5 ms·

I have a theory of why Tether is able to dodge risk. If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will

I have a theory of why Tether is able to dodge risk. If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will hit their target? They know the bitfinex order depth for every asset so they can for example buy into bitcoin and then calculate exactly when they must get out. Its possible this could be built into the core layer of their exchange software. That’s how I would do it if I wanted max profit without the risk and didn’t care about regulation.

gruez 4y ago
>If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will hit their target? They know the bitfinex order depth for every asset so they can for example buy into bitcoin and then calculate exactly when they must get out. This makes no sense to me. Can you rephrase/elaborate what you mean by this?
- djbusby 4y ago
  Bitfinex (B) sees orders incoming for BTC or other currency. Then B acquires for $X. Then B fills the order to clients at $X.03 Boom, $0.03 free money. Multiply by scale of their client base.
  - gruez 4y ago
    That's just front running though? I'm not sure how tether has to do with it. You can pull that off with or without creating a stablecoin with questionable backing.
  - wskinner 4y ago
    1. This only applies to market orders. 2. Bitfinex is not the only exchange where people can trade BTC or other crypto. 3. How does B acquire BTC for $X at scale?
    - dangero 4y ago
      1. They can see an order match for a limit order and preempt it with a better offer before pushing it through by a micro-fraction of a penny 2. They can run trading bots on all major exchanges to keep USDT pegged —- while not foolproof it will hold in most situations provided there is enough liquidity in their accounts on every exchange.
  - grey-area 4y ago
    Even more profitable is printing their own currency with nothing backing it, then lying about having it fully backed to set the value at or just below $1. Each USDT printed and sold to a sucker = $1 USD free money.
    - raven105x 4y ago
      You're describing post-1971 USD. It's getting difficult to tell which currency is the bigger scam at this point.
      - tartoran 4y ago
        Except the latter is backed by an army and you can actually buy stuff with it. The former is so volatile that you don’t know if it’ll exist next year or not
        andirk 4y ago
        8% of every dollar in your pocket a year ago no longer exists.
        shuckles 4y ago
        Not only is that adjacent to, but itself, a wrong statement, what does it even have to do with anything?
        andirk 4y ago
        shuckles 4y ago
        Inflation is a measure of purchasing power. I have all the dollars in my pocket and, depending on what I'm trying to buy like shipments of containers from Shanghai to Los Angeles, I could possibly buy more goods and services from last year. I think your comments are below the level of quality the HN community demands.
dangero 4y ago
At any moment they can see the order book size in btc and the prices so if they buy btc with USDT they can safely hold the Bitcoin provided they are monitoring the order book. If a big sell order comes in or someone tries to cancel a buy order they can preempt it with a sell from their holdings to make sure they don’t end up in the red. Bottom line if you can freely frontrun an order book you can make a lot of money. USDT provides the liquidity to do that.

gruez 4y ago

>If they are owned by Bitfinex can they not front-run the Bitfinex order book to guarantee their stops will hit their target? They know the bitfinex order depth for every asset so they can for example buy into bitcoin and then calculate exactly when they must get out. This makes no sense to me. Can you rephrase/elaborate what you mean by this?

djbusby 4y ago
Bitfinex (B) sees orders incoming for BTC or other currency. Then B acquires for $X. Then B fills the order to clients at $X.03 Boom, $0.03 free money. Multiply by scale of their client base.
- gruez 4y ago
  That's just front running though? I'm not sure how tether has to do with it. You can pull that off with or without creating a stablecoin with questionable backing.
- wskinner 4y ago
  1. This only applies to market orders. 2. Bitfinex is not the only exchange where people can trade BTC or other crypto. 3. How does B acquire BTC for $X at scale?
  - dangero 4y ago
    1. They can see an order match for a limit order and preempt it with a better offer before pushing it through by a micro-fraction of a penny 2. They can run trading bots on all major exchanges to keep USDT pegged —- while not foolproof it will hold in most situations provided there is enough liquidity in their accounts on every exchange.
- grey-area 4y ago
  Even more profitable is printing their own currency with nothing backing it, then lying about having it fully backed to set the value at or just below $1. Each USDT printed and sold to a sucker = $1 USD free money.
  - raven105x 4y ago
    You're describing post-1971 USD. It's getting difficult to tell which currency is the bigger scam at this point.
    - tartoran 4y ago
      Except the latter is backed by an army and you can actually buy stuff with it. The former is so volatile that you don’t know if it’ll exist next year or not
      - andirk 4y ago
        8% of every dollar in your pocket a year ago no longer exists.
        shuckles 4y ago
        Not only is that adjacent to, but itself, a wrong statement, what does it even have to do with anything?
        andirk 4y ago
        shuckles 4y ago
        Inflation is a measure of purchasing power. I have all the dollars in my pocket and, depending on what I'm trying to buy like shipments of containers from Shanghai to Los Angeles, I could possibly buy more goods and services from last year. I think your comments are below the level of quality the HN community demands.

dangero 4y ago

At any moment they can see the order book size in btc and the prices so if they buy btc with USDT they can safely hold the Bitcoin provided they are monitoring the order book. If a big sell order comes in or someone tries to cancel a buy order they can preempt it with a sell from their holdings to make sure they don’t end up in the red. Bottom line if you can freely frontrun an order book you can make a lot of money. USDT provides the liquidity to do that.