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Kraken’s Tether Trade Looks Very Suspicious



De Silva

Something is not right.

Humans are notoriously bad at generating random numbers. We're amazingly predictable. That's why the distribution of trade volumes on Kraken's USD/USDT pair looks awfully suspect.

"I've looked through lots and lots of data, and I don't think this is real," said Rosa Abrantes-Metz, a professor at New York University's Stern School of Business and an expert on manipulation.

Kraken's bitcoin trade reflects fairly typical human behavior (with volumes clustered around 0.01, 0.1, and 1 BTC). By comparison, its USDT order book looks downright bizarre. According to Bloomberg, over the last month and a half, the most common volumes on the USD/USDT trading pair are 75 units; 1,000 units; and 13,076.389 units.


Yes, between May 1 and June 22, 2018, trades for 13,076.389 USDT were one of the most popular on the exchange's USD/USDT trading pair. That's not a number most people would choose off the top of their heads.

More importantly, based on price and volume data, the exchange's USD/USDT order book seems to violate basic tenets of economics. Large and small trades have virtually the same impact on prices (that is, almost no impact). When you think about the dynamic relationship between supply and demand, this doesn't make any sense. Especially in the cryptocurrency markets, the absence of volatility is shocking.

"The mystery is bracketed by another quirk: Oddly specific order sizes – many going out to five decimal points, with some repeating frequently. Another red flag," Bloomberg wrote.

Tether has become the open secret of the cryptocurrency world. It's the elephant in the room – the inconvenient truth. While bitcoin believers and Ether enthusiasts worship their pretty trading charts, Tether is the nasty undercurrent that threatens to destroy the crypto discipleship.

Last week, Tether's management released a "transparency update" through its legal representation, but the information proved woefully insufficient. That report has been mocked in the community:

With the Commodity Futures Trading Commission having subpoenaed Tether and Bitfinex in December and the US Department of Justice investigating cryptocurrency price manipulation, all eyes should be on Kraken and the USDT. They just might sink the ship.

Matthew De Silva

Matthew has a passion for law and technology. He graduated from Georgetown University, where he studied international economics and music. Matthew enjoys biking and listening to tech podcasts. He lives in Los Angeles.

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