Bitcoin crash accelerates as Tether fingered

There’s no way to put a good interpretation upon the BTC crash chart. The bearish descending triangle is broken on daily, weekly and monthly charts:

All we need now is to break the intra-day low at $6k and it’s free-fall time.

The renewed selling came as the NYT caught up with the great Tether-ponzi:

A concentrated campaign of price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year, according to a paper released on Wednesday by an academic with a history of spotting fraud in financial markets.

The paper by John Griffin, a finance professor at the University of Texas, and Amin Shams, a graduate student, is likely to stoke a debate about how much of Bitcoin’s skyrocketing gain last year was caused by the covert actions of a few big players, rather than real demand from investors.

Many industry players expressed concern at the time that the prices were being pushed up at least partly by activity at Bitfinex, one of the largest and least regulated exchanges in the industry. The exchange, which is registered in the Caribbean with offices in Asia, was subpoenaed by American regulators shortly after articles about the concerns appeared in The New York Times and other publications.

Mr. Griffin looked at the flow of digital tokens going in and out of Bitfinex and identified several distinct patterns that suggest that someone or some people at the exchange successfully worked to push up prices when they sagged at other exchanges. To do that, the person or people used a secondary virtual currency, known as Tether, which was created and sold by the owners of Bitfinex, to buy up those other cryptocurrencies.

…In particular, Mr. Griffin and Mr. Shams examined the flow of Tether, a token that is supposed to be tied to the value of the dollar and that is issued exclusively by Bitfinex in large batches. They found that half of the increase in Bitcoin’s price in 2017 could be traced to the hours immediately after Tether flowed to a handful of other exchanges, generally when the price was declining.

Other large virtual currencies that can be purchased with Tether, such as Ether and Zcash, rose even more quickly than Bitcoin in those periods. The prices rose much more quickly on exchanges that accepted Tether than they did on those that did not, and the pattern ceased when Bitfinex stopped issuing new Tether this year, the authors found.

Here is the paper.

MB readers fingered Tether long ago and was one of the reasons why we’ve been so bearish on the world’s first ever global ponzi-scheme which appears now on the verge of going completely bust.

Comments

  1. Bitfinex were just copying the Fed.

    The process of creating USD-Tether out of nothing to buy Bitcoin is similar to QE creating US Dollars by quantitative easing (QE) to prop up asset prices.

    • Oh yeah, I remember that one, all currencies are worthless so might as well buy a worthless crypto because “the future”.

      Except US dollars are useful for buying things.

      You stick with tethers and I’ll keep some USD and let’s see how it goes shall we?

    • And don’t ignore the faithful keeping firm to their vows while the edifice crashes.

  2. Tether is only a tiny part of the scam

    The exchanges are a black box: there is no way to verify that any trades on there (involving USDT or not) are actually real, because none of them get written on the blockchain, and there is no oversight or transparency

    The whole thing is a sham

    • Any more details on this ? i thought everything went on the chain …. that was the point .

      • The exchanges aren’t bitcoin.
        but what he means is that you deposit money/crypto into an exchange, which then maintains a ledger of transactions internally while holding both the money and crypto internally, and records only appear on the blockchain/in bank accounts when stuff is withdrawn from the exchange.
        As far as I know this is how exchanges for most things work, crypto or not. And in terms of bitcoin and similar, placing blockchain records for every small transaction conducted on an exchange would result in massive fees and make them unfeasible. Whether this would be a good or bad thing I leave up to you, but this applies as much to stock trading as cryptos, with the keeping of records on the exchange allowing the High frequency trading currently being done by computers.

      • ^^^^the difference is that stock exchanges are highly regulated

        That was supposed to be the point

        I don’t know what more details you want
        No on-exchange transactions are written on the blockchain for any crypto
        It would make trading prohibitively slow and expensive
        Thereby illustrating the comical futility of cryptocurrency and cancelling any of the purported benefits of blockchain

        Exchanges are not regulated , and most are based in obscure lawless territories

        If market volume really is $25billion , and exchange fees are ~1%
        -$250million/day is coming out in fees either in fiat or in crypto equivalent

        Either
        -$250million of new money needs to enter the market every day just to keep the price stable
        OR
        -the exchanges end up owning the whole market

        If it’s the latter, do you think they have some inventive and ability to manipulate the price in their black box system

      • The reality is that the overwhelming majority (90%+) of the volume is wash-trading, probably undertaken by the exchanges themselves or in conspiracy with others

        There was a guy on twitter who spent a lot of time demonstrating this, and it was fairly obvious from the illogical buy/sell orders

        You can also tell by the absurd volatility: +/-10%/day
        Always on no news whatsoever (or delusionals convince themselves
        that it was “Chinese new year” “institutional money” “korean government crackdown”, or draw some ridiculous technical chart to try to make the dots fit)
        and without any actual fundamentals to account for changing valuations (no profits, no dividend, no use)

      • @coming
        Your argument is the equivalent of saying gold is worthless because there are paper gold issuers who are manipulating the market value with no accountability with regards to physical gold, and due to no dividends, no profits, and very limited use other than hoarding for physical gold.

      • total and utter nonsense

        the gold market is regulated – several HSBC traders were recently jailed for market manipulation

        gold has extensive use – it is pretty to look at, confers status when used to adorn the body, has numerous industrial applications

        gold is actually limited – the number of possible bitcoin, bitcoin variants and sh!tcoins is truly infinite

        these are the key differences between gold and cryptocurrencies, and I am not even a gold bug

      • Thanks for the explanation bjw678. I understand your unwavering enthusiasm for your investment now. Glad to hear it’s all good.

      • @coming lol.
        The fact that bitcoin exchanges are unregulated is a failure of lawmakers, or more probably law enforcers to enforce laws that already exist, and has nothing to do with crypto currencies themselves.
        Bitcoin is as capable of displaying status as gold is for any meaningful value, no one is walking around wearing $1,000,000 in gold.
        Fiat currencies are as unlimited in number as crypto currencies and can be created at will by anyone, but guess what, only a select few have any value and are in widespread use. Try and understand the reason behind that and you might understand why some crypto’s can be valuable despite the fact that the are trivial to create.

      • drsmithyMEMBER

        The fact that bitcoin exchanges are unregulated is a failure of lawmakers, or more probably law enforcers to enforce laws that already exist, and has nothing to do with crypto currencies themselves.

        How do you regulate something outside of your jurisdiction ?

      • @Drsmithy,
        the way the Australian government has on multiple occasions. Online gambling has been regulated, OS companies are going to be required to collect GST on behalf of the Australian government when selling into Australia.
        How you enforce these regulations is a trickier question, however the most likely place to be successful is at the interface into Australian dollars, ie the banking system, which seems to have been successful for online gambling in large part.

      • drsmithyMEMBER

        How you enforce these regulations is a trickier question, however the most likely place to be successful is at the interface into Australian dollars, ie the banking system, which seems to have been successful for online gambling in large part.

        So you’d be onboard with not being able to turn your Whatevercoins into real AUD, or having that transaction held up until you’d demonstrated where the money came from originally ?

      • In exactly the same way as a transaction from gold to AUD or USD into AUD is, then yes I would.
        I suspect that exchanges operating within Australia already need to comply with this but I’m not a lawyer, and don’t play one on tv 🙂

      • bjw these laws are only enforceable in country or where the operator has a foothold in country. How does the Aussie govt regulate extraterritorially?

  3. People need to understand that government has an important and valid role in society. Without some form of government there is no society.

    If you don’t like it, change the form or the politicians but anarchy will never yield utopia. Primates will do what primates do.

      • LOL – are you no longer shilling iota?
        Moved on to the next sh!tcoin

        Honestly, you are scum

      • Why am I scum Coming? For offering my opinion on the markets? For speculating on assets? Get rid of the chip on your shoulder and bring some comment of value to the table.

        DLT has a range of use cases. If you can’t see the vision, this might be a good video for you:

        https://twitter.com/BullionBaron/status/1004961071986163713

        Yes I think IOTA looks like a better solution than others I’ve seen, so have taken a punt. One of the founders once said, it’s market cap is eventually going to $0 or $1+ trillion, I agree.

      • why would any of these “amazing” technologies need to be in the form of limited tokens ?
        when the coding is completely non-proprietary
        Why would one iota token be worth anything more than 0cents when I can copy and paste the code unlimited times for free

        Why would I or anyone else allow you to rent-seek by speculating on these artificially-valuable artificially-limited tokens, and contributing nothing useful

        But I think you know all this is true, but you think you can profit anyway, and that is why you are scum

      • Coming, for the most part I agree with your ‘we don’t need a token for every DLT use case’ i.e. we don’t need a bananacoin, dentacoin or even the likes of power ledger. Mostly these ICOs are just a fund raising mechanism that provide less control to token holders than an IPO.

        I also think limiting the number of tokens will be a problem down the track and have said as much:

        https://twitter.com/BullionBaron/status/891063835225767936
        https://twitter.com/BullionBaron/status/978412443427782656

        However IOTA is coming at it from a protocol / infrastructure perspective and it makes sense to have a common unit of account, especially when the token can be exchanged in amounts that are valued at fractions of a cent.

        The tech can’t be copy / pasted. The structure IOTA has used for scalability (directed acyclic graph) will mean that security and speed of the network will rely on participation. How will a competing project attract the adoption required if the likes of VW, Fujitsu, Bosch, etc adopt IOTA as an industry standard. These are DLT basics and my guess is that you don’t have much of a technical understanding, so I can’t be bothered explaining it further to you. Google if you want to learn more on that aspect.

        IOTA was not a particularly large investment / speculation of mine. I have put more capital into a tech/industry startup I am working on. I guess as the perfect person and ethical investor you don’t hold any speculative assets.

      • What would you have me refer to the tech as Ronin8317? I am just using the industry standard, there is no point making up my own words to confuse the situation.

      • Not surprising that Coming disappeared. Wonder if they’ll take back their ‘scum’ label considering their argument for it’s use has no technical or logical merit.

        Everyone wants to have an opinion on this tech no matter how poor their understanding is.

      • mikef179MEMBER

        DLT is not a buzz-word. DLT accurately describes exactly what is going on. Most IT people understand exactly what distributed means. And quite obviously the blockchain is a ledger of transactions.

      • Lol DLT it just gets more wanky

        They are basically shared excel spreadsheets
        Which are valued at $280billion

        Ok then , best of luck to you

      • mikef179MEMBER

        lol, considering how much money is at stakes, literally billions, do you think it would not have been cracked by now if it could have been. The best crackers in the world will have been hammering this hard for any weakness.

      • “basically shared excel spreadsheets”

        Coming,

        Believe what you like I guess. This sounds regurgitated from something you’ve read online, rather than something you’ve come up with based on an understanding of how it works. It probably isn’t as exciting as some make it out to be and a lot of tokens are going to 0, but there are likely to be some implementations that last long term and underpin the way we exchange value, form distributed consensus, share services (such as computing power and storage) and verify data in the future. If I can’t convince you then perhaps give some consideration to the massive companies currently creating PoC’s and actually adopting some of the tech. Don’t you think they would resort to an Excel spreadsheet if they could?

      • @coming
        “They are basically shared excel spreadsheets
        Which are valued at $280billion”
        As opposed to banks, which are shared spreadsheets valued at trillions, Fiat which is used as a distributed spreadsheet to maintain a record of transactions, or gold which is used for the same purpose.
        The entire purpose of any currency/means of exchange/ unit of account is to provide a distributed means of account, or ledger, with the goal of being reliable secure and widely available.
        Cryptos achieve this far better than the previously available alternatives.

    • mikef179MEMBER

      Government may have a valid role in society, at least at the present time, but that doesn’t mean that currency itself necessarily needs to be handled by a government. In fact, we’ve seen many cases now throughout the 20th century and into the 21st of why government money is less than ideal.

      I tend to think that cryptocurrency is the next evolution in money. Whether that means Bitcoin or some other derivation remains to be seen. But having nationalistic money in an increasingly global digitally-connected market seems anachronistic. I think the market is more likely to come up with a better solution than government decree.

      As for scams surrounding it, sure, I’m not really surprised. How many scams were there surrounding the internet in the 90’s? How many people at the time pretty much claimed the internet was just a huge scam? How many thought they were proved right when the dotcom bubble crashed?

      • drsmithyMEMBER

        If Government doesn’t control money, you might want to consider what happens around paying the police. Or the army.

      • @drsmithy
        they are forced to “balance the budget” for reals, or borrow the difference in actual borrowing rather than printing.

      • drsmithyMEMBER

        So they become beholden to the people who do actually control the money ?

        That sounds like a great outcome for the people !

      • That is the beauty of cryptos, they are not controlled by anyone.
        They are controlled by the mathematics used in their creation, and once accepted into use cannot be changed without large scale agreement from the user base.

      • And, of course the corollary from your statement for the status quo where the banks control the money results in governments beholden to the banking sector, and that’s turning out really well for the populace isn’t it.

      • mikef179MEMBER

        “If Government doesn’t control money, you might want to consider what happens around paying the police. Or the army.”

        Don’t government pay these people with taxes? Is there some reason that government won’t still be able to levy taxes on the population?

      • drsmithyMEMBER

        That is the beauty of cryptos, they are not controlled by anyone.

        That’s also the problem when it comes to things you want some control over. Like, say, running a country.

        They are controlled by the mathematics used in their creation, and once accepted into use cannot be changed without large scale agreement from the user base.

        The user base ? I think you mean the holders of the majority of the coins. VERY big difference.

        And, of course the corollary from your statement for the status quo where the banks control the money results in governments beholden to the banking sector, and that’s turning out really well for the populace isn’t it.

        I’m a little unclear on where or how I supported that status quo.

      • drsmithyMEMBER

        Don’t government pay these people with taxes?

        Government creates the money it needs to pay them, same as everything else it pays for.

        Is there some reason that government won’t still be able to levy taxes on the population?

        There may be a reason why the police and the army don’t want to be paid in the money the Government controls.

      • DominicMEMBER

        Smithy you really should find a way to think beyond just the one dimension. Assuming it’s possible to learn to do so.

        In any event, Mike is right: competing currencies are healthy as competition breeds discipline and creates its own regulation. Having the Govt control the only legal medium of exchange is a recipe for ill-discipline and tyranny, frankly. Which is what you’ve had happen over the past few decades in virtually every Western country. Governments cannot help themselves — they will print the money they need so they can live beyond their means. Printing money is theft in the same way that counterfeiting is. You won’t see that because of your issue with dimensions, but it’s fact.

      • drsmithyMEMBER

        Smithy you really should find a way to think beyond just the one dimension.

        FMD that’s hilarious, coming from you.

    • DominicMEMBER

      Yup, I get it. Without government we’d all be grazed-knuckle neanderthals. There’d be no roads, no buildings, no education, no healthcare, no iPhones. Oh, and no society ..

      What we need to make this country a better place is more government.

  4. JspitzerMEMBER

    Massive wipeout of wealth. Transferred from millions of people to a very few. Especially S Korea and significant in oz.

  5. Was it Buffett or Soros who said along the lines of; one cannot do well by investing in something popular?

    It is true and will remain true.

    • mikef179MEMBER

      I don’t think Bitcoin is that popular and becoming less popular with the price falls. I don’t know a single person in my personal life who actually owns any apart from myself. Contrast that to the number of people I know who own investment properties.

      • depends on your age cohort Mike. I dare you to try and find anyone under the age of 25; or a decent minority under 30 who have investment properties

        versus the same age groups and their “investments” in various cryptos

      • mikef179MEMBER

        Well, I don’t know anyone under the age under the age of 25 who owns either tbh.

        And yes, I’ve always argued that cryptos, as currencies (or potential currencies) are speculations and not investments, just as you can speculate in US dollars, Yen etc…

  6. MediocritasMEMBER

    It’s the age old scam: identify an entity that has real value, create a paper derivative from that entity, then sell the paper as if it’s the real thing. Inevitably, the temptation to create paper from nothing will prove too strong.

    “Your tethers are backed by real US dollars guys…just trust us!”

    A multi-layer scam. Creating tethers out of thin air, “backed” by dollars that are also mostly virtual coins, created out of thin air by banks, “backed” by hard currency that’s created largely out of nothing, “backed” by the might of the USA’s military & police.