7 ms·

I don't understand. Of course the orders don't move the price because any move away from 1.00 can be quickly arbitraged away. There is going to be massive liqui

I don't understand. Of course the orders don't move the price because any move away from 1.00 can be quickly arbitraged away. There is going to be massive liquidity in the books around 1.00 because that is its fixed, known price. There is no discovery happening here.

ISL 8y ago
I'm no Tether expert, but late in the article, it suggests that new Tethers are supposed to be issued if the price reaches $1.1 . It is interesting to me that there is any substantial demand for a Tether, when $1 is always worth $1. If Tethers are actually worth $1, why not convert them to dollars and avoid the counterparty risk entirely?
- cslarson 8y ago
  There may be demand for tether to use on exchanges that don't have real $ trading but otherwise have good liquidity on lots of tokens.
- rewtraw 8y ago
  Tether is more convenient (faster) than exchanging for USD. And many exchanges don't support USD/Fiat so the only way to sell tokens for a stable currency is to exchange for Tether.
- trophycase 8y ago
  Exchanges with actual USD pairings generally have low volume (Kraken, on account of its terrible engine) or few coins listed (gdax, gemini). So if you want to hedge in fiat on a higher volume exchange like bitfinex or binance and also want to trade alts, you will need tether. The price of tether will likely never reach 1.1 unless there are solvency concerns. Any price disparity between BtC/usdt and BTC/USD has historically disappeared, so you can pseudo-arbitrage these pairs across exchanges even though they are technically not the same. Kraken's USD/USDT pair also makes this bridge easier.
- thisisit 8y ago
  There are many reasons why they are not converted. For one, the business with Tether started when Bitfinex was hacked. Secondly, AFAIK many exchanges including Bitfinex had trouble letting people withdraw USD. I am not entirely sure if that has changed recently. So, in both cases Tether acts as a counterparty to BTC trades. In most cases, the BTC/USD pair is not actual USD but TUSD.
- aeternus 8y ago
  New Tethers are not supposed to be issued if the price reaches $1.1, I believe the article got that part wrong. Tether should only be issued based on the amount of USD that Tether has in its bank account / vaults (they have released a 'audit' by a law firm but not by an official auditor). Since each Tether represents exactly $1, market forces should handle the pegging. Assuming people trust that Tether does have the USD, then any price < or > $1 represents an arbitrage opportunity. The demand for Tether comes from the fact that many exchanges are not licensed to operate in USD. Tether is used in place of USD on those exchanges, and the counterparty risk you mention is likely balanced by arbitrage opportunity.
  - bitreality 8y ago
    The USD/USDT price has no impact on if Tethers are issued. A USD/USDT trade occurs on only a few markets, one of which is Kraken, and it requires one party to already have USDT, which they are then selling for "real" USD.
- pjc50 8y ago
  Dollars have to be sent through a bank, and too many of the exchanges have been cut off from the banking system. They exist to let money circulate between those exchanges and the few real USD exit points of the system. It's not clear if tether can really be "redeemed".
- mygo 8y ago
  Tether, in theory, actually has a real use case. It can be used as a stable intermediary between exchanges that do not support USD and exchanges that do. But in practice I don’t know enough to be confident that a tether is always going to be $1.
ggggtez 8y ago
Basic point is: If 37.5 moves the price 0.0002, and 13,076.389 only moves it by half that, then the second purchase is fake (trading to yourself). In reality, it might look like there are thousands of tether being traded around, but actually there are probably only a couple real trades, and relatively low volume ones at that. That difference can indicate that the suggestion that they are backed by USD is bullshit. For example, they are likely avoiding hitting 1.10 on purpose so they can avoid scrutiny on re-issue.
- trophycase 8y ago
  I'm not sure how Kraken trading to themselves would indicate that Tether is not backed. Kraken is not associated with tether and their volume is not large and contributes very little to the market. And how does someone trading to themselves have any effect on price whatsoever? If there was real liquidity on Kraken and the price actually hit 1.10, then Bitfinex/Tether could simply print tether and arbitrage the difference themselves, essentially creating the tether out of all the money they made arbitraging, meaning it is fully backed. If the accusation is wash trading I just don't see how that would matter.
  - darawk 8y ago
    Yep. Not to mention the fact that there is a tether usd market on Bittrex, and a tether/trueusd market. As well as a Tether/TrueUSD market on Binance. TrueUSD is a US-based company with properly audited reserves. There is zero chance that all of these markets are manipulated.
    - JumpCrisscross 8y ago
      > There is zero chance that all of these markets are manipulated This lacks the imagination of market manipulators from even the 19th century. For more modern context, see penny stocks. These are traded OTC at a variety of venues. Manipulation is trivial given (a) prices on one venue are broadcast to others, thereby letting one bad apple spoil the bunch and (b) electronic trading makes overseeing dozens of accounts easy.
JumpCrisscross 8y ago
> Of course the orders don't move the price because any move away from 1.00 can be quickly arbitraged away Former algorithmic trader. You're right–the ceiling isn't particularly unusual. That prices never cross through is weird, but not inexplicable. What is inexplicable is the downtick inelasticity. Large sell orders should burn through more book than small orders. As the top of the order book is burned, lower bids are revealed. Even in the presence of lots of arbitrageurs, there will be transactions at those newly-revealed lows. That isn't happening. Instead we see a stable harmonic evocative of wash trading.
- 100qs 8y ago
  Suppose wash trading is indeed occurring, what is the benefit to the perpetrator? Fees are 0.20% for both maker and taker on Kraken. You'd have to pay ~$52,000 to print a $13 million trade.
  - JumpCrisscross 8y ago
    > what is the benefit to the perpetrator? Let's assume a third-party manipulator (i.e. they can't print new Tether). To make this economical, they would need an in with at least one exchange. Their trades on this venue (let's call it ShadyBit) would be free, or close to it. This is where the majority of their wash trades happen. If one naïvely averages volume across the market, this will do the trick. But the jig will fall apart if another exchange starts sharply diverging. So you set up sock puppet accounts there to soak up excess demand. As long as you keep the confidence game balanced, there shouldn't be too many people looking to sell at unusually low prices. In the meantime, you can continue using your inflated-value tokens as collateral for borrowing or to buy appreciating assets or to sell or whatnot.
    - dmurray 8y ago
      But this isn't happening. Rather than being artificially inflated, the price of Tether stays at $1 (to three significant figures) on all the exchanges.

ISL 8y ago

I'm no Tether expert, but late in the article, it suggests that new Tethers are supposed to be issued if the price reaches $1.1 . It is interesting to me that there is any substantial demand for a Tether, when $1 is always worth $1. If Tethers are actually worth $1, why not convert them to dollars and avoid the counterparty risk entirely?

cslarson 8y ago
There may be demand for tether to use on exchanges that don't have real $ trading but otherwise have good liquidity on lots of tokens.
rewtraw 8y ago
Tether is more convenient (faster) than exchanging for USD. And many exchanges don't support USD/Fiat so the only way to sell tokens for a stable currency is to exchange for Tether.
trophycase 8y ago
Exchanges with actual USD pairings generally have low volume (Kraken, on account of its terrible engine) or few coins listed (gdax, gemini). So if you want to hedge in fiat on a higher volume exchange like bitfinex or binance and also want to trade alts, you will need tether. The price of tether will likely never reach 1.1 unless there are solvency concerns. Any price disparity between BtC/usdt and BTC/USD has historically disappeared, so you can pseudo-arbitrage these pairs across exchanges even though they are technically not the same. Kraken's USD/USDT pair also makes this bridge easier.
thisisit 8y ago
There are many reasons why they are not converted. For one, the business with Tether started when Bitfinex was hacked. Secondly, AFAIK many exchanges including Bitfinex had trouble letting people withdraw USD. I am not entirely sure if that has changed recently. So, in both cases Tether acts as a counterparty to BTC trades. In most cases, the BTC/USD pair is not actual USD but TUSD.
aeternus 8y ago
New Tethers are not supposed to be issued if the price reaches $1.1, I believe the article got that part wrong. Tether should only be issued based on the amount of USD that Tether has in its bank account / vaults (they have released a 'audit' by a law firm but not by an official auditor). Since each Tether represents exactly $1, market forces should handle the pegging. Assuming people trust that Tether does have the USD, then any price < or > $1 represents an arbitrage opportunity. The demand for Tether comes from the fact that many exchanges are not licensed to operate in USD. Tether is used in place of USD on those exchanges, and the counterparty risk you mention is likely balanced by arbitrage opportunity.
- bitreality 8y ago
  The USD/USDT price has no impact on if Tethers are issued. A USD/USDT trade occurs on only a few markets, one of which is Kraken, and it requires one party to already have USDT, which they are then selling for "real" USD.
pjc50 8y ago
Dollars have to be sent through a bank, and too many of the exchanges have been cut off from the banking system. They exist to let money circulate between those exchanges and the few real USD exit points of the system. It's not clear if tether can really be "redeemed".
mygo 8y ago
Tether, in theory, actually has a real use case. It can be used as a stable intermediary between exchanges that do not support USD and exchanges that do. But in practice I don’t know enough to be confident that a tether is always going to be $1.

ggggtez 8y ago

Basic point is: If 37.5 moves the price 0.0002, and 13,076.389 only moves it by half that, then the second purchase is fake (trading to yourself). In reality, it might look like there are thousands of tether being traded around, but actually there are probably only a couple real trades, and relatively low volume ones at that. That difference can indicate that the suggestion that they are backed by USD is bullshit. For example, they are likely avoiding hitting 1.10 on purpose so they can avoid scrutiny on re-issue.

trophycase 8y ago
I'm not sure how Kraken trading to themselves would indicate that Tether is not backed. Kraken is not associated with tether and their volume is not large and contributes very little to the market. And how does someone trading to themselves have any effect on price whatsoever? If there was real liquidity on Kraken and the price actually hit 1.10, then Bitfinex/Tether could simply print tether and arbitrage the difference themselves, essentially creating the tether out of all the money they made arbitraging, meaning it is fully backed. If the accusation is wash trading I just don't see how that would matter.
- darawk 8y ago
  Yep. Not to mention the fact that there is a tether usd market on Bittrex, and a tether/trueusd market. As well as a Tether/TrueUSD market on Binance. TrueUSD is a US-based company with properly audited reserves. There is zero chance that all of these markets are manipulated.
  - JumpCrisscross 8y ago
    > There is zero chance that all of these markets are manipulated This lacks the imagination of market manipulators from even the 19th century. For more modern context, see penny stocks. These are traded OTC at a variety of venues. Manipulation is trivial given (a) prices on one venue are broadcast to others, thereby letting one bad apple spoil the bunch and (b) electronic trading makes overseeing dozens of accounts easy.

JumpCrisscross 8y ago

> Of course the orders don't move the price because any move away from 1.00 can be quickly arbitraged away Former algorithmic trader. You're right–the ceiling isn't particularly unusual. That prices never cross through is weird, but not inexplicable. What is inexplicable is the downtick inelasticity. Large sell orders should burn through more book than small orders. As the top of the order book is burned, lower bids are revealed. Even in the presence of lots of arbitrageurs, there will be transactions at those newly-revealed lows. That isn't happening. Instead we see a stable harmonic evocative of wash trading.

100qs 8y ago
Suppose wash trading is indeed occurring, what is the benefit to the perpetrator? Fees are 0.20% for both maker and taker on Kraken. You'd have to pay ~$52,000 to print a $13 million trade.
- JumpCrisscross 8y ago
  > what is the benefit to the perpetrator? Let's assume a third-party manipulator (i.e. they can't print new Tether). To make this economical, they would need an in with at least one exchange. Their trades on this venue (let's call it ShadyBit) would be free, or close to it. This is where the majority of their wash trades happen. If one naïvely averages volume across the market, this will do the trick. But the jig will fall apart if another exchange starts sharply diverging. So you set up sock puppet accounts there to soak up excess demand. As long as you keep the confidence game balanced, there shouldn't be too many people looking to sell at unusually low prices. In the meantime, you can continue using your inflated-value tokens as collateral for borrowing or to buy appreciating assets or to sell or whatnot.
  - dmurray 8y ago
    But this isn't happening. Rather than being artificially inflated, the price of Tether stays at $1 (to three significant figures) on all the exchanges.