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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

#321

Post by Laforet »

jayd16 wrote: post #203
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.

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 th…

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

Indeed, one of the BFX employees accidentally let it out that Tethers are not backed by USD but perceived value of cryptos held by the exchange.

https://mobile.twitter.com/bitfinexed/status/935333097377329...

Anybody claiming that a loop does not exist has to be in some kind of denial.

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

#322

Post by dnautics »

SwellJoe wrote: post #263
dnautics wrote: post #155

Earlier quoted context omitted.

Why not. Sell your coin to tether to weather short term price dips and transfer between exchanges.... If tether is unsustainable long term, who cares?

If the fire that this smoke points to is really there, someday soon a lot of people are going to be left holding a bag of worthless tethers. That'd be a pretty bad day, wouldn't it? Kinda like being stuck in Mt. Gox during the end days.

sure, you just have to move quickly, which USDT enables you to do (versus USD, which to do transfers has ECH delays).

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

#323

Post by School-Cotton »

Geep wrote: post #302
komali2 wrote: post #267

Earlier quoted context omitted.

If it's 1-1 to USD, why not just swap coin for USD?

That's the point, you can't do that now and more than likely ever...

What are you talking about? I can do so easily on gdax.com and I assume other places as well.

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

#324

Post by komali2 »

School-Cotton wrote: post #323
Geep wrote: post #302

Earlier quoted context omitted.

That's the point, you can't do that now and more than likely ever...

What are you talking about? I can do so easily on gdax.com and I assume other places as well.

I saw a bitcoin ATM at the mall the other day.

I get that I guess it's not easy for someone in a major city or whatever.

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

#325

Post by wampwamp »

PeterisP wrote: post #159
azureel wrote: post #115

I'm not sure but, isn't this how the real banks operate, too? For example let's take a legal, legit, Bank named X in a country. If all the account owners wanted to retrieve their money, at the same time: can that bank serve that demand? Because normally for every 1 dollar deposited inside, bank can give away 5 dollars worth of credits to other people. (the ratio changes in every country probably). So accusing a virtu…

Fraction reserve lending doesn't mean "for every 1 dollar deposited inside, bank can give away 5 dollars worth of credits to other people" - it means that if people deposit 5 dollars, you can give away 4 dollars of them as loans and only keep 1 dollar in reserves (as opposed to keeping all 5). It still has to have more assets than liabilities, except that some of those assets can be not available on demand, but loans…

The banking system can expand an initial deposit of $100 into a maximum of $1,000 at a 10% reserve ratio when subsequent loans are re-deposited. ($100+$90+81+$72.90+...=$1,000). This all gets counted as M1 money.

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

#326

Post by School-Cotton »

DannyBee wrote: post #148
panarky wrote: post #112

When something doesn't make sense, usually it's because information is missing. Every market participant knows that Tether doesn't prove their reserves, and yet the market exchange rate to USD stays in a tight band between 0.98 and 1.02 across multiple exchanges. If the market doesn't trust Tether, then it should trade at a deep discount to USD, not at parity. Similarly, the conventional wisdom says cryptocurrencies…

Your claim is one that the market should be efficient, and thus, there must be missing info. Remember that markets are only efficient if P = NP. (Strong form efficiency is impossible, and weak form efficiency is only possible if P = NP). So, IMHO, the most likely possibility is simply that your market is inefficient.

Can you explain this a bit more?

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

#327

Post by lee101 »

If your anxious about things going to crash because of tethers the best way you can hedge against the volatility is watch the markets like a hawk lol. Can be very profitable too with all the volatility

Checkout the live charts and forecasts at https://bitbank.nz

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

#328

Post by pbhjpbhj »

mgbmtl wrote: post #197
csomar wrote: post #172

Earlier quoted context omitted.

The exchange doesn't sell/buy. It just connects the buyers/sellers. There are brokers that do that but you can't call them an exchange. I also think regulation prevent exchanges from trading on their own exchange to avoid front-running and since they have lots of information about the users/deposits/etc...

Thanks. Makes sense. I guess the "instant buy" on some exchanges gave me the impression that they kept coins in stock. (edit: I just saw the other comments regarding Coinbase, which answer that issue) However I'm a bit confused by: > An unsustainable price of bitcoin will lead to the collapse of other exchanges since people cashing out on these exchanges requires enormous amount of real money. To cash out, other peop…

>To cash out //

Isn't the problem that an exchange can [pretend to] credit your account to the tune of $n million, use your bitcoin to sell for that amount, then keep/use the proceeds of the sale.

This is what traditional banks do with fractional reserve banking, except here the fraction of your bitcoin held is zero ;0).

Also, if bitcoin plummets you're probably not going to be happy when the exchange says "oopsies, our bad, that transaction failed, here's your bitcoins back".

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

#329

Post by pbhjpbhj »

gst wrote: post #188
querulous wrote: post #136

Earlier quoted context omitted.

the market is extremely illiquid. even if you know it's a scam you have few options if you want to cash out. you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. there's no significant over the counter market. you can swap your bitco…

> you can trade bitcoin for cash balances at various exchanges but actually withdrawing those balances is subject to miniscule daily/monthly withdrawal limits and if there's a run on the market those exchanges will almost certainly collapse. Afaik Bitstamp doesn't have any withdrawal limits for verified users.

Cool, so Satoshi comes along and says "I'll have $100 Million please" then Bitstamp have the cash to cover it?

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

#330

Post by b1daly »

rsynnott wrote: post #116
panarky wrote: post #112

When something doesn't make sense, usually it's because information is missing. Every market participant knows that Tether doesn't prove their reserves, and yet the market exchange rate to USD stays in a tight band between 0.98 and 1.02 across multiple exchanges. If the market doesn't trust Tether, then it should trade at a deep discount to USD, not at parity. Similarly, the conventional wisdom says cryptocurrencies…

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…

As it stands, according to Bitfinex (who is has same management as Tether) individuals do not buy tether from the Tether (the entity). They buy from Bitfinex, with dollars, transfer internally to Tether, Tether generates new tethers, they transfer to Bitfinex tether hot wallet, who then deposit in customers trading account.

One issue, is that they just revealed this arrangement. The Tether website makes it look like you can both buy and redeem tethers through an online wallet on that site, but apparently nobody has done so.

The core issue is, that despite promising to do so, Tether has not released an audit proving that they only issue new tethers on receipt of dollars.

If in fact they are issuing them unbacked, they can easily fake demand for Bitcoin. Tethers are transferable via block chain between exchanges, and are used by exchanges without access to real US dollar banking to conduct trade in (nominal) across cryptocoin-USD(T) pairs.

It’s unclear whether there have been any significance redemptions of tethers for dollars. There have been ~$800m tethers issued this year.

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