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As a bitcoin believer, what do you think about Tether, and the reports that the run-up of Bitcoin and other cryptocurrencies in 2017 was essentially due to pric

by skohan 6y ago

As a bitcoin believer, what do you think about Tether, and the reports that the run-up of Bitcoin and other cryptocurrencies in 2017 was essentially due to price manipulation via the injection of billions of dollars worth of faked value into the system?

marcell 6y ago
Not OP, but I would say: (1) Tether is largely orthogonal to bitcoin. It's a way to trade USD more quickly over the internet, which isn't really related to bitcoin, besides the underlying technology is similar. (2) I don't know much about the 2017 run-up in terms of price manipulation. I think Ethereum was more impacted than bitcoin, but of course both experienced price surges and crashes. Is there any public info available on this?
- amznthrwaway 6y ago
  Tether is largely used to run pump scams on BTC. It's other uses are marginal at best. It is common for Coiners to remain willfully ignorant about the price manipulation, because y'all don't want to admit how small, fragile, and wildly corrupt your ecosystem is.
  - marcell 6y ago
    I'm just not clear on how Tether usage specifically increases the bitcoin price. My understanding is it's used to transfer money between exchanges, and possibly to fund ICO's. Neither of those really lead to an increased bitcoin price.
    - skohan 6y ago
      It goes something like this: 1. Tether was announced as a "USD equivalent" - i.e. 1 tether == 1 USD which would be deposited somewhere in a bank accouont 2. Billions of dollars worth of tether were created with no USD backing, injecting fake value into the system 3 These tethers were used to buy BTC, thereby giving an artificial value to BTC since it was assumed thes BTC/Tether transactions could be treated as BTC/USD transactions. Essentially a lot of fake demand was created for BTC, thereby inflating the price massively, and luring retail investors to spend real money for BTC since they saw it as a rapidly appreciating asset.
      - marcell 6y ago
        That makes sense, but is there evidence this is actually happening? I think for this chain of logic to be true, there would have to be cases of people attempting to convert Tether into USD, and failing. That did happen with Mt Gox, so it’s certainly possible.
        skohan 6y ago
        There is a credible study[0] on the subject. But your condition does not have to hold for this manipulation to work. Assuming Bitfinex made billions of real dollars in this scheme, they could easily cover the liquidity of cashing out anyone who wants to exchange Tether for USD. [0]: https://www.wsj.com/articles/large-bitcoin-player-manipulated-price-sharply-higher-study-says-11572863400 https://www.wsj.com/articles/large-bitcoin-player-manipulate...
        marcell 6y ago
        Interesting. If the study is indeed correct, and half the previous run-up to ~$20k was due to Tether, then the market has since correct as the price is a little below half that value. Of course there have been a lot of ups/downs since then, with bitcoin hitting as low as $5k recently.
        skohan 6y ago
        I mean, the fact that the price of this asset has been heavily manipulated in the past and the price has since come down a bit would not be evidence that there is not still manipulation happening, or that the price has reached it's "fair market value"
xiphias2 6y ago
The best explanation for the timings of the bubbles that I know of is the stock to flow model by PlanB (which suggests that the next one is coming soon, as Bitcoin is getting almost as valuable as gold, and in 5 years more valuable as a scarce store of value). Regarding Tether I think the amount of Tether is really manipulated (and not 100% backed by real USD), but that Bitcoin's 2017 bubble has nothing to do with that. To me it was similar to previous bubbles that I experienced, with similar rollercoaster feelings (though I was much calmer and was much more used to it).
lmpostor 6y ago
Tether is probably not backed 1:1, but at the same time I believe it is closer to 1:1 than it is to 0:1 just because the entity that runs it is literally a money-printing machine (Bitfinex is extraordinarily profitable) and there is evidence for some large quantity of people using Tether (they had 500m seized no?) End of the day imo crypto is still a small fish when we look at the absolute numbers comparative to stocks. Manipulation is expected to a certain degree but I still lean towards a positive correlation in perceived value and price. Also I believe it is treated the same as every other market, fake it until you make it or implode. I mean I view it very much like Tesla in that in only gets is value from the "possible end state", but the reality is that BTC doesn't need much capital in the schema of the financial world to multiple even at current levels.
mD5pPxMcS6fVWKE 6y ago
Except there was no faked value injected anywhere, all tethers are 100% backed by USD in the bank. The reports are fake news. If it were not so, the freely traded tether/USD value would be below 1, but it isn't, it's traded at exactly 1.
- skohan 6y ago
  This is extremely flawed reasoning, and I'm sad to see a comment of this low quality on HN. Tether's valuation is based on the assumption that it's backed by real currency. They even removed the promise that their cash stores are audited from the website FAQ: https://cryptocoinspy.com/tether-usdt-has-removed-its-auditing-promise-from-its-faq/ https://cryptocoinspy.com/tether-usdt-has-removed-its-auditi...
  - mD5pPxMcS6fVWKE 6y ago
    This is extremely flawed reasoning, and I'm sad to see a comment of this low quality on HN. Tether's valuation is based on free market trade. If an insider knew they are not 100% backed, he has a billion dollars incentive to short the trade and then drop the bomb. However that has not happened.

by skohan 6y ago

marcell 6y ago

Not OP, but I would say: (1) Tether is largely orthogonal to bitcoin. It's a way to trade USD more quickly over the internet, which isn't really related to bitcoin, besides the underlying technology is similar. (2) I don't know much about the 2017 run-up in terms of price manipulation. I think Ethereum was more impacted than bitcoin, but of course both experienced price surges and crashes. Is there any public info available on this?

amznthrwaway 6y ago
Tether is largely used to run pump scams on BTC. It's other uses are marginal at best. It is common for Coiners to remain willfully ignorant about the price manipulation, because y'all don't want to admit how small, fragile, and wildly corrupt your ecosystem is.
- marcell 6y ago
  I'm just not clear on how Tether usage specifically increases the bitcoin price. My understanding is it's used to transfer money between exchanges, and possibly to fund ICO's. Neither of those really lead to an increased bitcoin price.
  - skohan 6y ago
    It goes something like this: 1. Tether was announced as a "USD equivalent" - i.e. 1 tether == 1 USD which would be deposited somewhere in a bank accouont 2. Billions of dollars worth of tether were created with no USD backing, injecting fake value into the system 3 These tethers were used to buy BTC, thereby giving an artificial value to BTC since it was assumed thes BTC/Tether transactions could be treated as BTC/USD transactions. Essentially a lot of fake demand was created for BTC, thereby inflating the price massively, and luring retail investors to spend real money for BTC since they saw it as a rapidly appreciating asset.
    - marcell 6y ago
      That makes sense, but is there evidence this is actually happening? I think for this chain of logic to be true, there would have to be cases of people attempting to convert Tether into USD, and failing. That did happen with Mt Gox, so it’s certainly possible.
      - skohan 6y ago
        There is a credible study[0] on the subject. But your condition does not have to hold for this manipulation to work. Assuming Bitfinex made billions of real dollars in this scheme, they could easily cover the liquidity of cashing out anyone who wants to exchange Tether for USD. [0]: https://www.wsj.com/articles/large-bitcoin-player-manipulated-price-sharply-higher-study-says-11572863400 https://www.wsj.com/articles/large-bitcoin-player-manipulate...
        marcell 6y ago
        Interesting. If the study is indeed correct, and half the previous run-up to ~$20k was due to Tether, then the market has since correct as the price is a little below half that value. Of course there have been a lot of ups/downs since then, with bitcoin hitting as low as $5k recently.
        skohan 6y ago
        I mean, the fact that the price of this asset has been heavily manipulated in the past and the price has since come down a bit would not be evidence that there is not still manipulation happening, or that the price has reached it's "fair market value"

xiphias2 6y ago

The best explanation for the timings of the bubbles that I know of is the stock to flow model by PlanB (which suggests that the next one is coming soon, as Bitcoin is getting almost as valuable as gold, and in 5 years more valuable as a scarce store of value). Regarding Tether I think the amount of Tether is really manipulated (and not 100% backed by real USD), but that Bitcoin's 2017 bubble has nothing to do with that. To me it was similar to previous bubbles that I experienced, with similar rollercoaster feelings (though I was much calmer and was much more used to it).

lmpostor 6y ago

Tether is probably not backed 1:1, but at the same time I believe it is closer to 1:1 than it is to 0:1 just because the entity that runs it is literally a money-printing machine (Bitfinex is extraordinarily profitable) and there is evidence for some large quantity of people using Tether (they had 500m seized no?) End of the day imo crypto is still a small fish when we look at the absolute numbers comparative to stocks. Manipulation is expected to a certain degree but I still lean towards a positive correlation in perceived value and price. Also I believe it is treated the same as every other market, fake it until you make it or implode. I mean I view it very much like Tesla in that in only gets is value from the "possible end state", but the reality is that BTC doesn't need much capital in the schema of the financial world to multiple even at current levels.

mD5pPxMcS6fVWKE 6y ago

Except there was no faked value injected anywhere, all tethers are 100% backed by USD in the bank. The reports are fake news. If it were not so, the freely traded tether/USD value would be below 1, but it isn't, it's traded at exactly 1.

skohan 6y ago
This is extremely flawed reasoning, and I'm sad to see a comment of this low quality on HN. Tether's valuation is based on the assumption that it's backed by real currency. They even removed the promise that their cash stores are audited from the website FAQ: https://cryptocoinspy.com/tether-usdt-has-removed-its-auditing-promise-from-its-faq/ https://cryptocoinspy.com/tether-usdt-has-removed-its-auditi...
- mD5pPxMcS6fVWKE 6y ago
  This is extremely flawed reasoning, and I'm sad to see a comment of this low quality on HN. Tether's valuation is based on free market trade. If an insider knew they are not 100% backed, he has a billion dollars incentive to short the trade and then drop the bomb. However that has not happened.