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Comment by JumpCrisscross | Hacker News Reader

> Of course the orders don't move the price because any move away from 1.00 can be quickly arbitraged away

Former algorithmic trader. You're right–the ceiling isn't particularly unusual. That prices never cross through is weird, but not inexplicable.

What is inexplicable is the downtick inelasticity. Large sell orders should burn through more book than small orders. As the top of the order book is burned, lower bids are revealed. Even in the presence of lots of arbitrageurs, there will be transactions at those newly-revealed lows.

That isn't happening. Instead we see a stable harmonic evocative of wash trading.

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Not necessarily. I think as a former algo trader you must have seen bots that wait for blocks (bid/asks) and as soon as they appear they sell into them. So this can generate volume without price movement.

Suppose wash trading is indeed occurring, what is the benefit to the perpetrator? Fees are 0.20% for both maker and taker on Kraken. You'd have to pay ~$52,000 to print a $13 million trade.

> what is the benefit to the perpetrator?

Let's assume a third-party manipulator (i.e. they can't print new Tether).

To make this economical, they would need an in with at least one exchange. Their trades on this venue (let's call it ShadyBit) would be free, or close to it. This is where the majority of their wash trades happen. If one naïvely averages volume across the market, this will do the trick.

But the jig will fall apart if another exchange starts sharply diverging. So you set up sock puppet accounts there to soak up excess demand. As long as you keep the confidence game balanced, there shouldn't be too many people looking to sell at unusually low prices.

In the meantime, you can continue using your inflated-value tokens as collateral for borrowing or to buy appreciating assets or to sell or whatnot.

But this isn't happening. Rather than being artificially inflated, the price of Tether stays at $1 (to three significant figures) on all the exchanges.

If the goal of the market manipulator is to artificially inflate the value of Tether to $1 (there are many reasons to believe the true value is less than $1) this would be an indication they are doing an extremely effective job of it.

If I understand your example correctly, you mean to say that wash trading can be used to inflate prices. This could be true if Tether was simply another no-name altcoin with abnormally large percentage volume on Kraken. However, Tether trades on the magnitude of a few billion USD daily[1]. $13 million is a drop in the bucket. And as the article states, the trade did not impact price.

[1] https://coinmarketcap.com/currencies/tether/

> Tether trades on the magnitude of a few billion USD dail

You’re responding to an allegation of fabricated volumes by quoting volumes.

Not to mention the fact that real traders would stop exchanging their crypto for USDT pretty darn quick if its price fell below £1USD on exchanges trading USD/USDT pairs for a sustained period. A lot of the genuine activity takes place only because people/bots are watching those relatively small volumes of USD/USDT exchanges and seeing a steady stream of USDT orders at $1.

If everyone has an expectation that USD-USDT is 1:1, why would anyone sell for substantially less, outside of insolvency scares? Better just to wait until your order can be filled at the known value. Bitcoin-USD and Bitcoin-USDT arbitrage probably happens at a much faster rate than USD-USDT demand, and so any USD-USDT decoupling is quickly arbitraged back to 1:1.

And its not like USD-USDT hasn't become uncoupled before. It's been as low as .7 in the past.

> Better just to wait until your order can be filled at the known value

You're describing a shallow order book. This happens quite frequently in less-liquid markets. The transaction signature of a shallow order book is large orders prompting a pause in trading, as the order book is drained and refilled.

Contrast that to a hyper-liquid market like that for on-the-run Treasuries. You'll have a mix of price and time preferences, with some people wanting immediacy and others willing to provide it for a discount/premium.

The presence of continuous, non-volatile trading--particularly on the downticks, given a pegged asset--is very unusual. Enough so that I've never seen anything like it before in a properly-functioning market. Which is suspicious.

AFAIK Tether is always liquid because the coins are minted on-demand. There is never scarcity. No incentive to provide immediacy.

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