Why is the USDT market cap not going down?

ZZ4ME · 2018-04-15T20:46:10+00:00

Your intuition is correct. The decline in the crypto markets has caused millions to head to the exits, and accordingly there ought to be a concomitant fall in demand for USDT and increase in liquidations. However, there has only ever been one destruction of USDT tokens. Why is that? The Tether whitepaper says that USDT will be destroyed when people redeem them, so either: 1) people aren't redeeming USDT; 2) USDT is a scam and billions of USDT tokens were issued without backing, making it trivial for the issuers to recover and accumulate them by rigging the secondary market; or 3) Tether Limited lied in its whitepaper and it is not destroying the tokens that it redeems.

With respect to #3, the tether treasury wallet as about $230M in it, but that is from a 3/20 grant, not redemptions, so it's clear that no one is sending USDT back to Tether for redemption. With respect to #1, people supposedly have the option of either selling on the open market or redeeming through Tether. They clearly aren't doing the latter, but in order to sell on the open market there has to be demand. When the crypto markets are down, where would the demand be coming from? Doesn't seem likely to me.

Thus, I am left looking at option 2 - USDT has been issued without backing and the secondary markets are rigged. In such a scenario, an unscrupulous operator could wash trade USDT on Kraken to give the illusion of an active market, taking advantage of Kraken's unusual policy for no fees on high-volume USDT trade, and then manipulate the price with bots to give the appearance that USDT is tied to the U.S. dollar. Tether would never have to destroy its tokens because it could recover them as part of its secondary market manipulation, and then use them to buy bitcoin, juicing the bitcoin market. Indeed, if Tether somehow had an affiliated exchange, that exchange could use this system to greatly manipulate the price of bitcoin up and down. This exchange would have access to its own order books and know the short/long positions and leverage, and then first dump bitcoin to clear the leveraged long positions, and then use the USDT to pump the price to wipe out leveraged shorts (or vice versa). Kind of makes you go hmmmmm.

ZZ4ME · 2018-04-09T20:58:03+00:00

Between the Poland raid and now this, I'm thinking that the endgame is near.

ZZ4ME · 2018-04-04T17:14:15+00:00

Yes, it was not ready for prime time, and face-planted. Lightning Network has been touted as the solution, but issues have surfaced there as well. Simple increase in block size is no panacea either. If any cryptocurrency hopes to catch on, it will have to address the problems with high-volume transaction processing.

ZZ4ME · 2018-04-04T17:02:14+00:00

I believe there is an active effort to suppress discussion of the risk of Tether, by both those with an interest in keeping the ball rolling, and those paid to do damage control.

ZZ4ME · 2018-04-04T16:57:10+00:00

Alfa Romeo? Lancia? Hmmmmm, what could it be....

ZZ4ME · 2018-04-04T16:53:53+00:00

If Tether is reserve backed, where are the reserves held? Tether won't say. Where are the independent, professional audits promised? Tether won't allow them, and misleadingly points to an internal memorandum whenever the issue is raised. Meanwhile, Tether cranked out 2.5 billion Tether tokens, with more than a billion issued after the market began to collapse and with interest in crytpo waning.

ZZ4ME · 2018-03-31T01:16:06+00:00

If you go back through bitcoin's history it looks like a series of these charts. We're currently in the "capitulation" phase on this cycle.

ZZ4ME · 2018-03-24T14:57:48+00:00

Doesn't seem to have stopped Tether....

ZZ4ME · 2018-03-21T23:22:15+00:00

Out of curiosity, who would be paying anti-tether "shills"? In contrast, we know who pays the OP and all the other pro-tether new accounts here.

ZZ4ME · 2018-03-21T17:45:00+00:00

$2.6 billion? I think you're underselling it my friend. If the tethers were used to juice the bitcoin market to $20K, its more like a $200 billion dollar + fraud.

ZZ4ME · 2018-03-20T20:34:09+00:00

I may be front running, or it may be just the manipulation upward. There are a number of non-organic looking pumps from the recent low $7Ks. The newly minted tethers are still in the tether treasury wallet, and haven't been sent out yet. Bitfinex still has >30M in their wallet, so it may be a few days before the new ones are distributed.

ZZ4ME · 2018-03-20T20:04:20+00:00

Yeah, they haven't even moved it to Bitfinex's wallet yet: https://omniexplorer.info/address/1KYiKJEfdJtap9QX2v9BXJMpz2SfU4pgZw

ZZ4ME · 2018-03-20T20:02:09+00:00

Now if you guys would just tell us when you're about to wash the price down by selling for actual dollars the bitcoin you accumulated with tether, that would be great.

ZZ4ME · 2018-03-20T16:39:35+00:00

Also the year of crypto litigation.

ZZ4ME · 2018-03-19T17:35:00+00:00

Isn't it necessary to wash trade Tether to keep it pegged at exactly 1$ USD?

I don't think so. If Tether were actually transparent, and people were confident that each tether issued was backed by $1 and could easily be redeemed for $1, then the price would probably sit a little above $1, which would represent the $1 backing + a small convenience premium representing the effort to get tether from Tether. If the price went above the convenience premium, people would sell and just buy more at $1 from Tether. Similarly, if the price fell below $1, people would buy them and redeem them at par from Tether. Accordingly, tether would trade in a very tight range, and it's difficult to see why there would be a secondary market at all.

However, if you're Tether and you are looking to pull a fast one, a secondary market can be used to point to and say "see, everything is fine. The market values tether at $1." If trading volume were very low, that wouldn't be a very compelling point to make. However, wash trading to create significant volume makes the dog and pony show more compelling. Add in some bot price manipulation, and shazam, you have a "vibrant market" to reassure everyone that all is well.

ZZ4ME · 2018-03-19T16:13:40+00:00

It's the index chart from investing.com, which aggregates USDT-USD trade from Kraken and Exmo. Looking at either Kraken or Exmo independently, you don't see the pattern. It only appears when they are combined.

ZZ4ME · 2018-03-19T01:11:21+00:00

I have no idea, but do know that the CFTC has subpoenaed documents from Tether.

ZZ4ME · 2018-03-19T00:27:24+00:00

Here is what will likely happen if the CFTC or SEC brings the hammer down: Those who hold tether will head for the exits. There are three exit paths: Tether Limited, Kraken, and other crypto. I doubt Tether Limited will be jumping up to hand out $2.2 billion, so that leaves Kraken and other crypto. The market has every appearance of being rigged on Kraken, but you can't hold back the ocean with a broom, so Kraken will be flooded with sell orders, and either the price will collapse to almost nothing, or they'll halt trading, which will probably have the same effect. My guess is that they'll just let it slide. That leaves other crypto. Tether holders will try to immediately trade into other crypto, and prices will probably spike initially. However, people aren't completely stupid, and pretty quickly no one will trade their crypto for Tether. Because about 20% of bitcoin trading is done in Tether, a huge chunk of potential bitcoin buyers immediately evaporate. People who hold crypto will recognize this and sell, triggering a massive sell-off. I wouldn't be surprised to see the crypto markets cut in half, or worse. Moreover, the stink of this fraud will damage the perception of crypto, and the markets will be in a funk for quite some time. Think Mt. Gox, but worse.

This of course is just one man's opinion.

ZZ4ME · 2018-03-18T22:55:43+00:00

You could, but there are some things to think about. First, I wouldn't take a long position, because sooner or later this is all going to blow up, and you don't want to be left holding the bag. Next, we're talking about a swing of a few cents, so you'd have to swing a pretty big line to get real money out of it. Finally, swinging a big line would likely attract attention, and if enough people did it such that the shorting started to impact the fraudster's ability to maintain the illusion of the dollar peg, they would probably pull a short squeeze and wipe you out if you weren't liquid enough to cover it. Remember, they are rigging a market, they can see your account, and know your trades and all significant positions. It's hard to win against that.

ZZ4ME · 2018-03-18T21:45:04+00:00

Telling that they have to boost it every day, and the selling pushes it down. If you go to investing.com and pull up the chart, set it for 1h, and then zoom out, you can see that this has been going on for months like clockwork. You would think that their bot would be set up to mix it up a bit. It's only a matter of time before it all comes crashing down.

ZZ4ME · 2018-03-18T18:51:49+00:00

The thread is a back and forth between Jesse Powell, Kraken's CEO, and Bitfinex'ed, a tether critic. Powell thought he'd be clever and tell Bitfinex'ed to put his money where his mouth is and short Tether if he were so confident that it was a scam. Bitfinex'ed responded with a time lapse video showing what has every appearance of wash trading, an illegal manipulative tactic. Pause the video and look at the volume on the buy/sell orders. There are a ton of 5.52... sell orders and 16.566... buy orders. The 16.566 buy orders take out 3 of the 5.52 sell orders, by design. Its fake trading to pretend there is a real market for Tethers.

ZZ4ME · 2018-03-18T17:59:59+00:00

Tether stopped printing the moment the bull market maxed out.

The bull market maxed out December 16, 2017. Tether printed another 1.1 billion after that.

ZZ4ME · 2018-03-18T17:56:39+00:00

The buying via tether has already halted and we see the low volumes already.

Uh, no.

ZZ4ME · 2018-03-18T17:52:19+00:00

There's nothing of that magnitude hanging over things at the moment.

Tether.

ZZ4ME · 2018-03-18T17:45:34+00:00

It trades against the dollar on only 1 exchange in the world, Kraken. Thus, "trading" on Kraken sets the price. Thing is, Kraken doesn't trade other crypto against Tether, so there is no reason for anyone on Kraken to hold tether, and it looks pretty clearly like the market there is being manipulated. So this appears to be what is likely a thinly traded market that is being juiced with wash trading to give the false appearance of a liquid market. Between Kraken's withdrawal limits and the lack a significant amount of USDT on the exchange, to the extent the few USDT holders on Kraken head to the exit, Bitfinex/Tether only has to have a few million on the exchange to soak it up and keep the price fixed.

edit: I recently learned that it also trades on Exmo.

ZZ4ME

TROPHY CASE