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Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

nytimes.com

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Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#21

Post by tomrod »

lallysingh wrote: post #14
ejstronge wrote: post #4

Could we change the title to that of the article, "Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say"? It currently implies that the New York Times did independent research ("NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex") which does not seem to be the case. I think this is a subtle point but, with the tension surrounding 'fake news', it's critical to distinguish reporting on…

Do people take the 'fake news' claims seriously? Even here in HN?

Yes. Clarity is important.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#22

Post by ceejayoz »

paulgb wrote: post #15
ceejayoz wrote: post #11

Earlier quoted context omitted.

> You can just print money, that's the business model. That is not Tether's stated business model. To issue 1 USDT, Tether is supposed to take in 1 USD from someone, and hold it safely in an account. Their stated business model is taking a 10 basis point or $20 fee (whichever one is higher) when someone buys USDT with USD. https://tether.to/fees/ The likely fraudulent business model would be printing USDT that aren't…

> The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains. If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down. It's still a profitable business model, because they can get ~1…

> If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down.

The hysteria generated by Bitcoin's skyrocketing price likely allowed them to cash out quietly without crashing the market.

Now that the excitement has worn off, that's no longer true, and hey, look... they're suddenly not printing USDT so much.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#23

Post by dustingetz »

paulgb wrote: post #8

What I don't get about the theory that Tether was used to intentionally manipulate markets, is that if you have a money-printing machine, you don't need to manipulate markets as a business model. You can just print money, that's the business model. Of course it's possible that that influx of capital will move a thin market. But Occam's razor seems to imply that that's a side effect rather than the intent.

Printing money and using it to buy crypto is what inflated the price

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#24

Post by CyberDildonics »

ejstronge wrote: post #4

Could we change the title to that of the article, "Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say"? It currently implies that the New York Times did independent research ("NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex") which does not seem to be the case. I think this is a subtle point but, with the tension surrounding 'fake news', it's critical to distinguish reporting on…

I don't think it implies that at all. The New York Times is reporting on in-depth research from UT Austin which seems clear from the title.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#25

Post by Larrikin »

lallysingh wrote: post #14
ejstronge wrote: post #4

Could we change the title to that of the article, "Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say"? It currently implies that the New York Times did independent research ("NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex") which does not seem to be the case. I think this is a subtle point but, with the tension surrounding 'fake news', it's critical to distinguish reporting on…

Do people take the 'fake news' claims seriously? Even here in HN?

Active measures show up on here, this is a pretty big forum with a larger than average number of influential users after all. But typically those posts are down voted pretty quickly.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#26

Post by dustingetz »

Real central banks share an incentive to inflate asset prices just as much as Crypto exchanges do (altcoin exchanges take profits in crypto and thus are exposed). The parallels to central banking are astounding to me. Except in crypto this happened at internet speed instead of over 50 years.

(I am not talking about money printing and interest rates, I'm talking about actual assets in bubbles like houses and stocks and cryptoassets. Central banks = nation states and nation states want growth in assets)

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#27

Post by craigc »

I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims:

> This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past.

I haven’t read the entire 66 page report yet, but assume for a second that the relationship between Tether and US dollars is 1:1. This would mean that during a bull market, when the price started to decline, big players invested money to buy up the available supply. Nothing about that seems suspicious to me. They may have chosen to use Tether instead of US dollars for any reason. Perhaps because there are more exchanges that have USDT trading pairs than there are with USD pairs. Or perhaps because it made arbitrage easier (transferring USDT from one exchange to another is much simpler than USD where you would have to first move it to a bank account then wait days for a new transfer to take place).

There is a chart at the end of the report that shows that the Tether issuance continued to increase even as the BTC price was falling. Also it shows that less than 25% of BTC trading volume came from Tether while over 60% came from USD (page 38).

It is funny that claiming that the price decline in BTC since December is manipulation will lead to you getting flamed here and people will tell you that it is just going to its “natural value of zero”, but the idea that there was a conspiracy to pump up the price last year is greeted with open arms, and everyone latches onto it (The reality is probably somewhere in between). The math regarding Bitcoin’s price increase is actually pretty sound, and I encourage anyone who disagrees to read this article:

https://medium.com/the-crypto-times/why-is-everyone-investin...

---

As a side note, I think if you said this exact same thing about the stock market, it would not be big news at all: “US dollars were used to pump up the stock market after it experienced big dips”. And meanwhile BTC is 0.3% the size of the stock market.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#28

Post by kgwgk »

Today Matt Levine talks about this paper in his daily column:

https://www.bloomberg.com/view/articles/2018-06-13/judge-rul...

"of these two explanations—

1) Bitcoin’s rapid and sustained rise is due to the fact that it satisfies a real economic need in an elegant way, and people have responded to that; or

2) Bitcoin’s rapid and sustained rise is due to a magical fountain of fake dollars that everyone just decided to treat as real dollars, and that can be used to manipulate its price any time it’s in danger of falling—

the second is possibly more impressive. Like, creating billions of dollars’ worth of value by building a useful thing is relatively straightforward. Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation."

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#29

Post by yifanl »

craigc wrote: post #27

I am fully prepared to receive negative points for this comment, but I do not believe there is anything new here. This narrative has been pushed by the media for almost a year now. The article even claims: > This method is not conclusive, but it has helped government authorities and academics spot suspicious activity in the past. I haven’t read the entire 66 page report yet, but assume for a second that the relations…

The issue with using Tethers to pump up the price is that it implies there's billions of U.S. dollars backing up that Tether. If there isn't billions of USD to be found then... what?

The USD pumping up the stock market is undeniably there, but if the Tether pumping up BTC isn't real (real being defined by the 1 USDT = 1 USD), then the price is essentially being pumped up by nothing.

Re: Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say

#30

Post by paulgb »

Scott_Sanderson wrote: post #13
paulgb wrote: post #8

What I don't get about the theory that Tether was used to intentionally manipulate markets, is that if you have a money-printing machine, you don't need to manipulate markets as a business model. You can just print money, that's the business model. Of course it's possible that that influx of capital will move a thin market. But Occam's razor seems to imply that that's a side effect rather than the intent.

It's a money printing machine in the sense they printed 100s of millions of tethers whenever they wanted. Problem is no one will give you $1 for a tether (except a very thin market on Kraken). Instead, they used the tethers to buy bitcoin and pump the price, then cashed out their bitcoin to fiat in over-the-counter deals.

Say you print $100M USDT and do this, and the market moves up 10%, and you get lucky enough to find an OTC buyer willing to give you the market price. You rake in 110M for printing 100M. This is still a money printing business model, the market manipulation is just icing on the cake.
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