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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

#31

Post by cornholio »

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…

Yes. The fundamental issue they don't seem to address is that strongly positive correlation between Bitcoin prices and Tether issuance is to be expected even if there is no manipulation, or, at most, manipulation from unrelated 3rd parties that are actually pumping real dollars into the market via Tether. Tether could indeed hide the manipulation, but there still doesn't seem to be a smoking gun.

In addition, a willful design for manipulation of the whole cryptocurrency market would strongly motivate Bitfinex to hide or manipulate public Tether data precisely to make such a link impossible to prove.

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

#32

Post by mikeash »

CyberDildonics wrote: post #24
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.

The current HN title of “NYT and UT Austin: Bitcoin Prices Manipulated by Tether and Bitfinex” makes it sound like the NYT was part of the research, not just reporting.

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

#33

Post by ceejayoz »

kgwgk wrote: post #28

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…

> Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation.

That's silly. Ponzi-style schemes have been around since at least the late 1800s.

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

#34

Post by ceejayoz »

dustingetz wrote: post #26

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 an…

Real central banks regularly raise interest rates to prevent over-inflation of asset prices.

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

#35

Post by gph »

paulgb wrote: post #30
Scott_Sanderson wrote: post #13

Earlier quoted context omitted.

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.

But printing the money is only useful in that it manipulates the market price to go that 10% higher which is where you make the profits.

If they printed that money and everyone found it worthless and the market didn't response they wouldn't have a business model.

Edit: I guess I should say that's the conjecture of those saying Tether was created purely for profit based on market manipulation. I don't have an inside knowledge on what was going through the heads of those at bitfinix who created it.

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

#36

Post by deltateam »

kgwgk wrote: post #28

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…

Right, its been the argument for the past year in the crypto space, and this is because of a lack of transparency from Bitfinex, which is the right move for Bitfinex. Many people are just assuming the worse, as they have no proof for the best case or the worst case.

Every OTC desk I talk to always brags about how much demand there is for large buy orders, especially during the dips. If Bitfinex's Tether works as created, then any surge in demand will result in new tether's being created, this is the only way Tether can sustain it's peg.

IF current cryptocurrency owners are storing value in Tether so they they don't lose money, then more Tether's should be printed.

ELSE IF new cryptocurrency buyers are sending fiat to Bitfinex and get Tether, then new Tether should be printed

The main gotcha is that no Tether's have been destroyed, to my knowledge. And this is from just looking at the OMNI Tether asset on Bitcoin's blockchain. But has demand for Tether ever really dropped?

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

#37

Post by josu »

I don't know, I followed all the ride very closely, and I don't think that manipulation played that big of a role. Bitcoin was clearly undervalued at the beginning of the year, when its price was around $1,000. Bitcoin needed a protocol update, however, the community couldn't agree on how to proceed, and there was the threat of a contentious fork, where bitcoin would split in 2. In the end, the protocol update was carried out (SegWit) and while there ended up being a fork (Bitcoin Cash) it wasn't the contentious fork everybody feared.

So once that all those threats were out of the way, the price of bitcoin started climbing really fast. Korean and Japanese people started buying cryptocurrency like there was no tomorrow and the market started to overheat. Koreans wanted to buy crypto so badly, that they were paying premiums of more than 40% compared to the rest of the world. Taxi drivers in the US were promoting ICOs, EOS had huge billboards in Times Square and the euphoria that goes hand in hand with every bubble started settling in.

But everybody knew that the price growth was outpacing the increase in usage of the technology, so once the CME futures launched in December, there were no more huge news in the horizon, and the price started deflating.

So was there some kind of price manipulation going on? Probably. But looking back there is really no need for price manipulation, you can explain the price increase using any economics textbook.

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

#38

Post by ataturk »

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?

The financial types who flocked to these cryptos had one goal in mind: Pump and dump in an unregulated market. Buyer beware.

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

#39

Post by CyberDildonics »

ceejayoz wrote: post #33
kgwgk wrote: post #28

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…

> Creating billions of dollars’ worth of value with a ridiculous perpetual-motion fake-dollar-printing machine is a real innovation. That's silly. Ponzi-style schemes have been around since at least the late 1800s.

So has caffeine but people still find a way to repackage it.

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

#40

Post by greyfox »

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…

Fake news or not your point is still valid, a clear, correct, and non-biased title is basically day one for anyone writing an article, if your title cannot be trusted...neither can your content?
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