How To Rig a 3 Trillion Dollar Market
An ongoing history of discrepancies i've found within the crypto space, focused mainly on stablecoins.
It's been a while since i've written about crypto in a long form format, but after everything that's happened over the past 2 years (and the shenanigans still continuing), i felt compelled to write up the history of price manipulations i've observed so far; especially since many people haven't yet figured out it's happening (or refuse to believe that it is), even if stablecoins are no longer as trusted as they once were. And it'll be cathartic for me getting a bunch of information out of my head and onto paper.
As one can easily figure out, this is gonna be an article about Tether mainly, though it'll feature the other stablecoins as well; as i still believe the lot of them to be involved in a cartel either formally or informally. To be specific, i'm going to go through most discrepancies i can remember and have observed within the markets, and lay out the conclusions i've been able to draw from them - or at the very least present the data so you can draw your own.
Unfortunately, i'm not able to "prove" anything, as that would require entities unwilling to hand over the data to hand it over; hence i'm restricted by the lack of action by the regulators. But i can prove there is plenty of discrepancy here to force regulators to action, or shame them forever if they still don't. Though i guess that boat has already sailed.
Lets talk data sources first, because crypto is supposed to be public and transparent, yet it is anything but. Over the past few years i used a variety of data sources i came across, most having been reduced to "questionable" status, and the few i have left are questioned continually anyway. I believe this is part of the grifter culture, to continually sow doubt so you can never be truly sure; basically institutionalized gaslighting.
The other part would be that crypto has proliferated so much, it's actually hard to get a good read on the money flows within the system in its entirety. The number of coins is now 20,700+, the number of exchanges 500+, and the number of actual additional regulation remains at zero - though there's been alot more talk about it. So i do feel sympathetic to the people out there trying to do good but are being overwhelmed.
That said; outside of data coming from the operators of stablecoins directly, i'll mainly be using Coinmarketcap data to show price patterns/volume shenanigans. There's many websites that track coin price and volume data, Coinmarketcap being the oldest and one of the two big ones, the other one being Coingecko. Many people prefer Coingecko over Coinmarketcap as CG seems to filter out alot of "fake" volume and exchanges while sticking as close to source data as possible, while CMC takes into account as much of the crypto space as possible, while verifying coin source data.
It's also this that makes Coingecko useless to me when analyzing stablecoin data such as circulating market cap. Simply because Coingecko says whatever Tether says it is, while CMC has atleast put effort into verifying which wallets do and don't belong to the project itself, and thus shouldn't really be counted as circulating supply. If there is one thing you don't do when trying to verify something, it's ask the proprietors themselves for verification.
.Now, as far as CMC's accuracy goes, obviously i don't trust it. Not when so much of the market is suspected and proven to be fake. But, having said that, CMC has one huge advantage over Coingecko: It is much older.
What that effectively means, is that alot of data sources have been fired and forgotten about since that time. Meaning, the sources were properly verified in a time where people still cared about that, and were left in their verified state. Nobody bothered to update them to hide their later shenanigans, because nobody trusts the website at large anyway, and any "glitches" would only serve to further that narrative.
But as a long term gamer, i know glitches, and i know glitches are consistent. Either they're one offs and you can never reproduce them again, or they happen all the time every time. In game development those are called reproducible bugs. This because computers are stupid, and they will always do exactly what you tell them. Even if you tell them to run the problem into the ground and freeze up. Computers will happily brick themselves (AKA become useless) if you tell them to.
So, if it's a problem with the website, it shows up on the website. If it shows up in one coin, but nothing else, then it's a problem with that one coin, not the website. Could be there's a problem with the website API causing the website to interpret some off-standard data wrong, but if it happens after a long time of doing it right, the developers of the coin must've changed the API. CMC has no reason to change data sources (and then change them back) out of the blue when everything is working properly.
If the glitch shows up in two coins at exactly the same time, but nowhere else, it shows a connection.
Doesn't matter how much "fake volume" is tracked here. Because it has to do with the nature of randomness, which is random. If you have thousands or millions of people trading back and forth every day, and those people are not exactly the same between two coins moving the exact same amount of capital, then you should see two completely different volume patterns.
People sell at different times for different amounts. So unless the trading happens between two coins exclusively, the volume pattern of one coin must be different at all times from other coins. And this is normal, when you look at the volume of two different coins at any given time, the patterns look different. Even in crypto where assets highly correlate, if you lay one volume over the other, you'll see differences in pattern, even if general momentum is in the same direction.
All this is to say, you can at times and under certain conditions, trust "fake" volume as well, simply due to the pattern it infers. Naturally, the volume displayed can't have happened, but the fact it displays something, anything in two places at the same time; shows something happened to both coins at the same time, which means there must be a connection. Even if we can't be sure what that connection is. It still provides a reason for a warrant so the authorities can find out what the hell is going on, as they can force people to turn over data sources.
And finally, if the market is mostly fake volume, i'd rather follow the data source that tracks as much fake volume as possible to scrounge up data patterns. The source that tries to be legit by throwing out most of the market (but ironically trusting fraudsters at their word) ends up being the least legit in that case. That said, even then i still use Coingecko myself from time to time, as CMC is nowhere near perfect.
Here we'll get into more specifics of what Tether has been pulling in the market. First off, i'll legitimize Coinmarketcap's "fake volume" a bit more, by showing the same issue has also shown up in other, completely disconnected places. It's also to start the data off with a bang, because it's the most direct proof, independently verified, that i have of a direct link between Tether's shenanigans, and atleast the volume of Bitcoin. Which also nobody else happens to have as i just got lucky after observing Tether's regular printing time day after day, week after week.
The following happened on the 17th of November 2020, at 1:34am local Dutch time. Tether always printed at the same time during that time, having switched to a daily print schedule somewhere in 2020. I could set my alarm to it, so i saw them live print many times. Only on the 17th, something else happened at the same time:
This was the very first "Volume Spike" i observed, and it's one of the ways Tether's capable of manipulating the price - or at the very least, moving money around "behind the scenes" to facilitate their other shenanigans that do affect price. I'm not entirely sure how the volume mechanic works, but i do think i know why it shows up this way on CMC.
Since CMC at best aggregates 5 minutes worth of data, if there are a very large amount of transactions happening very quickly, CMC aggregates it into 5 minutes worth of these transactions happening, and mathematically blows up any actually volume spikes that happened. They must not be following volume live second to second, or something, which makes the spikes count for more than they do in reality. So while i won't believe $190 billion of volume actually took place, i will believe that something took place, some volume increase, which increased transactions for a certain amount of time - and that thing must've happened for some reason which cannot be random due to its timing with the market cap increase.
The reason most used again being a "glitch".... But here's where it gets funky. If it's a glitch on CMC, then why does it show up on Investing.com - a completely unrelated third party website that also tries to track as many data sources as possible, but this time starting decades ago in traditional finance. Hence it's not unfair to assume no ties whatsoever between the two websites, or quite a find if there is.
And not just in Tether....
This screenshot was made a few minutes after the first one, after i had the brilliant idea of checking whether i could find the same discrepancy on other websites, and investing.com was the one i was using the most at the time for tracking the rest of the market, so i got lucky on that one. I hadn't even checked Bitcoin on CMC (and i forgot in my excitement), but that's fine, there's more discrepancies there later.
This is incontrovertible proof that Bitcoin and Tether are linked via shenanigans. There is no way in hell Bitcoin ever achieved $1.4 QUADRILLION worth of volume, because the amount of dollars to achieve that legitimately, don't even exist with M2 at $0.022 quadrillion. And it's ONLY Bitcoin and Tether that show this discrepancy at the same time. You cannot fool the chronological record.
Naturally i continued to observe and see when this would end, to confirm the websites were showing the same event, and sure enough;
It took a bit longer for Bitcoin's volume to return to normal, but after it went away in Tether on CMC, it went away in Tether on Investing.com. That's all i need to verify it did happen, live, and i caught it.
And notice how this was with Bitcoin at $16k - right before the first runup to $65k.
But this isn't nearly as crazy as things would get. While i can't find all the volume spikes in my files, here's a choice selection, starting with Bitcoin's volume on December 30th, 2020.
It's not the highest in Bitcoin i've seen. But it's the highest in Bitcoin of which i can remember where the file is located, because i made alot of screenshots over the years.
Here's the craziest one, taking place in Tether directly, achieving this because CMC aggregates data differently over different time ranges, so one day when i happened to press the 7 day range....
For reference; there is no reference to this. This is ~475 times the Japanese national debt as measured in Yen, but then in dollars. And it happened again, this time not even as a single tick spike...
That's on the daily chart so as fine as the data is aggregated, and it did not take place within seconds. With multiple volume candles there, this was an operation over the better part of an hour. Some spikes do take only one 5 minute tick, but others last quite a while, which makes it a very inconsistent glitch - and thus, extremely convenient. At these kinds of volumes, it becomes noticeable it had zero impact on price. You would expect something, but no.... Nothing. Not even a whisper.
Which is another one of those things that makes people believe it can't have happened, otherwise it would've done something. But this is transaction volume, not sales volume. You have no idea who sent what to whom for what price. If this is Tether sending freshly printed USDT to bot accounts for free, it wouldn't move the price. Don't forget, this is crypto, and you don't have to use an exchange. Direct deposits into wallets are perfectly possible as long as you have the address. While finding the transactions on a block explorer at the coin's regular volume is like finding a needle in a haystack, because you don't know what the actual size of the transactions was or when they happened within a 5 minute block. You're looking for many small transactions that happened rapidly during that time span, not big blocks. I think.
It's happened often, all the way through 2021, but even recently during Tether's redemptions and market cap reductions:
While i think i've made my point here, the interesting question is ofcourse, did any more spikes show up in Tether and other coins at the same time, proving a hidden connection between those as well?
As the intro of the article might allude; yes indeed, correlations have happened often. And by far and away, most of them happened between stablecoins.
Here's one from the start of this year, tying Tether, USDC and DAI together:
Note that this took place on January 19th 2022, so long before any trouble with CeFi, DeFi, or the whole TerraLuna debacle; with Bitcoin around $37K. Clearly, the connection that was made between Tether and Bitcoin on November 17th 2020 during the volume spike, has also been established between multiple stablecoins.
And it's not just Tether.
Here's a volspike from April 21st, again before the UST trouble (but not long before), showing a volume spike connecting BUSD and USDC and its apparent effects on the market cap of both. This spike wasn't in other stablecoins at that time, which is again key, that this can happen in two supposedly disconnected coins, at the exact same time. If it was at different times, it would've been less suspicious.
Size doesn't matter here, since it's all fake volume anyway, it only matters that it happened in two disconnected coins at the exact same time - showing they aren't as disconnected as first thought. The change in market cap patterns directly following the spike just makes it that much more suspicious, and possibly shows a direct impact of these volume spikes on atleast something to do with the stablecoins, even if it isn't price. And i'd argue changes in market cap I.E. reserves reacting to these volume spikes is far more important than price.
All of this culminates into what is happening right now, as i write this on August 22nd 2022. Since August 20th, both Tether's volume and USDC's volume has started to go sideways. Meaning it's no longer moving up or down, but it's exactly the same. It went sideways until today, where it actually dropped along the exact same pattern, at the exact same time in two coins supposedly unconnected, and leads to another market cap connection between USDC and BUSD.
This cannot be legit.
But, that just concludes volume. As indicated on the above charts there's more connections than volume and we'll get deeper into the connections between the different stablecoins as we go along. For right now we're going to keep the focus on Tether for a while longer, so we can talk about price and price action.
While the volume manipulation mechanic was invented in late 2020, a more tried and true method is Tether manipulating the price of their coin, in order to be able to afford to print more money for free. Any long term price chart of Tether shows big fluctuations that decreased over time in volatility as Tether has grown in size. What's interesting is i followed these fluctuations closely for a very long time, and regardless of Tether's total reserves size, the vast majority of the fluctuations stay in the $40 million to $80 million range, with sometimes spikes to ~$120 million.
This has stayed true for as long as i can remember for the months i watched this chart on the daily while Tether was growing in size exponentially, sometimes printing as much as $3 billion a week. And while i've observed this happening many times, it's more recent price action that i want to focus on. Since liquidity in the crypto markets has gotten alot tighter in 2022, alot of price action became more pronounced and easier to analyze.
This happened to TerraLuna as well in March, long before it crashed in May but after it was already doomed. I'm not entirely sure what happened - i suspect their washtrading bots threw a fit - but for a small moment in time UST became so stable, it showed every little bit of price action relative to the market cap in the market cap. Since the market cap of stablecoins is the price X number of coins, the more stable the price is around $1, the more the market cap will accurately reflect issuance of coins.
So when Terra seemingly activated ultra-instinct on March 12th;
The market cap showed a very steady pattern of hourly additions, which later got smoothed out somewhat after a reduction in printing for a while.
And as i've often said, staircase patterns in finance are not legit, and often an indication of some sort of shenanigans happening. The first chart is more like the pattern you would expect thousands of random traders to produce, while the second chart, clearly isn't. That pattern indicates most trading is actually very muted, while most additions come from a single entity or "whale", as they are instant additions of large sums. And by virtue of it happening so many times in a row so consistently, it's very unlikely to be the same entity "averaging in", as it's unlikely any human would wait approximately an hour between additions, rather than monitoring the price and averaging in a quasi-random pattern. Finally, since that pattern mostly disappears within a day of creation, it couldn't have been a glitch either, as it would've continued consistently, not smoothed out over time - which is the exact same reason it can't be a "regular timed addition" by the system either. Too consistent to be random amounts of money that coincidentally get added up to similar amounts 12 times in a row.
Well. I don't have to convince people of UST being a scam anymore, considering. It's just to display how in a coin we know was a scam price patterns in certain situations can reveal more than the scam-artists meant to reveal. And the Luna crash also gave us a unique window to look into Tether's price action manipulation, which i'd like to focus on, rather than the arcane cycling of money of the past.
To explain that though; the reason Tether can manipulate their own peg freely is because they are working with a minimum of 3 currency pairs (and probably alot more considering how big their tendrils have gotten); namely USDT:USD, BTC:USD, and BTC:USDT.
This means that, in a normal situation where there's only USDT:USD and USD:USDT, should USDT drop against USD, the only thing that can be done to defend the peg is buying up USDT for USD in the open market; reducing the supply of one, expanding it of the other, and thus increasing the price of USDT again as denominated in USD.
But when you have 3 pairs, it's alot easier to maintain the peg, thanks to the basis of trading called Arbitrage. Which simply means "buy low somewhere and sell high somewhere else and pocket the difference". This is desired because it equalizes prices between locations over time giving more stable prices and equal resource distribution without centralization, and it gives the arbitrageur a small profit for their efforts.
So if the USD:USDT peg falls, since you've got 3 pairs, you don't have to buy USDT with USD to restore the peg. You have 2 other options: If you have Bitcoin, you can sell it for USD (dropping the price of BTC in USD), which gives you the USD to buy USDT with and restore the peg (leaving you with the USDT, which you can sell at a later date when the peg's above 1:1); or you can buy USDT with BTC directly, restricting USDT supply in the market, and decreasing the price of BTC in USDT.
HOWEVER, because USDT = supposed to be $1, and selling BTC for USDT directly decreases the price of BTC in USDT but not in USD; arbitrage will happen between the BTC:USD price and BTC:USDT price. In this case, BTC will be sold for USD and bought with USDT to equalize the prices. Since this requires arbitrageurs to obtain USDT, they will use the USD gained from selling BTC to buy USDT with to buy BTC with - but the final step doesn't matter. All it matters is that it pushes more USD liquidity into the USDT market. This drops the price of USD vs USDT and the peg is restored. This leverages up Tether's capabilities significantly, as they can also use the reverse to pump up the BTC price in USD, by buying BTC for USDT on BTC:USDT pairs when they're above peg.
Naturally, it's not far fetched to use this mechanic even when the peg isn't in danger of falling below $1 in order to basically print free money. Print 1 USDT, sell for $1.0001 USD, the peg goes down to 1:1, put the $1 in the reserves so the USDT are backed in a cart-before-the-horse manner, and pocket the $0.0001 as profit. Which doesn't seem like alot, but times that 67.55 billion USDT, that works out to $6.75 million total available profit per $0.0001 difference to the peg. And the USDT will be backed by real money. These are the good times.
Problem is how to prove that, and until recently, that was pretty much impossible to do definitively, though i did find this chart that makes a good go of it, which was made on May 1st so right before the peg actually failed (and i was predicting a Tether peg/printing event on the basis of this pattern irrespective of what ended up happening to TerraLuna):
Thanks to the Luna and CeFi crash knocking Tether off its peg though and the 3 month grind to get back to it, we know liquidity is super tight for them right now. This limits their shenanigans, specifically which times they can employ them, which allows the price chart VS the market cap chart to reveal their secrets.
Here's the 3 month chart (zoomed in and equalized to the last 2 months), and i've drawn some lines on it to make the pattern crystal clear; to show what the commonality is between printing and not printing:
Something that lines up this closely, this often, cannot be coincidence. Once, sure. Twice, maybe. But 4 times? Direct correlation between Tether being above/below $1.0002 and printing/not printing? Nah. That's suspicious as fuck.
So it's again not a stretch to think, in the times where Tether stayed above $1 on a regular basis (and even dropped below it often to hit that $40 million - $80 million range), they took advantage of the same mechanic to literally print free money. The only reason it's so obvious now is because they have to, because they're running a ponzi scheme, and they're running low on actual liquid dollars after the recent troubles. So they're desperate enough to try and hope nobody notices. Which so far, they've been right in, considering i seem to be the only one who's made the connection so far.
Also again, note the weird volume pattern at the end of the chart - starting not long after their first reduction of market cap in a month. Another striking coincidence. There's so many of them ya might as well start pronouncing it coin-cidence.
Which leads us nicely into issue number three: Market Cap.
Not that it's not legit, infact i think the circulating supply on Coinmarketcap is just about the only legit thing we can track, even when people think it isn't legit but buggy instead. It really tracks ONLY the CIRCULATING supply. Meaning it's different from total supply, which they also track. So, when Coingecko says supply has gone up, but Coinmarketcap says it hasn't, it means Tether's lying, and it didn't actually increase circulating supply. Not the other way around.
What i want to highlight in fairly short form, is how the market cap of Tether has increased at very suspicious times, if that wasn't clear already. After all, if the market cap accurately reflects circulation, and it suddenly jumps by a predictable amount, then they must've put that predictable amount of money into circulation at that time; which is a strong indicator of shenanigans.
Looking at the market cap of Tether over time, ever since September 2020 it's been increasing on a daily basis, and its effects on the price of Bitcoin has become much harder to track and correlate. I've got tens of screenshots that made alot of sense at the time, but now probably won't without historical context, so i'll skip the arcane on this one.
Instead, outside of the recent clear rise in market cap in response to the price being above $1.0002 making it obvious, i wish to focus on one event specifically which i've already highlighted before. But which may now be seen in a slightly different light by other people.
At the start of July of 2020, the New York Appellate Court decided that Tether would have to turn over documents and stand trial in New York for fraud:
https://www.theblock.co/post/67348/new-york-appeals-ag-bitfinex-tether
What's interesting about this ruling is that Tether wasn't just ordered to hand over the documents, but to stop any activity that could further result in cash depletion. Or in other words; since the case was about the $850 million loan to Bitfinex, that money was subsequently frozen. Tether could no longer access the funds of this loan from July 9th 2020 forward. Which presents a problem when you're running a ponzi scheme and your real dollars are limited.
Which makes what happened on the 22nd of July 2020, very interesting:
There's about 830 million coincidences right there. And i would like to remind everybody: The world went positively apeshit when Michael Saylor invested $250 million in Bitcoin in August 2020. Not a single peep was ever uttered about Tether bringing in $830 million worth of investment in July of 2020.
As for those who wonder how that investigation ended, be sure to read this:
No need to believe me, the authorities say that Tether's a liar, despite their insistence that their fine without a need to admit guilt means everything is settled.
And a bit later the CFTC said exactly the same; only they came to even worse conclusions:
https://www.cftc.gov/PressRoom/PressReleases/8450-21
So if that's the case, what are the chances those 830 million USDT added at a price of $1 = 1USDT two weeks after they lost access to $850 million, are legit?
Or the $1.5 BILLION Tether added on March 30th 2020, just 2 weeks after the worst crypto crash so far, in the middle of a pandemic and a toilet paper panic. Or $4.5 billion of investment between the time the covid crash and George Floyd happened.
OR HALF A BILLION BEFORE THE VIRUS! C'MON NOW!
Infact the market cap went sideways after the repo crisis in September 2019 and until January of 2020, when suddenly, it jumps half a billion. And all this data cannot possibly be a glitch, considering it's all on Coingecko too, which uses Tether's own fucking API, so it's in their own fucking data. Infact it looks even less smooth than CMC does, so really, there can hardly be any claims of data corruption here.
Clearly, we're dealing with a market cap that's made to order - and not one backed by legitimate funds from the start. And i don't think it's the only one in the market that is like this.
So far i've only shown the market cap in dollars, which allows us to easily track the amount of reserves they claim to have as it'll be the same as the circulating supply times one. But it's also possible to show it in Bitcoin, in which case, effectively you're looking at the dollar price of Bitcoin inverted. Since the stablecoin is always supposed to be $1 (or close enough), and if it doesn't get any additions, if the market cap of the stablecoin grows against the Bitcoin market cap, then it's the price of Bitcoin that must've moved down, since the stablecoin can't move up.
It's not completely accurate, as when the market cap of the coin does grow but Bitcoin goes sideways in price, it still shows up as the BTC line going up. This is especially noticeable over very long time periods, or spikes making the market cap grow very fast. But it's close enough to follow one very simple thing: Whether reserves are being added to the coin during a downturn, or during an upturn.
Which makes it very interesting to compare the market cap of Tether in USD and BTC, VS the market cap of USDC in BTC and USD. Because you'll notice something very peculiar:
This chart starts on May 25th, so a week or two after the Luna crash and during the CeFi trouble. Tether was still reducing market cap, but it'd already dropped quite a bit from it's $83 billion high. USDC was going up in response, but by the time June rolled around, that effect had already started to minimize. At the start of the chart, BTC was trading at about $30k, so it'd already completed most its price movement down from its recent all time high.
So it's very surprising that, when BTC took its nosedive to the $17.6k 52week low, and the Tether market cap fell with it as you would expect in a large sell-off where people seek the safety of dollars and not stablecoins; USDC went up in market cap. By $2 billion over a very short period, while Tether lost nearly $6 billion over roughly the same period of time.
Well, maybe, people are fleeing for the safety of something as-good-as-dollars, and USDC's alot more trusted right now than Tether is, and they're fleeing from one into the other. I could buy that as an explanation.....
... if it wasn't for the fact that, when the BTC price recovered and went up again (shown as a decline on the chart), Tether eventually stabilized and started printing again.... But USDC lost market cap the entire way, which actually accelerated into the recent $24k high!
And this is a pattern i've noticed a few times before. That whenever, for whatever reason, Tether is incapable of printing or adding market cap, USDC always picks up the slack (until the recent drop to $21k). At the same time, whenever the Bitcoin price goes up, and you would actually expect more dollars to flow into the system considering all the altcoin prices highly correlate with Bitcoin - USDC goes down. In near perfect correlation with when Tether goes up, it's just the amounts that differ, not the pattern.
If we wanna start talking amounts lets question why Tether has a volume to market cap of 0.7 (67.55B market cap, 47B 24H volume) and USDC clocks in at 0.1, which now stands out as a sore thumb while USDC's 77% the size of Tether. That question isn't asked nearly often enough.
The market cap segment ends here, but naturally, it's not just USDC and Tether that mess around with how much currency is in circulation. Observant readers will have noticed at the start how the 7 day market cap of BUSD goes up in near perfect correlation with the 7 day market cap of USDC going down, in a case where Tether was unable to print because their peg price fell below $1.0002 so we have a clear reason as to why. In this case, even the amounts are the same, USDC and BUSD both exchanging a little over a billion dollars equivalent in market cap. What, so now suddenly nobody trusts USDC anymore in favor of BUSD, not long after USDC posts their treasury reserves down to the CUSIP? Only to then reverse that thinking on a dime a few days later? Get the fuck out outta here.
At this point, the easy logical conclusion is the correct one: Tether can't print cause the peg is too low, but for some reason that we aren't privy to, USDC can't print more money either. Which means BUSD has to pick up the slack for both, or risk the Bitcoin price cratering to a lower point where the crypto the stablecoin issuers have on their balance sheets become worth even less, requiring even more liquidation in the markets should they have a need for actual dollars at any given time. Or an unwillingness to let the market shrink, as the smaller it becomes, the less free money they can siphon off interest rates on any legitimate dollars they have loaned out - if the loans themselves don't bring enough trouble once prices fall, giving a motive to levitate the price of Bitcoin.
Because remember, it's a cartel ponzi, none of them have enough dollars, meaning they'll pull what they need from the open market when they need it. As for why BUSD would be part of it, that's because it's run by Binance, which has a massive funding need for the insane leverage they've run for far too long. The leverage blowing up is what caused the initial top for Bitcoin in May of 2021. That entire system is greased by Tether, so you could consider BUSD a supporting ponzi for Tether.
USDC's role in that system is to appear legitimate when Tether does not. That is why they started with attestations right off the bat, not long after Tether's 2018 attestation debacle. But a careful observer will note their attestations aren't of much higher quality than Tether's attestation in 2018; which the NYAG confirmed Tether effectively forged.
Which segues us nicely into the main point of contention of skeptics around these stablecoins; the attestations of their reserves. It should be no surprise at this point that i don't believe any of them, considering Tether's already shown how easy it is to fake one and make the market believe it, so anything even remotely less blatant would work.
Having said that, i've got a decent understanding how humans work, and that includes lawyers. These guys will attest to anything as that's the service they sell - but only when you can show them something. They'll attest that, to the best of their knowledge, you aren't lying about the information you provided. In turn they might perform some minor tests on the information, but by far and large it all comes from the firm itself. This is the main difference between an Audit and an Attestation:
Attestations attest that the documents sent over are indeed, documents. Audits check with 3rd parties to see if the information contained therein is actually legit. If that makes attestations sound overly vague; yes they are, and no i don't consider them to have any economic value anymore. I'll take quarterly or semi-annual audits over monthly attestations any day of the week. But, it's all we get for now, so it's what we have to work with.
This time, we're going to start with USDC. Even though Tether put out the first attestation, it was a stupid abomination anyway, and they didn't start doing quarterly attestations that atleast looked like they were trying until after the NYAG forced them to as part of the plea deal. Unrivaled transparency indeed.
Though i'm afraid USDC's "perfectly clear" couldn't be further from the truth either. In this case, we have to separate their attestations into those published before the October 2020 attestation, and those following the October 2020 attestation. Their attestations can be found here:
https://www.centre.io/usdc-transparency
Now, i'm not going to go through them top to bottom, as i've done that quite often. There's plenty of ways to fake an attestation like that, starting with the fact they're all attested at 1 minute to midnight pacific time. Including the December one, putting it one minute to midnight on new year's eve. I wanna commend Circle for their incredible work ethic. Hard to see how they could run at a loss this way, but they do.
As these attestations are crafted to throw you off their trail, they say very little that can be argued with. Circle simply submitted a few documents that said they have this much money, and Grant Thornton signed off on them since the beginning of the attestation is full of legal disclaimers saying they have no clue about the inside of the business anyway.
What i'm interested in when trying to track discrepancies in documents like this, is any change, month over month, as that change only needs to be there if there's a change behind the scenes. Hell, i've been obsessing about their constant changes in layout and what it could possibly mean that the Grant Thornton fax number sometimes is and sometimes isn't there. Means an intern's pretty damned lazy with their templates, that's what.
The reason October 2020 is different is because something changed: The Date. Not the attestation date or time, but the date Grant Thornton signed the attestation. It's equally interesting that the date on the documents Circle provides to Grant Thornton is the same as the date on the attestation itself. It's therefore no unreasonable conclusion to make that Grant Thornton does the attestation on the same day that they receive the documents. So conversely, if Grant Thornton doesn't receive documents, they won't sign off on anything, and the documents are dated later - leaving a question of why.
Every USDC attestation going back to October 2018 has been filed between the 11th of the month and the 18th of the month. Every single one, feel free to check. Then, suddenly without warning or explanation, the October 2020 attestation is dated November 23rd. A week late.
Now, one data point does not a pattern make, and maybe somebody got sick or there were pandemic delays; whatever. November's dated December 16th, so everything seemed back to normal... Until the December attestation didn't come.
It took until February 11th for this attestation to show up. Which makes the December attestation a month late. As it should've arrived in the 2nd week of January. The December 2019 and 2018 attestations are both dated January 15th, so it definitely is possible. And a week of absence i might buy, but an entire month? No.
January followed on March 5th, February on April 27th, March on May 24th, and April on June 9th. As you can see, it's a stubborn delay of about a month where previously, there never was one, and the attestations always arrived ~2 weeks after the attestation date.
The reason i stop with April, is because by June, the situation had changed. Because of the NYAG forcing Tether to commit to quarterly attestations, they started publishing a "breakdown" of their reserves. It's superficial at best, still not audited, so we still have no clue how much they're lying (but lie, they do). However, for USDC, it meant that suddenly the "legit" stablecoin with its attestations, didn't have an asset breakdown, while Tether did.
Naturally i'll toot my own horn a bit here, as it wasn't just Tether that forced USDC to be more transparent, but yours truly as well, finally getting some traction with my complaining about the attestations being late; and the Twitter questions grew louder by the day until USDC had to come up with something. This finally culminated with an article on Doomberg which i had a hand in (and it also has nicer graphs then i can make):
So, in the May attestation, that came out on July 16th following the pattern of being a month late, they gave a reserve breakdown. In the April attestation, just a month earlier, they specifically stated "As of the Report Date and Time, the US Dollars held in custody accounts are at least equal to or greater than the USDC tokens outstanding", on an amount of 14,9 billion USDC. A month later, this is how that looked:
So, officially, they actually lost $1.5 billion in cash and cash equivalents between April and May, because they started investing it in things that weren't cash. This is very hard to believe, and very unlikely, considering that not only did the attestation date discrepancies start in 2020, another big change happened between the February and March 2020 attestations, containing the crypto crash in the middle.
In February 2020, Circle still attested to "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions on behalf of the USDC holders at the Report Date and Time."
In March, that had changed to "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on
behalf of the USDC holders at the Report Date."
So, if they allowed themselves to invest in "approved investments" back in March of 2020, during a time where all of crypto was cheap compared to what would come later, why would they hold off until May of 2021 - the very peak of crypto - to invest in things other than dollars? Especially because, the moment people found out and got wary about it, they immediately promised to go back to all cash.
In other words, i don't trust them as far as i can throw them, and i'm willing to bet when the SEC investigates Circle thoroughly, they'll find they were investing in things other than dollars for months before they claimed they were. Maybe the attestations are legally vague enough, but during all this time, Circle and Coinbase still advertised with "100% backed by dollars" - the same thing Tether got in trouble for and convicted for lying about by the NYAG. At the very least, it's worth a fine.
Not just that - but in the June attestation, total cash composition had dropped to 46% and $11.7 billion on a total amount of $25.2 billion! By then, they had gotten so much pushback on investing in debt that they'd already promised to go back to all cash and later attestations would show that (as the June attestation came out on August 13th, while their August attestation later showed 92% cash).
And yeah, i will take pride in forcing them to be more legit, because not long after all this, Evergrande started taking down the Chinese property market, bonds have lost a ton of value since the start of this year when the Fed started to raise rates, and the trouble with CeFi/Luna has become legendary in the crypto space. On the off-chance that USDC is legit after all, i'm very sure i saved their ass from dropping many billions in a firesale like the rest, if not straight up bankruptcy cause they ran all this time at a loss. If they aren't legit it still saved more people's money allowing them to get out of the way of the steamroller in May, since USDC's peg never broke, while Tether's did and caused quite a panic doing so.
However...... The date discrepancies haven't gone away. Which is all the more egregious now considering they're all cash/treasuries again, which they should have no problem attesting quickly to. Not too long ago, Circle published a list of treasury bonds they supposedly own to show more transparency, down to the CUSIP. I looked up one of these bonds (because of course i did), and while they only had like $3 billion worth of that bond, the actual issue size was 10 times that. And i know you can buy slices of bonds rather than the whole bond too (otherwise the US government would never get funded at these amounts).
So that tells me nothing. They could've literally just looked up a bunch of bonds, wrote down the CUSIP/information, and stated that they own part of it. IT. IS. NOT. AN. AUDIT. The reason i try to bring their own data against them as much as i can because scammers and grifters are pathological liars! You cannot trust anything they say, as even if they're telling the truth, they're usually doing so because it's self-serving and furthers their scam in some way, shape or form. You simply cannot listen to them and have to independently be able to verify their claims, until you or somebody else actually has done so. And i don't feel bad for calling them scammers either at this point if they do turn out legit, because this level of incompetency and lack of transparency borders on criminal to begin with.
The June 2022 attestation (the latest one on the 24nd of August 2022, so July is late again), is dated July 28th. The June 2021 attestation is dated August 13th. June 2020 and 2019 came in on July 15th and 18th, July 18th being the latest date in the month until November 23rd happened. There's still the argument of "well they're so much larger now", but that doesn't apply either: October 2021, the attestation one year after the discrepancy started, is dated November 16th!
So by November 2021, they were back to their normal schedule of attestations. Then November came in on December 22nd (1 week late), December on January 24th, January on February 25th, February on March 31st (2 weeks late), March on April 29th, April on May 23rd (1 week late), May on June 22nd, and June on July 28th (2 weeks late).
Why the variation? Why isn't it consistent now while it used to be consistent at all cash before? And even if you consider it to have a consistent range now simply a week later than before - why a week later than before if they can attest to atleast $38 billion within 2 weeks in November 2021? I mean at a certain scale you have a process and additional scale shouldn't matter much - especially since the list of CUSIPs they posted was only 1 A4 page big while covering their entire reserves + cash. This shit cannot be this hard. They're a multi billion dollar company that's been publishing attestations for nearly 4 years!
Hence, shenanigans. Considering this is "too good to be true"'s cousin, "too shitty to be real". I can wave away just about every concern with the vagueness of their lack of perfectly clear transparency - but not the time discrepancy. The chronological record doesn't lie. They did not submit documents for attesting until July 28th on their latest attestation.
And if Grant Thornton redates their documents for them, i don't even know what good an attestation is then, because really, then it honestly tells you absolutely nothing, and they might as well submit some scribblings on the back of a napkin. Same value. Might as well hire the accountants under a bridge. And it still doesn't take care of the fact that Grant Thornton can't redate documents they don't have, so it still indicates a delay where there previously was none. Why would they sit on the documents for different periods of time?
Meanwhile, USDC isn't the only one that shows the dating discrepancy, while some more egregious attestation faux pas have already been committed by the rest of the cartel.
This time we have to take a closer look at Huobi USD, or HUSD. It was recently in the news for suffering its first real peg failure, dropping to below $0.85 but quickly recovering. The whole event took a little over a day, and HUSD's circulating supply hasn't changed before, during, or after the event. A little suspicious, to say the least. Even Tether had to reduce its supply to regain the peg.
For a while, HUSD was ontop of the world, topping at a market cap of $1 billion in May of 2021. The subsequent failure of the market dragged it down though, and it never benefited from the rebound in November. Until June of this year HUSD managed to hang on with ~$400 million market cap, until the trouble with Tether and CeFi finally managed to drag it to a low of $160 million, where it has stayed since the start of August - the peg failure happening 2 weeks after reaching this minimum; which is also pretty close to the ~$130 million average it had for the first 5 months of operation on Coinmarketcap. If it were to fail, it'd be the first "reserved/backed" stablecoin to do so.
Like most reserved stablecoins, HUSD published attestations attesting monthly to their reserves being all there. The past tense of that sentence tells you all you need to know. So for this bit we'll be using the wayback machine:
https://web.archive.org/web/20220218044714/https://www.stcoins.com/attestation/index
Lucky for us, the wayback machine also archived the PDFs uploaded to those links, so we can still view them. The last sitegrab is from February 18th 2022, so somewhere after that date this specific page was deleted, and considering December 2021 is the last attestation on that page, it's fair to assume January 2022 never arrived.
Upon observing the page for the first time, the careful observer will notice something missing: June 2021.
Now, a reserved stablecoin stopping and deleting its attestations without ceasing operations is enough of a red flag to GTFO. But this article is about discrepancies within the stablecoin universe, and when i first noticed this attestation missing in July 2021, HUSD was still going strong. So we must find out why, and in doing so, we'll see another hidden connection stretching across multiple stablecoins.
Since we don't have June, we'll have to compare differences between May and July. And that difference is quickly noticed: From inception and the first attestation in July of 2019, HUSD invested atleast part of its reserves into PAX (now USDP) - so it was a stablecoin backed by another stablecoin. Not really an issue; as long as the other stablecoin has the dollars, and the representative tokens never move out of the "house account" so they don't circulate.
This is clearly seen in the May attestation, which lists "US Dollars and PAX tokens held in Reserve Account(s)".
However, by July, that has changed.
They've also lost $340 million in between attestations, so it's only a small leap of logic to say "well they must've just sold off their PAX tokens until they were gone and had no longer any need for them". Which is fine by me - but then why is the June attestation missing; which, considering that's where most of the crypto crash after the May 2021 high took place, is the most interesting one. Yet, directly after the crash they still attested to owning PAX at the end of May 2021, so i wonder what happened in between.
On its own it's not enough to carry an accusation, so i never pushed too hard on this; but taken with the current flat market cap of $160 million and the sudden peg failure, while the attestation page containing this little oversight has been straight up deleted... It starts to ask questions.
The main reason i know this happened at all is because of my research into USDC attestations at the time, so obviously i kept watch on "all the others" at some point. In this case, that also includes BUSD and PAX. Which is why i started with HUSD, as PAX is the link between BUSD and HUSD.
And funny that. BUSD also has a May, June and July 2021 attestation, with June being present here. Lets compare and see if we notice anything:
https://paxos.com/attestations/
I guess it's not hard to guess what happened, so here's May:
And June:
Turns out - BUSD invested part of its reserves into PAX at exactly the same time HUSD pulled out. Which we can't exactly check due to the very conveniently missing HUSD June attestation.
First 2% in June (which comes down to $201,239,230.70) and adding this paragraph to the attestation:
And then 4% in July (which came down to $490,122,523.25 at that time):
This amount was unchanged in August, staying at 4%, while BUSD attested to virtually the same amount of BUSD tokens outstanding in that month.
And that's where yours truly enters the picture again, as for once i didn't forget to bookmark something important. On October 9th, i made a thread saying i couldn't find BUSD's investment in PAX. I'd gotten used at that point not having much use of block explorers for Tether and USDC considering it's no secret where those funds are coming from, and tracking them into individual wallets to try and find bots is an impossible task to do manually due to size.
But, PAX never was that big, topping out slightly over $1.4 billion in a spike. By October 9th the market cap had started to go sideways on CMC at slightly below a billion, so i figured it shouldn't be that hard to find a pile of coins half the entire coin's size. The tweet with data can be found here:
Hoping to finally identify some stablecoin reserves, i looked at Etherscan... but i couldn't find a large enough pile of money to match BUSD's investment. This was shortly before the September attestation was to come out, and according to their last count, they should still have that pile of money. Since BUSD attested to more money in September than August, they didn't exactly have a need to rotate out either like HUSD did.
You can't see the upload date to the website, which is a problem here, so ya can't see when both files were uploaded at the same time. By chance, the wayback machine only has grabs of the 7th of October and the 21st, where they don't show on one but show on the other, so no luck there. Though, the 7th of October grab does show no USDP attestation, even when it's dated October 5th.
Nevertheless, the evidence is irrefutable: PAX (USDP) attested on the same date as BUSD, always. This is also where my experience with looking at dates on these attestations helps, as it's the first thing i compare and thus the first thing i notice.
Here's August 2021 USDP and BUSD fused together to show the dates (and still with the 4% investment):
Followed by the September attestations, now without USDP investment of BUSD:
With October being dually attested again on November 9th. November on December 8th for both, and so on.
There was NO CHANGE to PAX/BUSD at all, EXCEPT my thread on Twitter saying i couldn't find the BUSD investment in PAX on Etherscan and the thread doing decently well in likes/retweets. Not being able to find the crypto on Etherscan is absolute and undeniable due to the public ledger nature of crypto, hence the hasty change compared to other long standing discrepancies. By October of 2021 i was getting quite a few new followers from my Tether watch and videos on cryptos, so there's a good chance somebody working/in the know at PAX or Binance came across it and very hastily redid the paper work for the October attestation on BUSD - completely forgetting that USDP and BUSD always attest at the same date.
Except for that one time. They forgot to resubmit the USDP documents. Classic rookie mistake. And once you eliminate the impossible, whatever's left, however improbable, must be the truth. I don't trust BUSD or USDP as far as i can throw them, either. They're all in on it.
Now that i'm on BUSD/USDP dates anyway; they both show the same dating discrepancy as USDC does, although on a smaller scale. Before the USDP investment of BUSD, up to the May 2021 attestation, all attestations done by BUSD and USDP are dated in the single digits of the month. So the 1st until the 9th. NEVER more. May 2021 came in on June 4th (attesting to May 28th, so take that USDC with your month and a half. It's possible within 1 week).
But June came in on July 13th. July on August 12th, August on September 13th. The September attestation had the split discrepancy (Oct 5th/12th), then October came in on November 9th.
November came in on December 8th, December on January 11th, January on February 15th, and February on March 8th.
I'll stop it there, but you can see how changes in the attestation date compared to their usual average can show discrepancies behind the scene you have no other way of uncovering - so that might be the only use of attestations, as they can't be made without any documents, and continually supplying them on a set date might be too much to handle for non-legitimate businesses; which must put in effort to compile those documents and make them look legit, where as legitimate businesses can simply provide a printout of their business.
There's no reason the January BUSD attestation should arrive a week late compared to the February attestation, because the composition of reserves they attest to is exactly the same as before June 2021: All cash. No USDP investment, only $900 million of increase between December and January so it can't be that (and it jumped by $3 billion between January and February while the February attestation was on March 8th, so size increases have no effect on dates). Atleast, it's supposed to be all cash. HUSD, BUSD and USDP all have never done an audit, only attestations. They claim to be regulated, but hey, so was Enron.
And there's even less reason the USDP and BUSD attestations should attest on the same date, every date, except the one time when i publicly question their reserves using on-chain data in between their attestation dates. I can think of only one reason why the discrepancy is there. Chances of it being a coincidence are astronomical.
I'm not at all willing to believe BUSD isn't investing in things other than what they list in their attestation. And hey, language matters with these things, and they literally attest to "Those instruments generally include, but are not necessarily limited to". Since we don't have a breakdown of their reserves, who the fuck knows what's in there, or even if they exist. And they certainly aren't telling, because they could've already posted a breakdown of their reserves, but they haven't, so BUSD doesn't even give enough fucks to lie to us in a capable manner.
And USDP can suck it too. If the attestation timing discrepancies weren't bad enough, there's a huge discrepancy between its circulating market cap on CMC and Coingecko. I know CG uses USDP's own data, and when i check with Etherscan, CG lines up more.
But there's this nagging feeling that CMC tracks circulating supply, and it doesn't include a few wallets that CG does include because of their sticking closely to official sources (tracking Etherscan in this case), while it's those wallets doing most of the trading. It's hard to track USDP supply anyway since so much of it is locked up in DAI's peg stability module at any given time (DAI being a multi-collateral stablecoin, a stablecoin made out of stablecoins).
To be honest, over time the main big mover in the top holders i've seen on Etherscan has been a wallet belonging to FTX. I've seen that one cycle through tens of millions at times, and i can't tell whether that's an exchange wallet containing customer funds, or their personal little safe. Circulating supply doesn't seem to drop easily below $845 million on Coingecko, which it did do recently - but recovered after about 24 hours at the cost of 2 peg spikes to below $0.99. CMC doesn't show any peg trouble for the same time period - but it does show near identical volume as Coingecko does, with a big hump on August 19th/20th.
So i don't know which one of the two to believe, nor can i explain how CMC shows $100 million more than Etherscan (or why it takes many moons to fix a glaring issue like that). My instinct would be to believe Coingecko instead, but who knows at this point, and neither show encouraging data. What i do know is i've seen enough to just stay away from USDP too, as even if they're not illegitimate themselves, they're still circumstantially involved with alot of shady shit. Maybe even a legitimate stablecoin isn't a good idea over simply using regulated dollars.
And honestly that's it for me for attestations. They're mostly pointless, but even with the few things one can discover in there to find discrepancies and lies, people genuinely don't care very much about them. None of the discrepancies so far have stopped any of the stablecoins doing business in any sort of capacity and that's the real issue at play here. The only positive change effected so far has been in USDC, which took alot out of me, and they still haven't produced an audit of their reserves. It's not that hard people!
Oh right, Tether's attestations. Well that one's easy, since they've never been good at attestations. Again, change is key here, so lets just compare the emphasis of matter between December 2021 and March 2022.
If you can walk away from that red flag city feeling OK, or as some CPA on twitter described it, "Boilerplate stuff, and i know cause i read alot of these", then please, ignore this entire article. I won't spend more time on Tether's bullshit. Audit, or burn. THIS year, because they've been claiming to be looking for an auditor or being straight up unauditable since 2018. Which is the biggest load of shit i've ever heard.
Just so everybody knows what AN ACTUAL AUDIT WITHIN THE CRYPTO SPHERE LOOKS LIKE; here's the Kinesis one:
https://kinesis.money/wp-content/uploads/2022/08/Kinesis-Audit-Verification-June-2022.pdf
I'm not gonna post screenshots considering that thing is 62 PAGES long. But scroll through it. Others can be found here (though they're not holding up to their promise of bi-annual audits, so don't think i'm not watching you guys now!):
Without a doubt Kinesis is the most trustworthy crypto out there right now, as they're pretty much the only one with a comprehensive recent audit. All Tether has is a paragraph or two about how their Tether Gold is supposedly backed by a broken transparency page. I might still have problems with gold backed crypto - namely that the crypto part is pointless since you're always trusting a central authority to have the gold, so decentralization is moot and adds inefficiency - but none of that has to do with the soundness of Kinesis's reserves.
So for anybody still thinking i'd never be satisfied - you're dead wrong. Kinesis has the full audit, so i won't ask any more questions about their reserves, and they have my blessing for atleast the next 6 months. I'll ask questions about the next audit if that doesn't come on time as promised (i'm fine with annual audits too! But then, promise annual ones, not bi-annual ones. That's what transparency really means, don't make promises you can't keep); but i have no questions about the reserves themselves. This is as good as proof is gonna get, so i'm happy.
But the rest of crypto? Hell no. Because, we're not even done.
YEAH there's more to come still! You thought this was everything i'd found so far? No, this is ONLY THE BEGINNING!
...Nah i'm joking. But there still are some more exotic ways in which Tether and the cartel are lying that are fun to highlight, because it only serves to prove how blatant they can lie, and get away with, because humans love numbers going up. Which is why i continue to say this is such a regulatory failure. Even if "crypto" was a new asset class requiring new regulations, product misrepresentation and consumer fraud don't need new regulations. They're already illegal by default.
So all i have to do is prove, conclusively, that Tether is lying about its reserves, in any capacity. Which is piss easy, even if i can't see their reserves. Simply through exclusionary logic:
WHAT are the chances, really what are they, of Tether being able to run a stable coin with €370 euros and 96 cents worth of capital buffer? And being able to do so from a market cap of €44 million, AAAALLLL the way until €234 million, and back down to €88 million euro?
Yet, they managed. While i can't find the screenshots of when EURT was still only €44 million in my mess of a directory, i do remember it, and i do have a screenshot from last June for the €234 million euro:
Which i can easily supplement with a screenshot taken right now:
Which also doesn't line up with Coingecko's account of the circulating supply, which it currently has at ~200 million. Using Tether's own data. From the same page. CMC doesn't even try and has it stuck at 40 million permanently.
So now i don't know what to believe. Does this coin even exist? Am i even real?
Moving on from existential dread; there's yet more ways in which Tether keeps the scam going. Though Price, Volume, Market Cap and Attestations/Reserve shuffling are the main ways via which Tether and indeed the whole stablecoin cartel is manipulating price (once you think cartel level, the amount of currency pairs to shuffle money around with increases exponentially), there are a few other ways which are used to keep a lid on the price as well as have legitimate dollars flow into the ecosystem in order to continue the scam.
First, lets talk Bitfinex. The people behind Bitfinex are the same as the ones behind Tether, as they once tried to hide but the Panama Papers revealed. To keep a long story short as it's already quite depressing in how many ways this market is manipulated, i've got good reason to believe Bitfinex is Tether's reserves. Or atleast, the missing part of it that's supposed to be there.
The main way Tether keeps its peg with the dollar is via Bitfinex. I say this because there's a difference between Tether's trading pairs with other crypto, and its pairs with dollars. Since that's the on and off ramp between the entirety of crypto and the fiat banking system and requires traditional banking connections, only a few exchanges allow trading between crypto and fiat currency.
This is why, when you look at Coinmarketcap's "Markets" section of Tether and sort by trading pair, you'll find that the USD pairs generally have a slight discount to the other pairs.
These numbers change all the time ofcourse, with many spikes up and down in specific crypto, but in general the above screenshot is the case. The USDT:USD pairs are grouped together around the same price, while all the crypto pairs trade at the same price with a few exceptions. They will often trade at the peg while the USD pairs do not.
And while a $0.0001 difference with par doesn't seem like much, at $67.55B in size, that's still a $6.7 million arbitrageable difference. Free money on the table.
This how Bitfinex employs its main method to hold the peg, as can be gleamed from the screenshot. Most of the times, and before the Luna crash all of the time, the Tether peg on Bitfinex trades at a premium to every other USD pair. During the various depegging events over the past 2 years where Tether traded below $1 either for a short or longer period of time, Bitfinex held the line at $1 even when Kraken went to $0.9983, generally the lowest it would go before Luna.
Such a dip can be observed for instance on the 20th of December 2021, where the price averaged $0.999 from $1 the day before. At the time, Tether had a market cap of ~$76.25 billion, placing that $0.001 fluctuation at $76,250,000. As i've stated, you go back in time and look at alot of these fluctuations, you end up with a 40-80 million dollar range. While i can't go back and take screenshots of the market composition back then, i can state i didn't see Bitfinex break its peg until May 2022, or if it happened it only happened for a short amount of time, even when others continually traded below peg.
So lets focus on the post-Luna crash then, because it also clearly and cleanly shows something Bitfinex does which no other exchange shows. Every time the Tether peg starts to crash everywhere else, it starts to rise on Bitfinex - Until it inevitably has to equalize with everyone else if everyone else doesn't equalize with Bitfinex. This is also limited by how much money Bitfinex has available at the time.
Lets start with the big one - the May 2022 crash.
Here it showed the same pattern, but the crash was too big for Bitfinex to overwhelm with arbitrage, and they simply ran out of funds. I'm fully of the belief some of the market cap reductions in Tether since the May crash was Bitfinex calling in funds to defend the peg - or maybe even deleveraging of funds Bitfinex had spent and would now no longer be backing the peg to begin with (reverse printing: spend the USD first, deleverage the USDT later).
The truth will be found out after everything's fallen down i'm afraid. I'm anticipating the movie that's gonna come out of all this quite fervently at this point. In any case, the most notable thing about the May crash on Bitfinex was the change in pattern from before the crash. As you can see, Bitfinex used to trade in very solid "blocks", from which the price would never deviate. After the crash, these blocks disappeared and turned into a "line" which often saw the price "bleed" from out of the bottom of the block. Needless to say, their trading engine was in shambles at this point due to a lack of liquidity, and took months to recover, which it still hasn't fully yet.
To take a little side tangent on another way Tether/Bitfinex keeps the peg, as it happened around the May crash; Bitfinex's peg is Tether's main line of defense, but it's not the only option they have. Naturally, if you're spending your own money while running a ponzi, you're gonna run out of funds pretty quick. But if you can leverage those funds somehow, you can make them last a heck of alot longer.
And that's what they managed to do. Here's the CTO of Tether posting USD and USDT APRs from Bitfinex on May 14th - which is after the trouble on the screenshot above.
For those who aren't into the lending stuff, this basically means, if you lend your USDt or USD to people on Bitfinex, you get 33% and 35% returns on that. Typical ponzi scheme returns are 20% and Bernie Madoff evaded capture for so long because (outside of regulatory complacency, AGAIN) he only promised a steady 10% returns.
So basically, when your system is crashing, you simply offer ponzi-level returns to get enough rubes to throw money at you to, hopefully, survive. And it worked considering Tether ended up surviving May. Though, all ponzi's are finite, so it'll crash at a later date instead.
To return to Bitfinex's price action, May 2022 was an unique event in Tether's history (so far) where their peg broke because of outside panic rather than questions about their solvency, the same thing that ended up taking Bernie Madoff down in 2008. A quick scan through June shows two more (very clean) events where Bitfinex tried the same tried and true strategy to hold the peg up.
And it should be noted right off the bat that, while both screenshots on Bitfinex show Tether above its peg, a Coinmarketcap screenshot of the same times shows that was very much not the case across the entirety of the crypto space. I know Kraken was far below it as i was watching the peg on the daily back then, which is also the mystery of the 3 months since May: The Bitfinex peg had already recovered while everything else was grinding up. Arbitrage should've meant everything would recover as fast as Huobi did recently, maybe after a week or so at most. Why didn't arbitrage take place, or so little of it?
In any case, here's Bitfinex on June 2nd:
June 13th:
And both events on CMC around the same times:
It should be clear what happened here at a glance. On June 2, the Tether peg was in danger of taking another nosedive down, but due to Bitfinex running interference and supercharging arbitrage to a 1.0023-0.9993 = $0.003 x $72.5B = $217,500,000 gap - it was enough to prevent the crypto space in general from crashing, and the peg returned to its equilibrium with the other pegs in the market, plus the premium in order to try and force the peg up over time. They pulled in the money for it through absurd APRs.
On June 13th, they weren't so lucky. They attempted the same tactic as on May 12th and June 2nd, but like in May, they ran out of liquidity or the selling pressure was just too great. This caused a peg failure on Bitfinex once the rest of the space took a nosedive, as if arbitrage pressure becomes too great, it'll drain all of Bitfinex's funds immediately and they're in bigger shit. At that point it requires additional funds and Tether market cap reductions - which happened to the tune of ~$6 billion dollars right after the June 12th peg slide. After June 2nd, the first Tether market cap reduction was on June 7th. While not all that money would've gone to Bitfinex, i'll bet part of it did.
I'm pretty sure that, should Bitfinex be shut down, Tether's peg would be crushed within days if not hours - even if every other exchange continues as normal. This is a market without true price discovery and many invisible hands, but Bitfinex is the biggest one by far. They don't have a hand on the scales - they are the scales. Though, FTX gives them a run for their monopoly money in that regard.
For that path; i recommend reading Protos's Tether Papers:
https://protos.com/tether-papers-crypto-stablecoin-usdt-investigation-analysis/
Which shows that a large part of Tether issuance has gone to Sam Bankman-Fried, the proprietor of FTX and his hedge-fund-which-isn't-a-hedgefund-because-it-has-research-in-the-title, Almeda Research. Just because FTX (and Kraken) don't have their own stablecoin, doesn't mean they can't be part of the cartel.
To stay with Bitfinex but move away from price peg manipulation, there's another way in which Bitfinex manipulates the market, though it's not Tether they manipulate directly here. It's the other part of the equation that makes all this work; Bitcoin. While i'm sure thanks to the volume spikes that Tether's got its tendrils in all of the crypto markets, and has for a long time:
As we all know, right now atleast, Bitcoin = crypto and crypto = Bitcoin. Everything, even Ethereum, trades fairly close to Bitcoin. If not in price relationship, then in momentum. Which conversely also means, you only have to control Bitcoin, and can sacrifice countless altcoins to do so, in order to keep the entirety of the scam alive. Nobody is gonna care about an altcoin dying when Bitcoin is still going up.
Naturally, that also means you have to keep the Bitcoin price pointed upwards. That's quite a bit more difficult than messing with the Tether peg, as they cannot print Bitcoin, they can only exchange for it. So what is an exchange to do? Well, you might not be able to print Bitcoin... But you can leverage it. If you make leveraged bets within the Crypto space, you touch Tether or other stablecoins at some point.
So, if Bitfinex drops its own Bitcoin into its own margin accounts which are levered up by Tethers which they control - they suddenly get alot more leverage over the Bitcoin price than before. And while those margin accounts are essentially running at a loss, the very fact they exist puts positive price pressure on Bitcoin. After all, you still need Bitcoin as collateral, which goes into these margin accounts, while others can see this data (though not the specific owners) and act upon it.
Now, there's nothing wrong intrinsically with trading on Margin. There's nothing wrong with betting on an asset going up even when it's going down. But it has to be a natural price pattern. If the price keeps falling, then less and less people will decide it's a good idea to go long, ESPECIALLY on margin, as the first people that lose their money during a crash are the people trading on margin.
Bitfinex puts out this data on these margined accounts under a charts called BTCUSDLONGS. They also do it for shorts, which is the chart i want to look at first.
The reason i wanna look at this first is because this chart follows the pattern you would expect, mostly. The chart starts back in March 2019, and you can see spikes in shorts around major events. Shorts decreased into 2020 as the price was running up, until the spike in March 2020. After the recovery of Bitcoin, shorts got crushed into the initial spike, until the May 2021 sell-off which saw a massive implosion in margin.
From that point onwards, it starts becoming a little bit more... suspicious. Between November 2021 and January 2022, Bitcoin nearly halved from its all time high. Yet, during that period, margined short accounts barely moved. Equally so, between March and June this year, the price of Bitcoin has done almost nothing but go down, yet there's very little short activity to be found on Bitfinex. Even when the drop from the November all time high exceeded the May drop by a wide margin (in breath though not in speed). It could be that enough margin shorters got wiped out to simply shrink the market. Bitcoin at $20k doesn't get nearly the same attention as Bitcoin at $60k.
But i'm pretty sure the real explanation for this can be found in the opposite charts, the longs.
Same thing here up until 2022. The March peaks make sense before and after the March crash. The reduction into 2021 makes sense, even the dip and resumption along the May 2021 crash can still be considered normal considering the speed of the May crash, and everybody constantly betting on a recovery (hype for $100k bitcoin was very high). Longs reducing into the November peak can even be explained by them becoming wary of Bitcoin never making it to $100k, and settling for $70k.
It's after the price started falling from its November peak that things get sketchy, quick. To highlight it further here's a 2 year chart of the BTCUSDLONGS vs the actual Bitcoin price.
While the peak in BTCUSDLONGS after the May collapse is already questionable, one could still state that the frenzy leading into May continued until Bitcoin actually started going back up again in July, at which point the margin accounts started to deleverage.
But even then, the chart after May 2022 coinciding with the Luna/CeFi crash is materially different from the rest. To the point one can say this is simply not possible. The new peak in margin longs exceeds the previous one by more than double, during the biggest drop by flat price that Bitcoin has ever had.
This is not what happens to margin accounts in these situations. They get blown out and reduced like what happened in March 2020 when margined longs went down together with the price. Not only that, but the last spike up ended after Bitcoin hit $18k and bounced. Since then, Bitcoin ran back up to $24k, which is +25%. BTCUSDLONGS only dropped from 110k to 103k, or 5.5%.
The difference is too big to be legit. Especially since BTCUSDLONGS kept running up all throughout May and June 2021, until the bottom of July 2021. Ever since the recent peak, they've gone straight down, and any price drops in Bitcoin only elicited very small additions that quickly got reduced again. Which isn't consistent with its pattern before either. Regardless of what Bitcoin has done. To the point where the recent $4k drop in Bitcoin from $24.5k to $20.8k barely showed a bump in BTCUSDLONGs, where previously they would've spiked.
This is not human behavior. Humans are almost as consistent as computers, just not nearly as logical. Humans tend to do the same thing in the same situation. And one thing they won't do is add unlimited fuel to their accounts burning down. Only the Fed can do that. Meaning, the BTCUSDLONGS that jumped in in May, had to have held throughout June in order for BTCUSDLONGS to ONLY go up. All the way from $40k to $18k. At double the amount of people from a year earlier.
So, BTC drops from $40k, you jump in on margin, and then BTC goes to $18k. You really think you're not gonna get stopped out? It only makes sense if somebody has near unlimited collateral to back their margin with, or if you're the person in control of the button of when somebody gets stopped out.
I think that's a good place to just end it. It's not all i have, shockingly enough. There's still incredibly conspicuous timing as to when attestations are uploaded, and what the price of Bitcoin does (AKA the stablecoin guys have a shitton of crypto on their balance sheet, which they sell/loan/margin for USD to make the attestation, then buy back to continue the scam), and this suspicion stretches across multiple stablecoins:
Then there's more market cap trouble on CMC, where the market cap of the major stablecoins goes straight sideways at exactly the same time, BUT not in any of the OTHER coins and not in ALL stablecoins:
Which has to be shenanigans, because otherwise the same glitch would show up in ALL datafeeds if it's something that affects everything equally. Even if it's a glitch that only affects a subset, then why does it ONLY affect the major stablecoins, and none of the other major altcoins or minor stablecoins?
The fact that maybe the entire runup in Bitcoin from the 2018 bottom onwards was all Tether, because the Tether market cap bottomed a month before the Bitcoin price actually did (so during a until that point historic rout, because of Tether no less; people start throwing money at Tether again a month before the bottom? Get the fuck outta here):
Another volume spike that's visible on Investing.com but this time affecting USDC only (happened to come across it in my bookmarks):
Circle's SEC filing (the proprietors of USDC), as they're trying to go public which means they have to tell the SEC everything in some way or another, which has some major changes between filings as well as an admission that their deposits aren't as FDIC insured as their attestations made people think (also it should be noted the USDC attestation discrepancies started before Coinbase went public and insiders sold their shares continuously to the unsuspecting public):
Predicting market cap increases based on Tether price-rotation mechanism that i talked about above (though how it works exactly only they know, i just see the results in the chart):
This bullshit which literally happened during my final read/draft:
And i haven't even gotten to how incredibly untrustworthy these assholes running Tether are!
Others have done much more work digging into the past of these guys than i have so i'm leaving that to the side, that can be found elsewhere. Data leaves less questions in the end about whether or not they're doing it again. But suffice it to say, every single one of Tether's senior staff is connected to past scams and frauds in one way or another. Meanwhile, even verifying the continued existence of anybody except their dumbass fall guy CTO or ass covering general council is a pain in the ass. No company on the planet operates like this!
Hell, i feel insulted they didn't hide their manipulations better, and downright offended people have let them get away with this. The regulators that let it happen i feel nothing but disappointment for.
I guess i'll finish this article with an anecdote of what happened to me not long after i got an audience at the tail end of September 2020, before the real runup of Bitcoin in 2021. While silver and gold catapulted me into the public view, i made videos about crypto and Tether not long after, and somewhere in the last 3 months of 2020 apparently i pissed somebody off enough that he was going to verify my research.
Some random guy on Twitter messaged me, quite excitedly, that he believed i was wrong to such a degree, he was actually going to spend the time to look into stuff himself and ask some people, specifically to prove me wrong. Quite exciting at the time, since i've never touched any crypto myself, had no contacts in that sphere at that time and was just working off price patterns. And the belief that obvious fraud is obvious so i don't need to ask anybody whether it's a fraud or not.
He came back to me after about a week. He told me he'd spent the entire week looking as hard as he could and asking people within the cryptospace about it, and he only came across two types of people; those who didn't know what Tether was at all (despite already being the 3rd biggest crypto by market cap), and those who knew it was a scam, but didn't care, because it was literally their bread and butter.
Just to be sure, i asked him straight, "So you spent a week trying your best to disprove me, and all you've come up with is "we know"?"
His answer to that was a simple "Yes".
So i don't know what more could possibly be required at this point to make the authorities get off their ass and raid some offices like the good ol' days. Or just cut Tether off from the banking system entirely by decree, under some "funding terrorists" guise like they do so often. Thought we had those rules for more than just harassing small business.
I honestly believe governmental systems all over the place have been aware of the frauds within crypto for some time, but only China has acted against it in any sort of capacity, since every other country benefits from the fiat-lightning rod that crypto is (but the Chinese don't want domestic competitors to the Yuan). Since it's another synthetic market like bonds or stocks, the fiat that flows into this system, tends to stay within the system. Especially with ponzi-like returns and busted off-ramps keeping it there.
That in turn keeps prices in the general economy down. If all the money that went into crypto and Bitcoin over the past 2 years had gone into gold and silver instead, the system would've died ten times over already. By that, i mean fiat currencies would've ALL rerated MUCH lower through supply deficits, as what's happening right now to European power prices, would've happened to the gold and silver price, which automatically means the inverse would happen to fiat currencies, as they're all gold derivatives in the end.
Now, we're going to get that situation eventually anyway thanks to a simple supply shortage (hence power prices going vertical), only now, people do not have a ton of excess money to toss at commodities. It's all stuck in a space with no real exit liquidity in the currencies that buy everything else. So now the people are gonna have to live paycheck to paycheck again with their savings burnt through. Wanna keep prices in check? Make sure nobody has anything to spend.
Not that that helps in the end, but it gives the rich more time to spend their fiat on real world goods before it goes worthless, and it simply takes longer to circulate within the general economy, namely until the rich spend it, instead of when crypto winners start taking profits - profits they're capable of taking because another peasant rube hands their life savings over to them, keeping overall inflation the same through equivalent exchange.
The rich get richer, the poor get poorer, and the world keeps on turning as usual. Only this time i honestly don't even feel that sad anymore. It happened because the number went up, and the poor all thought they could become the rich by outsmarting people who know how to make money. They wanted to become the thing they hated, and they're gonna pay for it. By now, if anybody is still in the market (or is capable of ignoring all this which i documented), they're no longer victims of scammers, but of poetic justice. Even those who make it out will have to live with themselves knowing what they sold to somebody else out there, and what must've happened to them afterwards.
I'm all for protecting stupid people from themselves, and therefore i shall again point to the failure of regulators, and that of the educational system to impart even a basic sense of financial wisdom like what never to trust. But personal responsibility cannot completely be ignored, and my god, does one have to ignore it hard to still trade in any crypto at this point.
I doubt i'll ever see a mania like the last 2 years ever again.
Or atleast, i really, really hope i don't.
- Kirian "Deso" van Hest.
Find my stuff on Twitter! https://twitter.com/DesoGames
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The Definition of Money: http://books2read.com/u/bzdaVz
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Ethereal Value and the Cryptofuture: http://books2read.com/u/bMwrNA
This is thorough and well put together. Thanks for taking the time to write it
I remember the first interview I saw you on. You said I'll work day and night and end them myself if I have too. Absolutely astounding research masterful