This summer, over 50,000 trades on the popular Kraken crypto exchange related to the highly controversial alternative coin tether (USDT) were analyzed by journalists, an academic and a former Federal Reserve Commissioner. They describe the monitored activity as highly unusual as larger Tether orders could not “have a major impact on prices”. Red flags were raised because none of the three analysts had ever “seen a market behave like Kraken”. Is it blatant manipulation or a huge nothing burger?
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Tether on Kraken is a strange phenomenon
Give him a minute and Tether will get into another controversy. The intrepid reporters Matthew Leising et al. are once again immersed in the enduring mystery of the USDT. This time around, it’s the concept of “wash” trading, where key positions essentially trade themselves in order to put pressure on the price of an asset.
Between May 1 and June 22 of this year, 56,000 USDT orders were monitored for Kraken. To the researchers, even massive trades didn’t seem to affect the price of tether. In fact, larger trades were indistinguishable from smaller ones in this regard. The total of $ 13,076,389 was an exact anomaly that repeated enough times for analysts to conclude that something like bots were active in the exchange.
Tether occupies a strange place in the imagination of ecosystems. It evolved from Realcoin and has been around in its current incarnation for about four years. Your government company or your outfit seem to have ties to Switzerland and Hong Kong. Last year, the Paradise Papers publication assumed USDT was born from the giant crypto exchange Bitfinex, an indictment that was answered by demanding that the market maker and Tether Holdings Limited be independently separated.
For the past few months, USDT has been the subject of attempts to link it to price manipulation, including possibly the term Bitfinex billed for half of the late 2017 price hike from trading and inflating tether. Even the US Commodities and Futures Trading Commission (CFTC) is said to be investigating both Bitfinex and Tether. The scandalous reputation of the token goes to his heart: every USDT is covered by one US dollar, it is claimed. A test proved equally controversial, leaving no one satisfied. Nevertheless, it remains consistently in the top 20 most valuable coins by market capitalization.
The case for manipulation
Bloomberg Recently, Tether Trading proposed red flags. By hiring former Fed regulators Mark Williams and Rosa Abrantes-Metz of NYU, Mr. Leising and his staff investigated USDT activity on Kraken and found “oddly specific order sizes – many go down to five decimal places, some are repetitive” . Trading bots, if that is the case, are more natural nowadays and hardly controversial. It is the unresponsiveness of the USDT that leads this group to seek explanations. Bitcoin Core (BTC), which in turn assumes tether inflation as the cause, apparently jerks and pulls after tether dumps, which most would describe as “normal”. Tether lingers, does not respond.
The theory is that as demand increases, the price of an asset should increase accordingly. For example, a trade of 75 tether managed to move the price three zeros and one one after the decimal point, basically nothing. And USDT price should have increased on various other stages, along with pumping the gas with even more tether to calm it down. That didn’t happen either. What, in turn, should be a natural search for balance through supply is apparently control through bots.
Some immediately believe it was textbook manipulation, but more valid information is needed before such an allegation is made. Still, Researchers claim these types of irregularities “would defy gravity”. The manipulation question first came from a renowned poker player, Andrew Rennhack. He deleted data from Kraken and published his thoughts. He was one of the first to openly suggest something was wrong.
Researchers later noted that these strangely specific numbers, like the 13,076,389 tether, led them to suspect “that such numbers could be signals to the automated trading programs of fraudsters. One possible explanation: The software would look for jobs of a unique size and act against them. ”Taking both sides of the same coin gives the impression of some kind of momentum, and state regulators have deemed it appropriate to do so illegally. There is no evidence that Kraken was involved in any manipulation itself. Kraken CEO Jesse Powell replied, “Nothing looks out of place in our publicly available data feed. We have not checked the legitimacy of the dataset [researchers] asked us for a rating. ”The customer review has been automatically translated from German.
Is Tether’s price rigged? Let us know in the comments.
Images via Pixabay.
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C. Edward Kelso
C. Edward Kelso has written hundreds of articles as a journalist on a range of topics from international finance, regulations to cryptocurrency philosophies, luminary interviews and book reviews.
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