty well in coming weeks/months as people nursing their wounds look for the "people responsible".

glbrew 8y ago

No. Fucking. Shit.

deleted 8y ago

[deleted]

Noxmiles 8y ago

No Shit Sherlock.

thewordpainter 8y ago

love to know how much of the HN community suspected this -- when can we get an instagram poll?? :)

yuhong 8y ago

This reminds me of paying off debts using Bitcoin, where the dollars have to come from somewhere.

mrybczyn 8y ago

Shocking. I mean, a monetary system based on gambling, drugs, and smuggling can't be all bad?

AzzieElbab 8y ago

I wonder how soon they are going to draw a connection between this and sec approved bc futures

emilfihlman 8y ago

Surprised were _, _ and of course _.

gcatalfamo 8y ago

Omg, no shit? (If you downvote it’s fair, I just couldn’t resist it)

rblion 8y ago

Called it. I tried to tell this petroleum engineer from Texas last December that this whole thing, as awesome as blockchain is, is very suspect and that the market will crash unless the energy solved is solved simultaneously. The concept is brilliant but human beings are involved, so greed will be a factor too. There you have it.

ibmocy 8y ago

Both Ethereum and Bitcoin mining is very centralized, with the top four miners in Bitcoin and the top three miners in Ethereum controlling FAR FAR more than 51 % of the hash rate.

victor22 8y ago
Can you back that up?

lend000 8y ago

This all rests on the assumption that Tethers are not backed by dollars as they are supposed to be. If they are backed, it is just a form of liquidity which is in no way manipulating the market, just creating ease of capital transfer between exchanges.

pimmen 8y ago
They have not completed any audits, and that astronomical dollar value backing up Tether is an extraordinary claim lacking extraordinary evidence. So, I would say it rests on the assumption that Tether is lying and have something to hide, backed by the fact that they haven't completed an audit. The alternative, that this is not market manipulation, rests on blindly trusting that Tether is backed up by the dollars they claim.

ethn 8y ago

Ridiculously terrible analysis. The obvious assessment is that when people use their tether to buy coins, thereby leaving exchanges, the price goes up as there is more demand. This generally occurs when investors believe they can get an asset for a steal, such as when the Bitcoin price goes down.

arisAlexis 8y ago

this is simply not true. the causation and correlation was biased. Tether needs to print when there is volatility is just how the system works to keep the peg

mirimir 8y ago

> The new paper helped push down the already sinking price of Bitcoin and other cryptocurrencies on Wednesday. The price of Bitcoin fell as much as 5 percent after the report was published, approaching its lowest point of the year. Bitcoin is now down more than 65 percent from the highs it hit late last year. Well, then. An obvious question is who involved in this paper has just sold Bitcoin short. Maybe there's a disclaimer. But I've had no luck getting the paper. I've tried to get it from Sci-Hub, but they don't seem to have it yet. And Elsevier doesn't seem to accept Bitcoin. Anyone know a source?

grafporno 8y ago
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
- mirimir 8y ago
  Nope. I clicked "Download This Paper" several times, and nothing happened. But then, I don't have an SSRN account, so that's not too surprising.

jpatokal 8y ago

What continues to weird me out here is that Tether's price is still basically $1, and there's basically no risk premium for those exchanges that trade BTC against Tether instead of actual USD. But when the two start spreading, the shit will really hit the fan... http://www.untether.space/ http://www.untether.space/

FundThrowaway 8y ago

One part of the article I really don't understand, "The researchers relied on the millions of transaction records that are captured on the public ledgers of all virtual currency transactions, known as the blockchain, to spot patterns." Why is he looking at the blockchain for trading irregularities? Nearly all of the big exchanges just use a database to record trades and no actual cryptocurrency is transferred around except at withdrawal and deposit, so how can the blockchain possibly provide any insight?

jamesrom 8y ago

In other news, water is wet.

arisAlexis 8y ago

The biggest bank of the Netherlands is holding an account of Tether. Do you think they are holding billions of fraudulent money without doing due diligence?

whoisninja 8y ago

wall streeters are liars, opinionated and biased bunch, if there was any manipulation in unregulated crypto markets because they were nascent shouldn't surprise you, why? ponder upon the following: home prices were not artificially inflated during 2008 crisis usd or other fiat currencies are not artificially inflated (hint: negative interest rates) stock buybacks are not artificially inflating stock prices negative interest rates and bond buyback programs are not inflating economies hedge funds are not inflated, they just market themselves with buzz words like quant investing, alpha etc. yet most of them can't beat S&P and charge 2-20 business of banks are not inflated, they use 50 year old technology like mainframes and are overstaffed and charge $50 to wire $10 internationally tech companies are not inflated, they sell your freaking data and sell you ads so that you can buy $hit you don't need ---- where there are humans involved, there will be greed

blablablabla3 8y ago

NYTimes, Washington Post, NPR, all have turned into propaganda outlets. Seriously, listening and reading these things makes you less creative and more misinformed. And they are spamming HN. Please block these sites.

fiatjaf 8y ago

Tether is just like a normal bank creating fake dollars. Nothing new or unexpected here.

psyclobe 8y ago

No shit sherlock

arisAlexis 8y ago

statistical study finding no correlation with Bitcoin prices here. http://forklog.net/so-have-we-got-tethered/ http://forklog.net/so-have-we-got-tethered/ Since both of them appear quite well researched you can deduct why one got 500 upvotes and the other one 98. Power of emotions..

hulton 8y ago

You don't say? That wasn't obvious at all or anything. Good thing the nytimes was able to let us know in this hard-hitting report!

od320 8y ago

“The stock market — the daytime adventure serial of the well-to-do — would not be the stock market if it did not have its ups and downs. (...) And it has many other distinctive characteristics. Apart from the economic advantages and disadvantages of stock exchanges — the advantage that they provide a free flow of capital to finance industrial expansion, for instance, and the disadvantage that they provide an all too convenient way for the unlucky, the imprudent, and the gullible to lose their money — their development has created a whole pattern of social behavior, complete with customs, language, and predictable responses to given events. What is truly extraordinary is the speed with which this pattern emerged full blown following the establishment, in 1611, of the world's first important stock exchange — a roofless courtyard in Amsterdam — and the degree to which it persists (with variations, it is true) on the New York Stock Exchange in the nineteen-sixties. Present-day stock trading in the United States — a bewilderingly vast enterprise, involving millions of miles of private telegraph wires, computers that can read and copy the Manhattan Telephone Directory in three minutes, and over twenty million stockholder participants — would seem to be a far cry from a handful of seventeenth-century Dutchmen haggling in the rain. But the field marks are much the same. The first stock exchange was, inadvertently, a laboratory in which new human reactions were revealed. By the same token, the New York Stock Exchange is also a sociological test tube, forever contributing to the human species' self-understanding. The behaviour of the pioneering Dutch stock traders is ably documented in a book entitled “Confusion of Confusions,” written by a plunger on the Amsterdam market named Joseph de la Vega; originally published in 1688, (...)” — John Brooks, in “Business Adventures” (1968)[32]