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U.S. Launches Criminal Probe into Bitcoin Price Manipulation

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Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#101

Post by zby »

sine wrote: post #5

For anyone who hasn't been following, the prevailing theory is that the largest Cryptocoin exchange "Bitfinex" also runs an altcoin called "Teather" which was marketed as being backed 1:1 by USD. So far they've created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes. See this chart: https://i.imgur.com/Uo07d1d.jpg More details here: https…

For anyone who hasn't read the article - I wish Tether was investigated too - but this article is not about that: "The illicit tactics that the Justice Department is looking into include spoofing and wash trading"

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#102

Post by jasonmorton »

fwdpropaganda wrote: post #72
jasonmorton wrote: post #31

Earlier quoted context omitted.

Yes, it seems like intent is important, but in some cases (e.g. the BATS rule), no intent is needed. There are statistical properties that indicate intent, but it seems like most of the criminal cases involve finding an email or text message like "I found a bot" or someone telling an engineer to build a system with a manipulative intent.

Link to BATS rule?

12.15 on p 167 of http://cdn.batstrading.com/resources/regulation/rule_book/BA...

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#103

Post by wcarron »

whataretensors wrote: post #81
bhouston wrote: post #10

Earlier quoted context omitted.

Central banks are in the business of market manipulation via interest rates, and money supply. This is to control growth and inflation so that business cycles are smoothed out to a degree.

Not to mention steal money from the public with QE.

It's interesting that bitcoin (and crypto maximalists in general) repeatedly harp on and attack QE as if it was the end of democracy itself.

QE is just another tool for monetary policy designed to combat deflation and increase available capital supply as a stimulus measure. Because QE belongs to the school of thought that the economy is driven by consumer spending as opposed to consumer savings.

Could you please elaborate on what you mean by: > steal money from the public with QE ?

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#104

Post by Nursie »

DINKDINK wrote: post #87
sine wrote: post #5

For anyone who hasn't been following, the prevailing theory is that the largest Cryptocoin exchange "Bitfinex" also runs an altcoin called "Teather" which was marketed as being backed 1:1 by USD. So far they've created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes. See this chart: https://i.imgur.com/Uo07d1d.jpg More details here: https…

If there was a problem redeeming Tether for USD, you'd expect that the market price distortion of Tether. But it hasn't[1] https://www.tradingview.com/chart/?symbol=POLONIEX:USDTUSD >they've created 2.8 BILLION USDT Absolute numbers are meaningless and less eye catching when they're compared to the entire market. 2.8 ~ ~ Billion ~ ~ USDT is only 0.5%-0.8% of the market. Do you really think that a 300-500 billion doll…

> USDT is only 0.5%-0.8% of the market.

This is false. Market cap is a meaningless statistic when applied to cryptocurrencies. If I create a billion 'FOOCoins' and sell one to a friend for $1, FOOCoin now has a 1 billion market cap, but only a single dollar has changed hands. He sells it back to me for $2, now FOOCoin has a cap of $2 billion! With only $3 having changed hands.

This is clearly an exaggerated scenario, but it does show that the market price multiplied by the number of coins is not meaningful.

> Do you really think that a 300-500 billion dollar market is being propped up by less than pennies on the dollar?

I don't think it's a 300-500 billion dollar market.

In fact the article you linked to goes on to explain this very phenomenon! That in fact it's possible that only around $6 billion in inflow has gone into cryptocurrencies, ever. This puts tether at around 1/3 of the entire inflow. Is that still trivial?

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#105

Post by dzdt »

DINKDINK wrote: post #87
sine wrote: post #5

For anyone who hasn't been following, the prevailing theory is that the largest Cryptocoin exchange "Bitfinex" also runs an altcoin called "Teather" which was marketed as being backed 1:1 by USD. So far they've created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes. See this chart: https://i.imgur.com/Uo07d1d.jpg More details here: https…

If there was a problem redeeming Tether for USD, you'd expect that the market price distortion of Tether. But it hasn't[1] https://www.tradingview.com/chart/?symbol=POLONIEX:USDTUSD >they've created 2.8 BILLION USDT Absolute numbers are meaningless and less eye catching when they're compared to the entire market. 2.8 ~ ~ Billion ~ ~ USDT is only 0.5%-0.8% of the market. Do you really think that a 300-500 billion doll…

The mechanics are probably this: suppose someone goes to Bitfinex to redeem 10million USDT into USD. Since Bitfinex is behaving fraudulently, they don't actually have the 10million USD they promised they would hold to back the USDT. But they do have the ability to issue new unbacked USDT.

So they issue 11million unbacked USDT and use it to buy bitcoin. They sell the bitcoin for 10million USD on one of the exchanges that allows bitcoin to hard currency exchange. The 10% loss is because you have to pay a premium to exchange bitcoin to real currency. Bitfinex then pays the 10million USD to the customer in exchange for the 10million USDT which is retired.

The net results are 1million new unbacked USDT have been printed, and the illusion that USDT is backed by USD has been maintained.

Possibly the "Bitfinex issues unbacked USDT to buy bitcoin" step is being done not based purely on customer demand, but on a periodic basis when bitcoin price is falling.

Maybe Bitfinex has a hope to preserve their fraud by propping up bitcoin, or to dig out from under the fraud by building a big long bitcoin position and hoping it will rise in value.

Or maybe the timing of USDT issues with market drops is just that bitcoin price falls when there are more sellers than buyers, which is the same time there are more USDT redemptions. So to carry out the mechanics above, Bitfinex has to print tether to fund the redemptions at the time of the drops.

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#106

Post by bripeace »

sunsu wrote: post #97
bripeace wrote: post #76

Earlier quoted context omitted.

No, it's unlikely if Tether was legitimate USDT printing would correlate so closely with bitcoin (crypto) market downturns. The reason being, assuming tether is legitimate, for every printing they are sourcing additional USD to back the newly minted USDT. The idea they could so consistently find large investors willing to make NEW 100M+ investments while the crypto markets were in free fall is unlikely to say the lea…

This is inaccurate. Tether demand INCREASES when the cryptomarkets crash because traders want to escape to non-volatile assets. If everyone converts their crypto to USDT at the same time (which is what happens during big crashes) they MUST print more Tether or the price will increase.

Yes of course demand increases for UDST on downturns which increases the market value of USDT and that's fine.

In fact printing tether to ensure it's market value is $1 is a fine solution. Except for the fact that the bank accounts that BACK the tether with USD are now in deficit compared ot the UDST supply. So while the crypto market value of USDT is $1 it's no longer backed 1-1.

So now, if they're legit, tether must figure out a way to get the missing dollars back into the bank account. The most efficient way to do this is to find an outside investor and trade him all the newly printed USDT for USD. In practice this would be rather difficult to do consistently in sliding markets, difficult enough that the correlation would be low as I pointed out.

You could also exchange USDT for various COINS then sell the coins for USD which then go into those reserve bank accounts. If you have a willing exchange partner with lots of cash and a need for bitcoins then this could work pretty well. Considering Bitfnex is run by the same dudes as tether, if they are legit then this is probably what they are doing. But all that's just IF they are legit and there's plenty of things wrong with USDT outside of whether it's backed 1-1 with USD.

TLDR: Trading volume and market value of USDT does not relieve tether of actually having USD on hand for each Tether that exists.

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#107

Post by dragonwriter »

mtgx wrote: post #42
imeron wrote: post #39

Earlier quoted context omitted.

You can create Tether out of thin air and use it to move the market in a favourable direction.

But assuming Tether was legitimate, wouldn't they also need to create new Tether units during extreme market crashes because that's when the highest demand for Tether would be, so they'd run out of the existing Tether? They wouldn't need to create new Tether during bull runs, because nobody cares about putting their money into Tether then.

> But assuming Tether was legitimate, wouldn't they also need to create new Tether units during extreme market crashes because that's when the highest demand for Tether would be, so they'd run out of the existing Tether?

BTC crashes inherently would create BTC -> USDT interest, sure, but not inherently create USD availability for backing new USDT.

Creation of legitimate USDT would mainly seem to happen when there is high USD -> BTC interest, because that is, in many cases, realized by USD -> USDT conversion (with, in principle, the USDT created at that time and the USD in reserve backing the new USDT) followed by USDT -> BTC exchange.

You might see new legitimate, large-scale USDT creation in a crash if, say, bargain-hunting new USD money is flowing into BTC, but the people exiting BTC and driving the price down are holding USDT without converting to USD.

> They wouldn't need to create new Tether during bull runs, because nobody cares about putting their money into Tether then.

Yes, they would, unless “bull runs” in the USDT-denominated BTC market are just money already held in USDT rushing back into BTC, rather than new USD flowing into the USDT/BTC market.

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#108

Post by sunsu »

Nursie wrote: post #100
sunsu wrote: post #97

Earlier quoted context omitted.

This is inaccurate. Tether demand INCREASES when the cryptomarkets crash because traders want to escape to non-volatile assets. If everyone converts their crypto to USDT at the same time (which is what happens during big crashes) they MUST print more Tether or the price will increase.

> If everyone converts their crypto to USDT at the same time (which is what happens during big crashes) they MUST print more Tether or the price will increase. This doesn't make sense. You don't "convert" other cryptocurrencies to USDT, you sell your cryptocurrencies to people who have USDT. If there's a big sell pressure on the cryptocurrency, people want to move back to dollars, and there are not enough USD(T) then…

It makes perfect sense. If many people are trying to BUY USDT (increasing demand for USDT) the price of USDT will increase. Tether tries to prevent this by printing more USDT (increasing supply). They are not "magicking" Dollars, they are magicking a commodity (USDT) pegged to Dollar.

I'm not saying that I'm a big Tether fan or anything. However to say that it "doesn't make sense" when they print more Tether during market crashes is false.

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#109

Post by CryptoPunk »

wcarron wrote: post #103
whataretensors wrote: post #81

Earlier quoted context omitted.

Not to mention steal money from the public with QE.

It's interesting that bitcoin (and crypto maximalists in general) repeatedly harp on and attack QE as if it was the end of democracy itself. QE is just another tool for monetary policy designed to combat deflation and increase available capital supply as a stimulus measure. Because QE belongs to the school of thought that the economy is driven by consumer spending as opposed to consumer savings. Could you please elab…

QE extracts wealth from the public through seignorage, and redistributes it to private parties.

Re: U.S. Launches Criminal Probe into Bitcoin Price Manipulation

#110

Post by s73v3r_ »

Entangled wrote: post #16
sine wrote: post #5

For anyone who hasn't been following, the prevailing theory is that the largest Cryptocoin exchange "Bitfinex" also runs an altcoin called "Teather" which was marketed as being backed 1:1 by USD. So far they've created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes. See this chart: https://i.imgur.com/Uo07d1d.jpg More details here: https…

So, BTC created 16 million coins from air and nobody complained. Ripple created 100 billion coins from air and nobody complained. Tron, Stellar, Cardano, Iota, all in the billions. The top 1000 coins were created from air and nobody complained (most are scams). Why creating Tethers from thin air is now a cause of concern? That's a coin just like every coin out there, like Tron, Verge, EOS, they're created from nothin…

"And the market has decided USDT has more value than all other coins combined as it is number two in volume just behind BTC."

No, that just means that there's more of them.

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