There has always been a huge disconnect between the world of securities and the cryptocurrency market. However, one of the coins that completely bucks the trend of traditional securities markets, is Tether.
In light of the standard rules of economics, trades (both big and small) are supposed to move prices for any commodity. But when it comes to Tether, experts on market manipulation have identified a couple of red flags after a review of USDT on Kraken’s public order book.
A Review of USDT Trades on Kraken
According to analysis by Bloomberg on over 50,000 trades placed on Kraken’s exchange in the period between May 1st and June 22nd, orders on Tether failed to sway the prices significantly. The conclusions of the analysis were agreed upon by New York University Professor Rosa Abrantes-Metz and Mark Williams, who is a former examiner at the Federal Reserve Bank.
Adding to the myriad of questions surrounding Tether’s market activity, is a paper released by Professor John Griffin from the University of Texas. Mr. Griffin is known on Wall Street for flagging suspicious activity. On June 13th, he published a research paper highlighting transactions that used Tether to manipulate Bitcoin’s price at the start of the year. In his findings, he links the Bitfinex exchange to the market manipulation hypotheses, even though Bitfinex has disputed these claims.
Automated Trading Programs Using USDT?
According to Abrantes-Metz, there would appear to be automated trading programs behind Tether’s unusual market behavior. For instance, Kraken’s market indicated a consistent five decimal place number for almost a third of the trades. Adding this to the fact that Kraken is unregulated, conclusions from market analysts show that there could be instances of wash trading; where a trader takes both sides of a transaction. This trading technique has been banned in most regulated markets.
While speaking to Bloomberg concerning the analysis, Kraken’s chief of staff Allan Stevo told Bloomberg that:
Nothing looks out of place with the trade data feed; Kraken is not able to confirm that the data set sent was accurate.
Crypto Traders Don’t Care
It would appear that most traders in the crypto space are not only unaware of the implications of market manipulation, but as Kraken CEO earlier mentioned, the issue “doesn’t matter to most crypto traders.” This comes at a time when reports reveal that the Justice Department, as well as other regulators in the US, are paying close attention to the crypto market – especially in terms of market manipulation.
The issue with Tether and the crypto market has quickly become a serious problem, considering that the USDT is designed to be a stable coin that provides liquidity for most investors in the crypto market. Since USDT can be used to get a dollar equivalent for digital money, its impact on the market cannot be ignored.
Since Kraken is among the few cryptocurrency markets that allow traders to use USDT to cash out or deposit into the market, its contributions to the overall market activity of Tether are huge as well. According to Dave Weisberger (a leading expert in the $30 trillion US stock market):
Such mysteries are probably keeping big investors out of cryptocurrencies as institutional investors want to see the market is fair.
Do you think Tether’s unusual market behavior is keeping institutional investors away from cryptocurrency? Share your thoughts in the comments section.