Bloomberg Report Raises More Questions about Tether and Market Manipulation

 

 

 

A new Bloomberg report published on Friday may add additional fuel to the ongoing controversy over Tether’s possible role in market manipulation at many large cryptocurrency exchanges. The authors noted that an examination of trading at the popular Kraken exchange raised questions about everything from how Tether trades impacted the token’s price to possible signs of wash trading.

Bloomberg News reviewed 56,000 Tether trades on Kraken that occurred during the period May 1 to June 22, 2018. They then shared that trading information with two experts on market activity: Mark Williams, a former bank examiner for the Federal Reserve, and NYU professor Rosa Abrantes-Metz. Each of them suggested that the Tether trading on Kraken was inconsistent with normal market patterns.

The report observed that,

“Huge trades move prices about the same as small ones, ignoring the normal rules of economics, according to a review of Kraken’s public order book—a pattern that experts on market manipulation view as a red flag. 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.”

The most common trades included orders for 75 and 1,000 tethers. The next-most-common trade was for 13,076.389. The researchers were particularly concerned with the high rate of orders that were even more specific, including those five-decimal order amounts like 34.08652.

The two market experts they consulted suggested that those orders could be an indication of possible wash trading, a market manipulation technique in which traders take both sides of a trade. The practice is banned in traditional stock market exchanges, but similar regulations have yet to be applied to the crypto exchange industry.

After reviewing the data, Abrantes-Metz noted that Tether prices seemed to be unusual as well, She said, “Large trades are not impacting prices … I’ve looked through lots and lots of data, and I don’t think this is real.”

Williams questioned the data as well and noted that the five-decimal trade amounts seemed to be a “unique identifier which increases the probability it is being generated by the same person or entity.” He also said that “large and frequent trade volumes appeared to have less influence on price than small trade volumes” – in defiance of the normal rules of economics.

Like the recent study paper from University of Texas researcher John Griffin, the Bloomberg report is not proof that market manipulation has occurred. Moreover, the report acknowledges that there is no evidence that Kraken has done anything wrong.

Author: Ken Chase

Freelance writer whose interests include topics ranging from technology and finance to politics, fitness, and all things canine. Aspiring polymath, semi-professional skeptic, and passionate advocate for the judicious use of the Oxford comma.

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