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An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

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Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#201

Post by nebulous1 »

busterc wrote: post #117

I found this comment, by Richard Berger on SeekingAlpha, compelling: > STOP! and think about what this author has revealed. Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to create an arbitraged feedback loop whereby a pegged tether between Bitcoin - any_generic_tether - USD does exist and self feeds, driving up B…

> Causality is difficult to prove, but based on the correlation between the supply of Tether and Bitcoin and Tether Limited operating model, I am highly confident that the issuance of unbacked Tether is driving the insane rise of Bitcoin in USD.

Is this a parody?

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#202

Post by ncallaway »

um_ya wrote: post #189
ric2b wrote: post #173

Earlier quoted context omitted.

Bitfinex is also lacking in evidence when it comes to showing that Tethers are backed by USD.

How would they prove it? Twitter a picture of the bank balance?

At the very least, inform the public about which banking institutions they are currently using ever since Wells Fargo dropped out.

Contracting a reputable firm to conduct an in-depth audit and publicly releasing the results would also be a useful step.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#203

Post by jayd16 »

darawk wrote: post #123
busterc wrote: post #117

I found this comment, by Richard Berger on SeekingAlpha, compelling: > STOP! and think about what this author has revealed. Even IF Tether is NOT running a fraud, the arbitrage positions that automatically exist between Bitcoin and any tether are real and do create incentive to create an arbitraged feedback loop whereby a pegged tether between Bitcoin - any_generic_tether - USD does exist and self feeds, driving up B…

There's no reason arbitrage should push up the price of Bitcoin. Tether exists to normalize arb opportunities between exchanges. That's what it was created for. There is indeed a real question as to whether or not Bitfinex has issued more Tether than it has in reserve, or whether or not they will actually pay people out for their Tether tokens. But there is no 'arbitrage feedback loop' driving the price rise.

I'm no expert but mulling it over.... If Tether is big enough that the price of BTC is effected by it, such that investors feel they can cash out and that is part of their risk calculation, then a tank in Tether would also cause a drop in BTC.

If Tether is backed by loans and not hard cold cash that's a risk and effects the value.

If someone is able to buy Tether on credit, and the credit is actually backed by BTC then there could be a loop.

I'm not sure about the likelihood of this but if Bitfinex is overleveraged somehow then anything is possible. At least I think that was the argument.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#204

Post by nissimk »

tlb wrote: post #127

Tether shows the problem with non-shortable securities. If even 1% of traders believe it's valuable and 99% don't, the 1% can happily trade amongst themselves at full value. If there were a short market, the majority non-believers would drive the price down. I think you could find 1% of cryptocurrency traders that believe any theory you care to name.

Futures coming soon. Look what happened to subprime when it became possible to go short.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#205

Post by uberrr »

python-guy-vt wrote: post #133
aaavl2821 wrote: post #114

Earlier quoted context omitted.

The statement that "this is impossible with bitcoin" is false. While initially bitcoins are issued as proof of work, as soon as there is a somewhat liquid secondary market then bitcoin becomes a financial asset with a value determined by the market. That value is effectively completely indepdent of any "inherent value" and fully determined by supply and demand

> fully determined by supply and demand With bitcoin you cannot manipulate the supply, therefore you can't magically create $800M out of thin air.

You’re assuming that the balances claimed by the exchanges are actually held in reserve.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#206

Post by sp821543 »

csomar wrote: post #193
sp821543 wrote: post #186

Earlier quoted context omitted.

From coinbase TOS: You acknowledge that the quoted Buy Price Conversion Rate may not be the same as the Sell Price Conversion Rate at any given time, and that Coinbase may add a margin or “spread” to the quoted Conversion Rate.

Coinbase is not an exchange, it is a direct seller. Gdax is the exchange.

Same TOS

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#207

Post by Cakez0r »

tlb wrote: post #127

Tether shows the problem with non-shortable securities. If even 1% of traders believe it's valuable and 99% don't, the 1% can happily trade amongst themselves at full value. If there were a short market, the majority non-believers would drive the price down. I think you could find 1% of cryptocurrency traders that believe any theory you care to name.

You can short Tether on Kraken.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#208

Post by nissimk »

goialoq wrote: post #102
alexasmyths wrote: post #57

Earlier quoted context omitted.

The sheer scale of these potential frauds - including the total ambiguity of massive $ raised for ICOs is not only consistent with the shenanigans of the .com - it's much worse. In .com - companies were creating value, and we all assumed people would pay for 'email' - turns out consumers would not - so many businesses failed, and there was a stampede out of equities. All of this coin and ICO fraud, including 'regular…

Parent was talking about the 2008-2009 GFC, not the 2000 .com stock bubble. The .com stock bubble was just speculation about a new technology, not massive worldwide fraud.

https://en.wikipedia.org/wiki/Enron_scandal

https://en.wikipedia.org/wiki/MCI_Inc.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#209

Post by Analemma_ »

panarky wrote: post #176
rsynnott wrote: post #116

Earlier quoted context omitted.

Bear in mind that this is bitcoin. People continued pumping money into mtgox for _months_ after it was clear to anyone who’d been paying attention that it was dead. And currently bitcoin’s in an unusually large bubble, so there are lots of people buying into it who’ve never previously had experience of it. I see ads for, basically, “get rich quick with bitcoin” every day now. The people clicking those are not the wor…

> Bear in mind that this is bitcoin It's still a market, so market logic should apply. > get rich quick with bitcoin I see the same shit with real estate. > sufficient people buying tethers at face value It's a market. Smart money can sell tethers. When there's information that all market participants know, the market price should reflect that information.

> It's still a market, so market logic should apply.

How many levels of deranged libertarianism are you on? The market never makes mistakes?

> I see the same shit with real estate.

Right, and the real estate market spectacularly imploded and took the global economy down with it when it turned out the market was wrong. Is that your point?

> When there's information that all market participants know, the market price should reflect that information.

It should, but it empirically does not. "The market can remain irrational longer than you can remain solvent" - i.e., smart investors know that you don't bet against a bubble, even if you're 100% right that it is a bubble, unless you have very deep pockets, because you can't know how long it will continue to grow (and thus how much money you'll lose) before it pops.

Even if you know it's a bubble, the rational thing to do is to ride with it, make as much many as you can and try to get out at the right time. Hence bubbles can exist and grow even if every participant knows what's going on.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#210

Post by darawk »

notthemessiah wrote: post #163
darawk wrote: post #123

Earlier quoted context omitted.

There's no reason arbitrage should push up the price of Bitcoin. Tether exists to normalize arb opportunities between exchanges. That's what it was created for. There is indeed a real question as to whether or not Bitfinex has issued more Tether than it has in reserve, or whether or not they will actually pay people out for their Tether tokens. But there is no 'arbitrage feedback loop' driving the price rise.

> Tether exists to normalize arb opportunities between exchanges. That's what it was created for. What things are created for and how they actually behave often diverge.

Sure. Not claiming it can't have secondary effects. But there's no argument been presented that establishes that it does.
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