There is just not enough liquidity on Tether for it to follow the USD so closely. It has been very difficult to sell Tether for USD to Bitfinex AKA Tether over the past year. For awhile, any normal user had no option to withdraw USD from the platform at all. Their banks were completely shut off from the system.
You can argue there were people who were on the inside with Tether / Bitfinex and were able to sell Tether to them. I think there may have been some individuals / organizations that had the ability to send and receive fiat to Bitfinex, but I highly doubt they do enough volume to fully stabilize Tether 1:1 to the USD.
Look at Bitcoin over the past 1-2 years. It is completely common for it to trade at a 3-5% spread between USD exchanges. Don't get me started on exchanges in other fiat currencies. The spreads have been known to reach 10%+. These spreads can also be arbitraged by anybody, but they still appear. So I strongly doubt that Tether is a special case.
If Tether was trading on a real market, it would certainly not follow the price of USD 1:1.
If that trust is ever lost, or there are questions about solvency, I'd expect the price of Tether to drop very quickly.
That person might be an insider (they know tether is legit, so any deviation from $1 is a moneymaking opportunity), or it could be an outsider who believes the hype.
This happens all the time in the stock market. Look at the SPY stock which tracks the S&P 500 index. At everypoint in time, anyone can compute exactly what value this stock should have. Any deviation from this consistent and known price point is immediately traded away by arbitrators.
Does Tether actually hold one real United States Dollar for every USDT they issue? If so, they sure haven't convincingly demonstrated it by continually lying about being regularly audited (they have never published a real audit) and refusing to allow anyone to redeem their USDT with Tether to get back a USD.
> Kraken is among very few markets worldwide that let investors trade U.S. dollars for Tether and vice versa.
Same goes for buying it. In my experience, it only rises above $1.03 when liquidity is low and the BTC/USDT price diverges from BTC/USD enough to make arbitrage possible.
This has not been the case for a long time.
Consider, why do some bonds trade at negative interest rates?
So you are suggesting that the experts who were cited in the article, whose field of expertise is this very thing, do not understand how markets work?
Meanwhile you don't seem to understand why it is remarkable that the market can absorb a huge order that should move the market because of its sheer size while much smaller order have a much larger impact. When a buy order of quantity 37.5 moves the price by 0.0002, but the following buy order of quantity 13,076.389, that is almost 350 times the size of the previous order, moves the market by half of that, something is very strange about the liquidity situation.
> Meanwhile you don't seem to understand why it is remarkable that the market can absorb a huge order that should move the market because of its sheer size while much smaller order have a much larger impact.
Is the concept of an orderbook so foreign to non-finance/math people? Firstly, 13k is not a "huge" order. Secondly, someone clearly just had a somewhat large maker order placed at $1 for the example cited which absorbed a few orders, and the book was thinner for a subsequent price movement (liquidity vacuum). Explained by the market being low volume, low volatility, likely dominated by a handful of traders/algos, and plain old random variation (individual players' orders have a more significant effect in low volume markets like Tether/USD). It's also important to note that psychological price levels (like 1.0) tend to accumulate larger walls as a result of human nature. For Tether in particular, it makes sense that the price never breaches 1.0. It's an easy short above 1.0, as it is impossible for Tether to ever become worth more than the price it is pegged at, whereas it could become worth less if it were insolvent. So there is probably a huge wall sitting there on every exchange.
I used to write trading systems for market makers, and still have friends in the business. I also have friends who are professors, including a finance professor. Trading is not really about market knowledge; it's a skill and an orientation. Being a professor is much more about knowledge, but it's also about skills and orientation. They're different kinds of people, doing very different work.
Your "the only people who can possibly understand this are the ones who agree with me" approach is essentially religious thinking. You're making an argument from authority, except the only cited expert is you, an anonymous person with no credentials and no provable experience.
This applies to journalism at large, but for market and trading analysis in particular, professors fit into this category much more than in other fields (such as engineering, where there is still a disconnect between academia and industry). In trading, anyone who truly understands the market at such a powerful level is using that knowledge to make money. It's a complex adaptive system, so publishing financially actionable research in the field is usually pointless because the market adapts. In my anecdotal experience, even engineers / employees of quant funds like yourself do not often really understand the market when they were focused on some specific piece of infrastructure / a part of someone else's larger design. When left alone without the infrastructure and systems they were used to, breaking even is often their best case scenario.
But this is all beside the point. Instead of personal attacks, getting defensive, and bowing to credentials, consider thinking for yourself and addressing the content, if you reply.
Source: I'm an anonymous professional trader who beats the market.
Everything they have highlighted in the red and green graphs in the latter half of the article can be explained by a completely ordinary order flow. Much weirder stuff happens in the order books every day: iceberg orders that appear small but are bottomless, giant walls that retreat as soon as they're touched, spoof orders that are placed and canceled repeatedly. None of that funny stuff is in evidence here.
Let's focus on one particular error from the article and I'll explain the misunderstanding behind it. Take a look at the diagram titled "Tether-USD Trades on May 9 From 20:59:13 to 21:01:00 GMT." If you don't understand the two prices of a limit order book, you might think that diagram shows 7 different price movements. But in fact, there are only two price movements: when the Ask price moves from .9991 to .9992, and when the Ask price moves from .9992 back to .9991. Something to remember about limit order books: market buy orders will execute at the Ask price, which is at least one increment higher than the Bid price. Market sell orders will execute at the Bid price, which is at least one increment lower than the Ask price. Why can't the Ask and Bid prices be the same? If you had a limit buy order on the books at $100 and a limit sell order on the books also at $100, they match to each other, cancelling each other out until only one type of order (buy or sell) is left at the contested price. When looking at a price history graph like this, what is actually plotted is the Last Executed Price. If the Bid and Ask prices are completely static, the price history will show oscillation between the Bid and Ask prices as market buy orders and market sell orders are executed in turn. The gap between the Bid and Ask prices at a point in time in the order book is called the Bid-Ask Spread. An important point is that when the Bid and Ask are not moving, the Last Price graph will still show oscillation across the Bid-Ask Spread.
So now look again to the diagram caption: "Multiple sell orders of exactly 13,076.389 are executed, and the price didn’t budge..." What this means is that there was more than 183,076.46 in buy limit orders at the Bid price of $0.9990, which is fairly typical to witness. Certainly not evidence of manipulation or even out of the ordinary. The second caption "...but a buy order of just 75 moved the price up .0001" is more problematic. Neither the Bid price nor Ask price has actually moved in response to the size 75 order, this is just the normal oscillation across the Bid-Ask Spread. Furthermore the minimum price increment on Kraken is 0.0001, so the minimum any buy order following a sell order can move the Last Price is 0.0001 (barring a simultaneous drop in the Ask price.) Let me repeat: Unless the Ask price drops, any and all buy orders following a sell must move this price graph upward by at least .0001 by definition. This appears to be lost on the authors, who highlight the .0001 move upward as something notable, an outsized price move for such a small order. They might be shocked to discover that a size 0.01 order would also move the price graph upward as much as the size 75 order.
It's disappointing that Bloomberg, an ordinarily reputable news source when it comes to financial writing, missed the mark by so much on this topic.
I was also disappointed that this article made it to publishing on Bloomberg for the same reason.
The point wasn't that a trade containing that number happened to pop up. It was that the specific number 13076.389 was in the top 50 traded amounts on the exchange.
You'd expect there to be on average the same number of trades for 13076.388 and 13076.390 as there were for 13076.389, but that's not what the numbers show. Unless there is something special about the number 13076.389.
Could be that for USD-USDT algorithmic trading is dominant, vs, human trading being dominant in USD-BTC, in which case arbitrary amounts like 1, 0.1,.. would be less common for the USDT case. I'm not sure how to assess this though.
MOST of the concerns I've seen about Tether are based on a lack of understanding about how most markets work.
Its funny to me because the reasons I don't use Tether have to do with it being centralized in general, (with the assumption that they are full reserve). The systemic risk fractional reserve fear is why other people are concerned about Tether, and it doesn't really matter? That company is a huge target either way! If they seek to prove their reserve by an accountant, then their banking partner gets exposed and will close Tether's accounts, or that bank will be cut off by other banks.
This is what has happened in the past, when Wells Fargo cut them out of their international wires route.
Yeah, even if this is code vs. human, it's just as easy for the code to round or vary the amounts.
We get it, your one of the people who’ve been loosing tons on crypto the last couple of months. But maybe you can reverse the course by arguing away all clear signs of market manipulation with silly stories. Or maybe it would be good to get the spotlight on the bad actors of the market so they can be exposed and the space can move forwards. Mtgox didn’t end crypto, neither will the fall of tether.
I'm a small time automated trader, and I've made many thousands of orders that extend out to 5 or more decimal places. There's nothing unusual about this to me. My code will take a single uneven dollar amount and make X equal trades out of it. Every few days I add an uneven amount of profit back into the original amount and then I'm trading a new 5+ decimal place dollar amount.
>On May 9, eight sell trades for 13,076.389 Tethers each occurred in succession over 16 seconds, yet Tether’s price was unchanged at 0.999. The next trade—for just 75 Tethers—pushed the price up 0.0001.
Is this not just the bid-ask spread? Of course sell trades and buy trades execute at different prices, that's how a limit order book works.
The concern around Tether may well be justified, but some of the things I've seen presented as evidence suggest a lack of understanding about what normal exchange activity can look like.