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Comment by paulgb | Hacker News Reader

What I don't get about the theory that Tether was used to intentionally manipulate markets, is that if you have a money-printing machine, you don't need to manipulate markets as a business model. You can just print money, that's the business model.

Of course it's possible that that influx of capital will move a thin market. But Occam's razor seems to imply that that's a side effect rather than the intent.

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It's a money printing machine in the sense they printed 100s of millions of tethers whenever they wanted. Problem is no one will give you $1 for a tether (except a very thin market on Kraken). Instead, they used the tethers to buy bitcoin and pump the price, then cashed out their bitcoin to fiat in over-the-counter deals.

Correct. There's also a strong relationship between Tether and Bitfinex directors. It's suspected they were using margin loans to leverage their fake money further, while denying fiat withdrawals to real customers.

Say you print $100M USDT and do this, and the market moves up 10%, and you get lucky enough to find an OTC buyer willing to give you the market price. You rake in 110M for printing 100M. This is still a money printing business model, the market manipulation is just icing on the cake.

But printing the money is only useful in that it manipulates the market price to go that 10% higher which is where you make the profits.

If they printed that money and everyone found it worthless and the market didn't response they wouldn't have a business model.

Edit: I guess I should say that's the conjecture of those saying Tether was created purely for profit based on market manipulation. I don't have an inside knowledge on what was going through the heads of those at bitfinix who created it.

> But printing the money is only useful in that it manipulates the market price to go that 10% higher which is where you make the profits.

If you print money you have free money. That's pure profit. Anything else is just a bonus.

> You can just print money, that's the business model.

That is not Tether's stated business model. To issue 1 USDT, Tether is supposed to take in 1 USD from someone, and hold it safely in an account.

Their stated business model is taking a 10 basis point or $20 fee (whichever one is higher) when someone buys USDT with USD. https://tether.to/fees/

The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains.

Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have. Maybe at that point they'll finally complete their first audit. Their site still makes the shocking claim "subject to frequent professional audits" despite having been fired by their auditor.

> Done right, they might even make enough money with such fraudulent trading to eventually have the cash reserves they claim to have.

This is the long-term history of sucessful organized crime: Obtain $X illegally, use that as seed investment for a legitimate business that generates $X legally, and then (if necessary) repay the original $X. Casino, Waste hauling business, and governments are often owned by organized crime families.

> The likely fraudulent business model would be printing USDT that aren't backed by USD, purchasing cryptocurrencies with it, and then pumping up the value of that cryptocurrency to realize gains.

If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down.

It's still a profitable business model, because they can get ~100M (minus market impact costs) for basically nothing, but the money isn't from manipulating the market, it's from printing $100M USDT from nothing.

> If Tether prints, say, $100M USDT, and buys Bitcoin with it, they'll move the market up. But then when they cash out their gains, they'll move the market down.

The hysteria generated by Bitcoin's skyrocketing price likely allowed them to cash out quietly without crashing the market.

Now that the excitement has worn off, that's no longer true, and hey, look... they're suddenly not printing USDT so much.

If you create a $100 million dollar lie and convert it to $5 million real dollars, in the end you have...$5 million real dollars.

So someone could run a pretty big grift without crashing a market.

They had a relationship with Bitfinex, so they could easily convert to other shit coins and dump those to avoid tanking the BTC price when they dumped it.

> if you have a money-printing machine, you don't need to manipulate markets as a business model

"Money laundering involves three steps: The first involves introducing cash into the financial system by some means ('placement'); the second involves carrying out complex financial transactions to camouflage the illegal source of the cash ('layering'); and finally, acquiring wealth generated from the transactions of the illicit funds ('integration')" [1].

TL; DR If Tether just printed Tethers and sold them for dollars, people would catch on. Tethers being printed to buy Bitcoin (placement), such Bitcoin then being exchanged for other coins or tumbled (layering) before being sold for real money (integration) is tougher to untangle.

[1] https://en.wikipedia.org/wiki/Money_laundering

By printing money to prop up the price, you accomplish 2 things. One is that you can sell your crypto for USD if you are a large holder. The second is that you can acquire crypto for free because you created dollars (tether) out of nothing, and hold for the long term.

>The second is that you can acquire crypto for free because you created dollars

If someone pays bitfinix for tether, what makes this 'created'?

I dont use tether because it is fiat currency which is exactly why I bought Bitcoin- but I dont see the big deal either. Its easier than cashing out to USD.

Is tether real or fake? Who knows, I only trust Bitcoin.

> If someone pays bitfinix for tether, what makes this 'created'?

If someone pays actual USD for tether than that's how it's supposed to work - tether puts the USD in the bank, that person gets the tokens.

However if someone wants USDT for their BTC (or whatever) and tether whip up a bunch of USDT to satisfy that, then they are creating an unbacked token to buy other crypto currency with, inflating the market.

> Is tether real or fake? Who knows

That's the problem, they claim transparency, audits and all sorts of other stuff, but they're lies. So nobody knows. But if it is all fake, then fake money could represent a large proportion of the money flowing into cryptocurrencies.

Printing money and using it to buy crypto is what inflated the price

Just having money doesn't mean anyone thinks it's worth anything. You have to manipulate the market at least a little to sell people on your money.

Anyone can print ETH tokens.

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