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> How did you verify this? Because mechanically this is how an exchange order book works. Go to any exchange to place a trade and you will see this. > I think

> How did you verify this? Because mechanically this is how an exchange order book works. Go to any exchange to place a trade and you will see this. > I think it would be incredibly easy to maintain --- simply because no one ever audits their books. Publishing an order book and the resulting trades is the entire point of an exchange. The whole purpose is to provide a venue where buyers submit bids and sellers submit asks that are advertised to each other. When they happen to agree on price a trade automatically occur. If I go on an exchange and I can see in the order book that there are only 1000 USDT available for $1.00, and the next 1000 USDT are only available for $1.01, and I submit a buy order for 2000, I will break the "peg." However, since the majority of market participants will disagree with me, they will almost certainly quickly submit new orders willing to sell USDT for $1.00 again and the "peg" will be restored. The "peg" terminology comes from currency markets like USD <-> RMB where China sets the price by law and there is no order book price discovery at all. This isn't to say it's impossible for exchanges to engage in shenanigans. They can generate wash sales at no cost. But if they see you're going to break the peg, so they magically insert 1000 more USDT available for $1.00, and they support withdrawals, they are going to have to give you that money in which case the exchange has just made itself as regular seller and can only keep it up for as long as it is willing to set money on fire. And before you suggest they have unlimited USDT and so don't care, remember it goes both directions. You could also be a seller of USDT looking to find a buyer paying you in USD. For the "peg" to function the price needs to stay the same both ways.

jqpabc123 5y ago
Publishing an order book and the resulting trades is the entire point of an exchange. And there is no way to manipulate this "order book", right? Just using my imagination here, but how about this: Any offer to sell USDT for less than $1USD, the exchange itself buys it under whatever name they choose and then immediately lists it for sale at --- you guessed it $1USD. Any order to sell USDT for more than $1USD just sits there unexecuted until a suitable idiot is found or the order is cancelled. Meanwhile, any offer to buy/sell USDT at $1USD gets executed almost immediately. By doing this they are manipulating the market and making money by fixing the price of USDT at $1USD. As long as all (or most) of the exchanges follow suit --- USDT stays pegged at $1USD --- even though it may only be worth $0.30 at maybe nothing at all --- you really have no way to *know*. You have placed all your trust and blind faith in these unregulated exchanges that no one ever audits. You *assume* that they operate just like similar regulated markets but no one ever verifies this. You know what happens when you ass-u-me too much, right?
- everfree 5y ago
  > You have placed all your trust and blind faith in these unregulated exchanges that no one ever audits. As I mentioned in the other comment thread, Coinbase and Kraken trade USDT, are highly regulated under US law, and are audited regularly. Gemini is also highly regulated under US law and audited regularly, though they don't trade USDT. I don't know where you're getting this idea that most exchanges are unregulated and never audited, or that it even matters as long as the particular exchange you are using is regulated and audited. It would be really hard for me to believe that both Coinbase and Kraken are colluding to trade USDT at a rate other than fair market value as determined by their order books.
  - jqpabc123 5y ago
    ... both Coinbase and Kraken are colluding to trade USDT at a rate other than fair market value They may not be a party to any collusion. They may simply be powerless to prevent or affect it in any material way. As the crypto market stands, the largest exchange in the world has access to unlimited crypto funds simply by minting more Tethers. At the same time, their trading volume alone gives them significant price influence over these same Tethers. If they collude with enough other exchanges to control a substantial majority of the Tether market volume, any outlier exchanges (like Coinbase and Kraken) would just be along for the ride.
- dataangel 5y ago
  What you described isn't even manipulation, it's exactly equivalent to the exchange keeping a big limit buy order on the book at all times. If the exchange decides to take the other side of your trade, and they offer you a better price then you asked for, great! Your costs were reduced. Do they let you withdraw? If yes then they have no more ability to "manipulate" via this mechanism than anyone else. They are paying for it with their finite funds. It's no different than anyone else putting big orders at 1$. The exchange could discount their own fees, but that's just a disadvantage for other traders, not anything guaranteed to keep a price. There's no trust or blind faith here, just knowledge of how order books and exchanges actually work.
  - 5y ago

jqpabc123 5y ago

Publishing an order book and the resulting trades is the entire point of an exchange. And there is no way to manipulate this "order book", right? Just using my imagination here, but how about this: Any offer to sell USDT for less than $1USD, the exchange itself buys it under whatever name they choose and then immediately lists it for sale at --- you guessed it $1USD. Any order to sell USDT for more than $1USD just sits there unexecuted until a suitable idiot is found or the order is cancelled. Meanwhile, any offer to buy/sell USDT at $1USD gets executed almost immediately. By doing this they are manipulating the market and making money by fixing the price of USDT at $1USD. As long as all (or most) of the exchanges follow suit --- USDT stays pegged at $1USD --- even though it may only be worth $0.30 at maybe nothing at all --- you really have no way to *know*. You have placed all your trust and blind faith in these unregulated exchanges that no one ever audits. You *assume* that they operate just like similar regulated markets but no one ever verifies this. You know what happens when you ass-u-me too much, right?

everfree 5y ago
> You have placed all your trust and blind faith in these unregulated exchanges that no one ever audits. As I mentioned in the other comment thread, Coinbase and Kraken trade USDT, are highly regulated under US law, and are audited regularly. Gemini is also highly regulated under US law and audited regularly, though they don't trade USDT. I don't know where you're getting this idea that most exchanges are unregulated and never audited, or that it even matters as long as the particular exchange you are using is regulated and audited. It would be really hard for me to believe that both Coinbase and Kraken are colluding to trade USDT at a rate other than fair market value as determined by their order books.
- jqpabc123 5y ago
  ... both Coinbase and Kraken are colluding to trade USDT at a rate other than fair market value They may not be a party to any collusion. They may simply be powerless to prevent or affect it in any material way. As the crypto market stands, the largest exchange in the world has access to unlimited crypto funds simply by minting more Tethers. At the same time, their trading volume alone gives them significant price influence over these same Tethers. If they collude with enough other exchanges to control a substantial majority of the Tether market volume, any outlier exchanges (like Coinbase and Kraken) would just be along for the ride.
dataangel 5y ago
What you described isn't even manipulation, it's exactly equivalent to the exchange keeping a big limit buy order on the book at all times. If the exchange decides to take the other side of your trade, and they offer you a better price then you asked for, great! Your costs were reduced. Do they let you withdraw? If yes then they have no more ability to "manipulate" via this mechanism than anyone else. They are paying for it with their finite funds. It's no different than anyone else putting big orders at 1$. The exchange could discount their own fees, but that's just a disadvantage for other traders, not anything guaranteed to keep a price. There's no trust or blind faith here, just knowledge of how order books and exchanges actually work.
- 5y ago