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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 fo

by 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.
- craigc 8y ago
  But the article and report do not prove that Tethers are not backed by USD. In fact, it constantly says, “If Tether is not fully-backed by dollars”. All it definitively claims is that Tethers were used to buy Bitcoin when the Bitcoin price fell last year.
  - ceejayoz 8y ago
    There's exceedingly strong evidence Tethers are not backed by USD - the Tether website claims "frequent professional audits", but they never completed their first one, were fired by their auditor, and cited a document explicitly stating it was "not intended to be, and should not be, used or relied upon" as proof of their reserves. It's a demonstrably fraudulent claim right there on their home page.
    - craigc 8y ago
      That is not strong evidence that they are not backed by USD. That is strong suspicion. > Lack of transparency does not necessarily indicate fraud https://blog.bitmex.com/tether/ https://blog.bitmex.com/tether/
      - Angostura 8y ago
        Putting it another way, there is no evidence that Tethers are backed by dollars.
      - ceejayoz 8y ago
        > Lack of transparency does not necessarily indicate fraud Fraudulently claiming "frequent professional audits" that don't exist is good evidence of fraud. So is having a big link "proof of funds" on the home page that links to https://tether.to/wp-content/uploads/2017/09/Final-Tether-Consulting-Report-9-15-17_Redacted.pdf https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co... which says "not intended to be, and should not be, used or relied upon by [non-Tether parties]".
cornholio 8y ago
Yes. The fundamental issue they don't seem to address is that strongly positive correlation between Bitcoin prices and Tether issuance is to be expected even if there is no manipulation, or, at most, manipulation from unrelated 3rd parties that are actually pumping real dollars into the market via Tether. Tether could indeed hide the manipulation, but there still doesn't seem to be a smoking gun. In addition, a willful design for manipulation of the whole cryptocurrency market would strongly motivate Bitfinex to hide or manipulate public Tether data precisely to make such a link impossible to prove.
thisisit 8y ago
> 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-investin.. https://medium.com/the-crypto-times/why-is-everyone-investin.... The article doesn't prove the math is sound except quote some people about price prediction and talk about how pricey bitcoin will get because population, gold market size etc. And then it also misses why people don't invest in bitcon. It has nothing to do with Kanehman's psychological studies etc but because people still don't understand what is the use case of a bitcoin. Additionally, it is these kinds of poorly written articles used as proof which dissuade people even more because the narrative is - if prices are going up then it must be good. I am sure many said something similar about housing prices in 2005.
- craigc 8y ago
  > I am sure many said something similar about housing prices in 2005. The difference is that the housing prices were clearly in a bubble and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment. This is much much different than Bitcoin. I would argue that Bitcoin is the only asset class that is not currently in a bubble. > The article doesn't prove the math is sound I suppose you are right, but I still think it brings up some good points. The Bitcoin market cap is minuscule compared to any other established market. What gives gold its value? It is not that it is used in jewelry. It is that there is a limited supply of it, it can’t be easily created/counterfeited/reproduced, it is divisible, and it can be used to store and exchange value. Bitcoin has the exact same properties, but is even easier to purchase, store, and exchange. I fully believe that Bitcoin and Gold market caps will reach parity some day. Maybe it will take 10 or 20 years, but I believe it will happen.
  - ggggtez 8y ago
    >The difference is that the housing prices were clearly in a bubble The above article shows that Bitcoin was at the very least, in a bubble last year, and may still be one. >and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment. And nearly every coin has an ICO which is a "sure thing". Everyone is selling their coin like it's a low risk investment. >This is much much different than Bitcoin. How? >I would argue that Bitcoin is the only asset class that is not currently in a bubble. So, you're living in denial then?
hluska 8y ago
Good comment, I just have one picky edit (attached to a story I enjoy). You wrote, "during a bull market, when the price started to decline." It's the opposite. Bull markets are when price starts to increase. Bear markets are when price starts to decline. Years ago, I had an amazing macroeconomics professor named Alex Kelly. Dr. Kelly was an amazing educator with an incredible sense of humour, a penchant for telling the truth as he saw it, and genuine glee when he'd see students start to understand his material. I'll never forget the class where Dr. Kelly stood up, did his impression of a bear standing on his hind legs, growling and pushing down the market. Then showing the converse, snorting like a bull and pushing up the market. Afterwards, he did his usual shrug, reached into his pocket to fish out his everpresent Rolaids, quipped "now if anyone gets that wrong on the midterm..." and shook his head menacingly. Dr. Kelly could flat out teach and I quote him to this day.
- craigc 8y ago
  Oh I am well aware of the difference. I meant what I said though. During a bull market it is smart to buy up the dips. During a bear market it is smart to sell the rallies. For example last year there was a point during the bull market when the price dropped from $5k to $3k and that was one example of “when the price started to decline”. Thanks for the story!
makomk 8y ago
Yeah, this narrative has been around for a while and there have always been two major problems with it: - If Bitfinex was buying Bitcoins on their own exchange with fake USD in order to push the price up, they wouldn't do so by printing Tether because USD on Bitfinex is not backed by Tether - it's supposed to be backed directly by USD in Bitfinex-owned bank accounts, with Tether only being minted as necessary to handle Tether withdrawals. (Someone even found externally-visible evidence that there wasn't enough Tether in existence to cover the Bitfinex USD balances - naturally, this was seen as further proof it was a scam.) - During the period in question, it was Coinbase/GDAX which was pushing the price up, and that exchange never accepted Tether. The price of Bitcoin on Bitfinex and the other exchanges was pretty much always lower than GDAX, or to put this another way, Tether USD was worth more than its face value during the time when Bitfinex was supposedly printing it to push the Bitcoin price up. This is the exact opposite of what should have happened if they were doing so. It looks, at a quick glance, like this still has the same problems. Edit: this is more clever than the previous arguments, in that it also uses evidence from round-number trading biases and odd end-of-the-month behaviour of the kind you'd expect if Bitfinex had to make the Tether shortfall disappear for their monthly audit, and also examines outflows of Tether from Bitfinex to other exchanges. (The round-number stuff is less convincing since the divergence between exchanges and even between currencies on the same exchange was particularly bad around round numbers.) They also attempted to test the hypothesis that the Tether printing was a reaction to demand by comparing the amount of printing with the Tether-USD price. Unfortunately, they used the price on the Kraken exchange which had almost no volume or market depth compared to the potential Bitfinex-Bitcoin-GDAX route. Basically, no-one actually used it, and so it didn't accurately represent how much it'd cost to actually exchange any substantial amount of Tether to USD or vice-versa. It's entirely unsurprising that it wasn't correlated with anything of note.

by craigc 8y ago

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.

craigc 8y ago
But the article and report do not prove that Tethers are not backed by USD. In fact, it constantly says, “If Tether is not fully-backed by dollars”. All it definitively claims is that Tethers were used to buy Bitcoin when the Bitcoin price fell last year.
- ceejayoz 8y ago
  There's exceedingly strong evidence Tethers are not backed by USD - the Tether website claims "frequent professional audits", but they never completed their first one, were fired by their auditor, and cited a document explicitly stating it was "not intended to be, and should not be, used or relied upon" as proof of their reserves. It's a demonstrably fraudulent claim right there on their home page.
  - craigc 8y ago
    That is not strong evidence that they are not backed by USD. That is strong suspicion. > Lack of transparency does not necessarily indicate fraud https://blog.bitmex.com/tether/ https://blog.bitmex.com/tether/
    - Angostura 8y ago
      Putting it another way, there is no evidence that Tethers are backed by dollars.
    - ceejayoz 8y ago
      > Lack of transparency does not necessarily indicate fraud Fraudulently claiming "frequent professional audits" that don't exist is good evidence of fraud. So is having a big link "proof of funds" on the home page that links to https://tether.to/wp-content/uploads/2017/09/Final-Tether-Consulting-Report-9-15-17_Redacted.pdf https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co... which says "not intended to be, and should not be, used or relied upon by [non-Tether parties]".

cornholio 8y ago

Yes. The fundamental issue they don't seem to address is that strongly positive correlation between Bitcoin prices and Tether issuance is to be expected even if there is no manipulation, or, at most, manipulation from unrelated 3rd parties that are actually pumping real dollars into the market via Tether. Tether could indeed hide the manipulation, but there still doesn't seem to be a smoking gun. In addition, a willful design for manipulation of the whole cryptocurrency market would strongly motivate Bitfinex to hide or manipulate public Tether data precisely to make such a link impossible to prove.

thisisit 8y ago

> 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-investin.. https://medium.com/the-crypto-times/why-is-everyone-investin.... The article doesn't prove the math is sound except quote some people about price prediction and talk about how pricey bitcoin will get because population, gold market size etc. And then it also misses why people don't invest in bitcon. It has nothing to do with Kanehman's psychological studies etc but because people still don't understand what is the use case of a bitcoin. Additionally, it is these kinds of poorly written articles used as proof which dissuade people even more because the narrative is - if prices are going up then it must be good. I am sure many said something similar about housing prices in 2005.

craigc 8y ago
> I am sure many said something similar about housing prices in 2005. The difference is that the housing prices were clearly in a bubble and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment. This is much much different than Bitcoin. I would argue that Bitcoin is the only asset class that is not currently in a bubble. > The article doesn't prove the math is sound I suppose you are right, but I still think it brings up some good points. The Bitcoin market cap is minuscule compared to any other established market. What gives gold its value? It is not that it is used in jewelry. It is that there is a limited supply of it, it can’t be easily created/counterfeited/reproduced, it is divisible, and it can be used to store and exchange value. Bitcoin has the exact same properties, but is even easier to purchase, store, and exchange. I fully believe that Bitcoin and Gold market caps will reach parity some day. Maybe it will take 10 or 20 years, but I believe it will happen.
- ggggtez 8y ago
  >The difference is that the housing prices were clearly in a bubble The above article shows that Bitcoin was at the very least, in a bubble last year, and may still be one. >and banks were intentionally packaging subprime mortgages that they knew were bad and selling them as a low risk investment. And nearly every coin has an ICO which is a "sure thing". Everyone is selling their coin like it's a low risk investment. >This is much much different than Bitcoin. How? >I would argue that Bitcoin is the only asset class that is not currently in a bubble. So, you're living in denial then?

hluska 8y ago

Good comment, I just have one picky edit (attached to a story I enjoy). You wrote, "during a bull market, when the price started to decline." It's the opposite. Bull markets are when price starts to increase. Bear markets are when price starts to decline. Years ago, I had an amazing macroeconomics professor named Alex Kelly. Dr. Kelly was an amazing educator with an incredible sense of humour, a penchant for telling the truth as he saw it, and genuine glee when he'd see students start to understand his material. I'll never forget the class where Dr. Kelly stood up, did his impression of a bear standing on his hind legs, growling and pushing down the market. Then showing the converse, snorting like a bull and pushing up the market. Afterwards, he did his usual shrug, reached into his pocket to fish out his everpresent Rolaids, quipped "now if anyone gets that wrong on the midterm..." and shook his head menacingly. Dr. Kelly could flat out teach and I quote him to this day.

craigc 8y ago
Oh I am well aware of the difference. I meant what I said though. During a bull market it is smart to buy up the dips. During a bear market it is smart to sell the rallies. For example last year there was a point during the bull market when the price dropped from $5k to $3k and that was one example of “when the price started to decline”. Thanks for the story!

makomk 8y ago

Yeah, this narrative has been around for a while and there have always been two major problems with it: - If Bitfinex was buying Bitcoins on their own exchange with fake USD in order to push the price up, they wouldn't do so by printing Tether because USD on Bitfinex is not backed by Tether - it's supposed to be backed directly by USD in Bitfinex-owned bank accounts, with Tether only being minted as necessary to handle Tether withdrawals. (Someone even found externally-visible evidence that there wasn't enough Tether in existence to cover the Bitfinex USD balances - naturally, this was seen as further proof it was a scam.) - During the period in question, it was Coinbase/GDAX which was pushing the price up, and that exchange never accepted Tether. The price of Bitcoin on Bitfinex and the other exchanges was pretty much always lower than GDAX, or to put this another way, Tether USD was worth more than its face value during the time when Bitfinex was supposedly printing it to push the Bitcoin price up. This is the exact opposite of what should have happened if they were doing so. It looks, at a quick glance, like this still has the same problems. Edit: this is more clever than the previous arguments, in that it also uses evidence from round-number trading biases and odd end-of-the-month behaviour of the kind you'd expect if Bitfinex had to make the Tether shortfall disappear for their monthly audit, and also examines outflows of Tether from Bitfinex to other exchanges. (The round-number stuff is less convincing since the divergence between exchanges and even between currencies on the same exchange was particularly bad around round numbers.) They also attempted to test the hypothesis that the Tether printing was a reaction to demand by comparing the amount of printing with the Tether-USD price. Unfortunately, they used the price on the Kraken exchange which had almost no volume or market depth compared to the potential Bitfinex-Bitcoin-GDAX route. Basically, no-one actually used it, and so it didn't accurately represent how much it'd cost to actually exchange any substantial amount of Tether to USD or vice-versa. It's entirely unsurprising that it wasn't correlated with anything of note.