Bitcoin’s Price Was Artificially Inflated Last Year, Researchers Say • Hacker News Board

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

#11

Post by ceejayoz » Wed, Jun 13, 2018, 2:51 PM UTC

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.

> 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 backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains.

Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have. Maybe at that point they'll finally complete their first audit. Their site still makes the shocking claim "subject to frequent professional audits" despite having been fired by their auditor.

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

#12

Post by ufo » Wed, Jun 13, 2018, 2:57 PM UTC

chx wrote: post #7

And this is news how? That Tether is a nothing has been painfully obvious to anyone paying attention. Of course, anyone paying attention has been avoiding comedy gold...

The news is that now we have a detailed 66 page economics paper written about it.

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

#13

Post by Scott_Sanderson » Wed, Jun 13, 2018, 3:03 PM UTC

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.

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

#14

Post by lallysingh » Wed, Jun 13, 2018, 3:04 PM UTC

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?

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

#15

Post by paulgb » Wed, Jun 13, 2018, 3:04 PM UTC

ceejayoz wrote: post #11

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.

> 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 ~100M (minus market impact costs) for basically nothing, but the money isn't from manipulating the market, it's from printing $100M USDT from nothing.

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

#16

Post by burger_moon » Wed, Jun 13, 2018, 3:05 PM UTC

They seemed to have stopped posting in April but this person on Twitter was very active during the bull market in calling out the market manipulation by Bitfinex, https://twitter.com/bitfinexed I cannot speak to the credibility but at the very least it was entertaining to read the tweats and responses.

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

#17

Post by jaaames » Wed, Jun 13, 2018, 3:06 PM UTC

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.

Correct. There's also a strong relationship between Tether and Bitfinex directors. It's suspected they were using margin loans to leverage their fake money further, while denying fiat withdrawals to real customers.

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

#18

Post by mkirklions » Wed, Jun 13, 2018, 3:07 PM UTC

seibelj wrote: post #9

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.

By printing money to prop up the price, you accomplish 2 things. One is that you can sell your crypto for USD if you are a large holder. The second is that you can acquire crypto for free because you created dollars (tether) out of nothing, and hold for the long term.

>The second is that you can acquire crypto for free because you created dollars

If someone pays bitfinix for tether, what makes this 'created'?

I dont use tether because it is fiat currency which is exactly why I bought Bitcoin- but I dont see the big deal either. Its easier than cashing out to USD.

Is tether real or fake? Who knows, I only trust Bitcoin.

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

#19

Post by CyberDildonics » Wed, Jun 13, 2018, 3:07 PM UTC

tedeh wrote: post #3

Any ideas on why "they" appear unable to keep the price up at this point in time and continue fueling the hype? Already cashed out or just impossible to stem the tide of disillusioned people taking their losses and exiting?

They stopped printing tether when they came under investigation.

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

#20

Post by jaaames » Wed, Jun 13, 2018, 3:07 PM UTC

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…

They had a relationship with Bitfinex, so they could easily convert to other shit coins and dump those to avoid tanking the BTC price when they dumped it.