The Tether Effect

Illiquid markets, such as Bitcoin are easy prey to manipulation. The principle is to draw attention by buying a pretty big quantity (compared to the daily number being bought and sold) and once this attention is drawn, more and more people will start buying trying to jump on the bandwagon and trying not to miss the train.- Giancarlo Devasini, CFO of BitFinex (source).

Coincidences are rare in finance.

In 2013, Mt. Gox committed fraud (and was convicted of it) to manipulate the price of Bitcoin from $100 to $1200 in a little over a month.

The price would slowly fall to around $300, and stay at that price for roughly 3 years. Then, suddenly, someone started buying large amounts of Bitcoin with Tether, and the price skyrocketed from $300 to $20,000 in about 14 months.

A scholarly article found that 48.8% of Bitcoin’s price increases could be traced to within 2 hours of 91 Tether grants. After this article was published, the Senate Banking Committee called a hearing on Cyrptocurrencies. Tether stopped granting money, and the price of Bitcoin dropped to below $6K, or nearly 70% from its peak a month prior.

On February 6, 2018, the Senate Banking Committee held a mostly positive hearing about Cyrptocurrencies, mentioned nothing of Tether or BitFinex, and within hours, Tether granted $78M (in Euro). The price of Bitcoin went from $6128 to $7815 — a 27% increase — in 12 hours.

I decided to go back and get the data for every Tether grant, and find the price 12 hours prior to the grant, the price at the time of the grant, and the price 12 hours after. Unsurprisingly, an obvious pattern — proved in better depth by The Tether Report — emerged. The Tether Report’s findings are much more scientific than this, but they’re also harder to digest. So I’m publishing this data to make it more accessible to the statistically disinclined:

Is it a coincidence that in 93 grants, the price of Bitcoin only falls 5 times? But in 87 cases, it rises? Is it a coincidence that 48.8% of the price increase comes in the 2 hours following these grants? To put that into perspective, 186 hours accounts for a measly 0.7% of all Bitcoin’s trading time. Yet in those 186 hours, 48.8% of Bitcoin’s value “appeared”.

When Twitter users tweet: #BTFD or “buy the fucking dip”, they should say, “buy the fucking grant”.

It’s not a coincidence. It’s fraud.

There’s a public record of all Tether’s USDT grants on the Omni network. There’s also a public record of Tether’s recent EURT grants on the Ethereum network. Separately, Tether has granted $68M USDT on the Ethereum network, but I’m unable to find the public record of that — or the times at which those grants occurred.

For a chart of the 12 hours surrounding every Tether grant, checkout The Tether Charts.

If you’re interested, I wrote A Brief History of BitCon — detailing the many cases of cryptocurrency related fraud.

BTC: 19QK13CPNwNuzVcLgHxjqRWzGtAWv7SWwr