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It's impossible to have a discussion based on news reports, so here's a link for the original paper. I copied the title and abstract below. https://papers.ssrn

by neiman 7y ago

It's impossible to have a discussion based on news reports, so here's a link for the original paper. I copied the title and abstract below. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066 I browsed through the paper. Their main result, if I understood correctly, is that they found "considerable evidence that Tether is used to purchase Bitcoin following Tether authorization and a drop in Bitcoin price, and that this phenomenon has a sizable relation to future Bitcoin prices and other coins." This result, if true, does not imply directly the conclusion ("rally caused by single whale"). First, it doesn't explain the original raise of the price before the fall (that followed with tether purchases). Second, these results can have, I think, alternative explanations. For example, Tether was used as a tool for shorting Bitcoin, hence it makes sense that it be sold after Bitcoin price drops. I write this with knowing that perhaps my interpretation of the paper is wrong, since it relies heavily on professional jargon I'm not familiar with. ------------------------------- title: Is Bitcoin Really Un-Tethered? Abstract: This paper investigates whether Tether, a digital currency pegged to the U.S.dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.

lostmsu 7y ago
> Rather than demand from cash investors Can't find how did they determine, that Tether was not bought with cash, so this statement is basically baseless.
- Nursie 7y ago
  The pattern of issuances to market make it highly unlikely.
  - lostmsu 7y ago
    Can you elaborate?
    - Nursie 7y ago
      It's in the source material, but crudely it looks like tether issuances were used to prop up the market as it faltered, timed as they were. Either there was a remarkably, improbably prescient actor there, or it looks fishy as f*ck.
      - lostmsu 7y ago
        I don't understand, did they acquire dollars to back up those issuances, or not?
        Nursie 7y ago
        Probably not. Nobody knows the full story, but given that the pattern is one of responding to market movements rather than looking like money flowing in to a market from investors, it seems unlikely. Further, given their outright lies about auditing and the recent admission that only 75% of tether is backed by cash or cash-like instruments, it looks a lot like a huge fraud to me. Make your own mind up I guess, but if you're going to tell me "See, nobody actually knows!", then that's true. But we can analyse what looks likely, and what looks likely is that it's been issued out of thin air to prop up the market price of BTC and fleece market participants for the benefit of owners of the Tether corp and Bitfinex. I guess we'll see more as the various lawsuits shake themselves out.
        lostmsu 7y ago
        > Probably not. That is not enough to support claims of the paper.
        Nursie 7y ago
        Yeah, it is, given they've done the analysis and reported on how likely it is. If you have thorough refutation prepared, I suggest you publish. So far your argument appears to be "nuh uh"
DennisP 7y ago
And it seems unlikely that Ethereum's 100X rise in 2017 had nothing to do with the ICO boom.
- neiman 7y ago
  I also find it hard to believe that the whole cryptoboom of 2017 can be narrowed down to one dimensional Tether-Bitcoin analysis.
  - donkeyd 7y ago
    It's probably a combination of manipulation on an incredible scale and the media attention this surge caused. We all know multiple people who FOMO'ed into crypto and lost most of their money. So that surge definitely wasn't all manipulation, but I'm not at all surprised that manipulation was what triggered that madness.
    - neiman 7y ago
      That's probably true, but hardly unique for Bitcoin imo.
  - patrickk 7y ago
    Most of the crypto market follows Bitcoin's price, at least roughly. If Bitcoin gets up 5%, Ether and other coins might rise 6,7,10%. If you look at the 30, 60 day, etc charts of BTC vs the others, it's quite clear. So the market following the Bitcoin part is plausible.
Animats 7y ago
Tether is starting to look like a Madoff-scale Ponzi scam. What maintains the $1 price of Tether is a continual net inflow of cash. Tether is known not to be backed with sufficient real assets.[1] If there's a period of net outflow from Tether, the whole house of cards comes crashing down. [1] https://www.marketwatch.com/story/tether-reverses-claim-of-100-dollar-backing-sparking-criticism-2019-03-14 https://www.marketwatch.com/story/tether-reverses-claim-of-1...
- loeg 7y ago
  Also: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
- nostrademons 7y ago
  It's looked like a Madoff-scale Ponzi scam for a long time. Even in 2017, when the world was gaga over cryptocurrencies, people were saying that the Tether stuff is super sketchy. There was a near-run on Tether this May, though, and ironically that's what pumped Bitcoin from $5300 to $8000. When folks want to dump Tether, they generally cannot dump it directly into dollars. They have to dump to Bitcoin, move it off-exchange, and then sell the dollars on an exchange with fiat currency. That means that every Tether dump creates a run on Bitcoin, which pushes the price higher. If the arbitrage trade is interrupted (as it was in May, when Binance and Bitfinex both shut down withdrawals just as the run was beginning), then the price of Bitcoin remains permanently high, and instead of selling Bitcoin on other exchanges to compensate, people buy them to match the new price, the public forgets about the panic when withdrawals open 2 weeks later, and the price remains permanently high. I wonder also if at some point Bitfinex can just make up Tether's reserve shortfall out of their profits. (Actually, they claim that they made up the shortfall already with their Tokinex IEO, which was also super sketchy, but even if they hadn't...) Coinbase reportedly made $1B in profit in 2017 and about $400-500M in 2018; Bitfinex is of similar size, so a couple years like that and their profits could probably plug the hole, if they don't get sued/regulated out of existence first.
  - heelhook 7y ago
briatx 7y ago
I applaud going back to the original source, but the paper has been updated. See this better Bloomberg article: https://www.bloomberg.com/news/articles/2019-11-04/lone-bitcoin-whale-likely-fueled-2017-price-surge-study-says https://www.bloomberg.com/news/articles/2019-11-04/lone-bitc... Relevant quotes: > One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1. > “Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one,” Griffin said in an interview. “Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.” > “This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges,” they wrote in their new peer-reviewed paper, set to be published in a forthcoming Journal of Finance. > “Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”
- neiman 7y ago
  Damn, you're right, I linked the old paper. Oops! But it seems that the new one is "set to be published in a forthcoming Journal of Finance". So it's not published yet. I find it impossible to have a discussion based on Bloomberg article, as good as it my be.

by neiman 7y ago

lostmsu 7y ago

> Rather than demand from cash investors Can't find how did they determine, that Tether was not bought with cash, so this statement is basically baseless.

Nursie 7y ago
The pattern of issuances to market make it highly unlikely.
- lostmsu 7y ago
  Can you elaborate?
  - Nursie 7y ago
    It's in the source material, but crudely it looks like tether issuances were used to prop up the market as it faltered, timed as they were. Either there was a remarkably, improbably prescient actor there, or it looks fishy as f*ck.
    - lostmsu 7y ago
      I don't understand, did they acquire dollars to back up those issuances, or not?
      - Nursie 7y ago
        Probably not. Nobody knows the full story, but given that the pattern is one of responding to market movements rather than looking like money flowing in to a market from investors, it seems unlikely. Further, given their outright lies about auditing and the recent admission that only 75% of tether is backed by cash or cash-like instruments, it looks a lot like a huge fraud to me. Make your own mind up I guess, but if you're going to tell me "See, nobody actually knows!", then that's true. But we can analyse what looks likely, and what looks likely is that it's been issued out of thin air to prop up the market price of BTC and fleece market participants for the benefit of owners of the Tether corp and Bitfinex. I guess we'll see more as the various lawsuits shake themselves out.
        lostmsu 7y ago
        > Probably not. That is not enough to support claims of the paper.
        Nursie 7y ago
        Yeah, it is, given they've done the analysis and reported on how likely it is. If you have thorough refutation prepared, I suggest you publish. So far your argument appears to be "nuh uh"

DennisP 7y ago

And it seems unlikely that Ethereum's 100X rise in 2017 had nothing to do with the ICO boom.

neiman 7y ago
I also find it hard to believe that the whole cryptoboom of 2017 can be narrowed down to one dimensional Tether-Bitcoin analysis.
- donkeyd 7y ago
  It's probably a combination of manipulation on an incredible scale and the media attention this surge caused. We all know multiple people who FOMO'ed into crypto and lost most of their money. So that surge definitely wasn't all manipulation, but I'm not at all surprised that manipulation was what triggered that madness.
  - neiman 7y ago
    That's probably true, but hardly unique for Bitcoin imo.
- patrickk 7y ago
  Most of the crypto market follows Bitcoin's price, at least roughly. If Bitcoin gets up 5%, Ether and other coins might rise 6,7,10%. If you look at the 30, 60 day, etc charts of BTC vs the others, it's quite clear. So the market following the Bitcoin part is plausible.

Animats 7y ago

Tether is starting to look like a Madoff-scale Ponzi scam. What maintains the $1 price of Tether is a continual net inflow of cash. Tether is known not to be backed with sufficient real assets.[1] If there's a period of net outflow from Tether, the whole house of cards comes crashing down. [1] https://www.marketwatch.com/story/tether-reverses-claim-of-100-dollar-backing-sparking-criticism-2019-03-14 https://www.marketwatch.com/story/tether-reverses-claim-of-1...

loeg 7y ago
Also: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
nostrademons 7y ago
It's looked like a Madoff-scale Ponzi scam for a long time. Even in 2017, when the world was gaga over cryptocurrencies, people were saying that the Tether stuff is super sketchy. There was a near-run on Tether this May, though, and ironically that's what pumped Bitcoin from $5300 to $8000. When folks want to dump Tether, they generally cannot dump it directly into dollars. They have to dump to Bitcoin, move it off-exchange, and then sell the dollars on an exchange with fiat currency. That means that every Tether dump creates a run on Bitcoin, which pushes the price higher. If the arbitrage trade is interrupted (as it was in May, when Binance and Bitfinex both shut down withdrawals just as the run was beginning), then the price of Bitcoin remains permanently high, and instead of selling Bitcoin on other exchanges to compensate, people buy them to match the new price, the public forgets about the panic when withdrawals open 2 weeks later, and the price remains permanently high. I wonder also if at some point Bitfinex can just make up Tether's reserve shortfall out of their profits. (Actually, they claim that they made up the shortfall already with their Tokinex IEO, which was also super sketchy, but even if they hadn't...) Coinbase reportedly made $1B in profit in 2017 and about $400-500M in 2018; Bitfinex is of similar size, so a couple years like that and their profits could probably plug the hole, if they don't get sued/regulated out of existence first.
- heelhook 7y ago

briatx 7y ago

I applaud going back to the original source, but the paper has been updated. See this better Bloomberg article: https://www.bloomberg.com/news/articles/2019-11-04/lone-bitcoin-whale-likely-fueled-2017-price-surge-study-says https://www.bloomberg.com/news/articles/2019-11-04/lone-bitc... Relevant quotes: > One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1. > “Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one,” Griffin said in an interview. “Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.” > “This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges,” they wrote in their new peer-reviewed paper, set to be published in a forthcoming Journal of Finance. > “Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”

neiman 7y ago
Damn, you're right, I linked the old paper. Oops! But it seems that the new one is "set to be published in a forthcoming Journal of Finance". So it's not published yet. I find it impossible to have a discussion based on Bloomberg article, as good as it my be.