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> Let's assume a third-party manipulator (i.e. they can't print new Tether). Ok, sure. > To make this economical, they would need an in with at least one exch
by darawk 8y ago
> Let's assume a third-party manipulator (i.e. they can't print new Tether).
Ok, sure.
> 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.
Do what trick, exactly? What does your hypothetical manipulator get out of this?
> 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.
"Sock puppet accounts to soak up excess demand". See, right there, you're saying something, but I don't think you're following it through to its logical conclusion. Saying you just "soak up excess demand" hides the fact that this requires enormous amounts of capital, not to mention paying the transaction fees on the exchanges you aren't colluding with.
What you are supposing here is that someone is artificially propping up the price of Tether. What that means is that they are taking real US dollars and exchanging them for an asset that they know is not worth its current price, en masse. If you want to posit someone is doing that, you need to provide an extremely compelling motive for so doing. A motive that would generate more money than it costs them, and I don't see any way that could be happening, with the possible exception of Bitfinex themselves doing it. But...of course, if Bitfinex is propping up the price of Tether by exchanging them for USD 1:1 then....isn't that the point of Tether in the first place?
> 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.
You're really handwaving here. You're saying they're taking real money, USD, and buying Tether tokens so that they can prop up the price of Tether because they have a lot of Tether that they can exchange for other stuff?
Play this tape all the way through. Let's say you have 100M Tether and 1M USD. You want to prop up the price of Tether so that you can buy sweet cool stuff with your Tether tokens. So you use your 1M USD to prop up the price of Tether, and you starting buying shiny new Bitcoins with your Tether. Now you've bought 10M USDT worth of BTC, so now there is 10M more Tether out there in circulation. You've created massive selling pressure that you now need to balance with real USD. What you are proposing here just fundamentally violates equilibrium principles and so cannot, on its own, be what's happening.
- b1daly 8y agoI think you’re missing a few things here. Kraken is the only exchange that has a USD-tether pair. It is not trivial to be an active trader on Kraken who can freely move in an out of tether and USD. Most of the holders of Tether don’t have access to a market to exchange for dollars. So you’ve exchanged 10m tethers for Bitcoins to users who can’t sell them back for dollars, which will greatly diminish selling pressure. If you are wash trading, you are not giving up valuable dollars for questionable tethers, that’s the whole point of wash trading! Kraken could can just provide heavy discounts to the wash trader to minimize slippage to trading fees (which I think they do). Skeptics of the conspiracy, scam theory about tether basically use as their main argument a variation of yours: the bottom line being the market, as it is, believes Tether is not a scam, or the peg would simply not hold. The reasons individuals believe one thing or another is inscrutable, but the key to this scam is opacity by the entity that creates the tokens. As long as Bitfinex can maintain the belief that they are backing each tether with a new dollar, there is no way to tell if the 50million new tethers were printed from “thin air” or purchased by millionaires. Once the house of cards is built up, the holders of these related assets have a strong motivation to maintain the belief that tether is a real dollar backed asset. That really helps keep the peg at unity, until it doesn’t. One of the most absurd things about this, is that tether says they are under no obligation to redeem tethers for dollars. That alone is as serious red flag. Right now there seem to be enough suckers who are willing to play this game of “musical chairs” and do whatever they can to keep the music from stopping.
- darawk 8y ago> I think you’re missing a few things here. Kraken is the only exchange that has a USD-tether pair No it isn't. Bittrex has both a real USD pair and a TrueUSD (audited, US-based) pair. Binance has a TrueUSD pair. > It is not trivial to be an active trader on Kraken who can freely move in an out of tether and USD. Yes it is. I have a kraken account. I've traded Tether/USD plenty. I have no special privileges. > Most of the holders of Tether don’t have access to a market to exchange for dollars. Yes they do. See, first two answers. > If you are wash trading, you are not giving up valuable dollars for questionable tethers, that’s the whole point of wash trading! Kraken could can just provide heavy discounts to the wash trader to minimize slippage to trading fees (which I think they do). Ok, and this accomplishes what? > Skeptics of the conspiracy, scam theory about tether basically use as their main argument a variation of yours: the bottom line being the market, as it is, believes Tether is not a scam, or the peg would simply not hold. I'm not actually making that argument. The argument i'm making is that this 'wash trading' theory is stupid, because there is no reason to wash trade. The only entity that would have any interest in wash trading Tether is Kraken itself, to make the market appear more liquid, and attract real trading activity. But if that were the case, that has no bearing on the Tether-Bitfinex conspiracy theory and just isn't all that nefarious an activity. Nobody has provided any compelling reason why anyone would be interested in falsifying trades on this Tether market. In the absence of any motive, i'm skeptical both that it's happening at all, and that if it is, it has any meaning whatsoever. That being said, Tether itself may or may not still be a conspiracy. These things are unrelated in my mind. Though, on balance, I think I lean towards thinking it's not a conspiracy, though for other reasons than this.