Following aBloomberg Newsexpose, alleging market manipulation of controversial alternative token Tether (USDT) on its exchange, Kraken fires off a savage blog post mocking journalists and defending their business’ integrity.
Also read:Red Flag Waved in Tether’s Relationship with Kraken Exchange
Kraken Goes Savage On Bloomberg
On Tether: Journalists Defy Logic, Raising Red Flagsreveals the San Francisco-based cryptocurrency exchange is having exactly none of it. A journalist “covering market structure forBloomberg Newsinexplicably fails to comprehend basic market concepts such as arbitrage, order books and currency pegs. More troubling, however, was the applause from other ‘journalist’ lemmings as they followed in walking their reputations off a cliff. It defies logic.”
Kraken is a scrappier exchange in the crypto world, and if the present rebuttal doesn’t convince readers of that fact, remembering back to its verbal joust with no less than the New York Attorney General would suffice. The AG issued its notoriousVirtual Markets Integrity Initiative Questionnaireto leading cryptocurrency exchanges throughout the United States, and then, as now, Kraken went savage. CEO Jesse Powell shot back, referring to the AG’s request directly, “When I saw this 34-point demand, with a deadline 2 weeks out, I immediately thought ‘The audacity of these guys — the entitlement, the disrespect for our business, our time!’”
True too is the fact it has been one hell of a week for Kraken’s current object of scorn and derision, journalist Matt Leising. Not only was he principal author in the offending Tether story, he also releasedviral speculationabout Satoshi Nakamoto’s reemergence via new writings. For Kraken, however, “The would-be Tether takedown was indefensible and handily dismantled by the community. Each comment a prelude to a thorough evisceration,” and nearly half a dozen scathing Tweets follow. Mr. Leising has since announced he is “off Twitter until July 9. Go yell at someone else.”
For the exchange, the need to push back on Mr. Leising’s work in this manner comes down to the presumption “lawmakers are reading this stuff. The title sure was sensational, and it undoubtedly grabbed eyeballs but what of the readers who are not following the outrage on Reddit and Twitter? What of those who rely on the journalistic integrity and expertise of their news sources? If we are to take up our pitchforks against market manipulation, guide your torches toward this illumination: the Bloomberg News piece was published on June 29th, the last business day of trading for Q2, and expiration date of numerous futures contracts. It raises red flags,” the post chastised at Mr. Leising’s methodology.
“Taking a look at a snapshot of the order book, we see that there is well over $1 million dollars of resting buy and sell orders within a very close range around a price level of $1 US dollar. As a result, price changes in USDT are typically very small.”
Tether’s Price is Not Being Manipulated by Kraken
After explaining USDT’s price stability is a function of the token’s inherent design and rather banal arbitrage, the exchange turns to its overall influence on the tether market at large. “As much as we pride ourselves on the level of recognition we enjoy in the industry,” Kraken explains, “we sadly cannot claim to be the arbiters of the price of USDT. It is more likely determined by the billions of USDT traded over markets like BTC/USDT or ETH/USDT on other platforms. If 1 BTC trades for ~6,350 USDT on one platform and ~$6,350 US dollars on Kraken, then the implied price of each USDT is logically $1 US dollar. This level of USDT price discovery happens on markets with hundreds of millions of dollars of volume, not on Kraken’s USDT/USD market, which has currently traded less than $1 million in the last 24 hours.” They further invite anyone to check their logic against publicly available data.
The exchange bills itself in terms of euro liquidity and volume “the world’s largest bitcoin exchange.” It operates in the United States, European Union, Canada, and Japan. Owned by Payward Inc., ironically it provides bitcoin core (BTC) pricing to the Bloomberg Terminal. It was founded largely in the wake of the Mt. Gox implosion, and established itself as a viable alternative. It was launched by Mr. Powell in Fall of 2013, and, with some noted hiccups, has been an ecosystem staple.
“For a real-world historical picture of a massive pegged market, take a look at USD/CNY in 2004,” above.
“We take allegations of manipulation very seriously,” the exchange insisted. “We strive to operate a platform that is open and fair to all of our users.” Nevertheless, “After reading theBloombergarticle, we scratched our heads, questioning just what type of manipulation was being claimed.” Rhetorically, it asks, “Is it so hard to believe that an asset-backed stablecoin could trade, well… with so much stability? As we discussed previously, one need only take a look at the order book to understand why trades of different sizes result in little-to-no change in price levels. If an order book is too hard a concept to grasp, think about stock at your grocery store. Why doesn’t the price on avocados change every time you put one in your basket?”
As for the charge of wash trading, “If you’re looking around for potential wash trading in USDT, we recommend you look elsewhere. That said, it’s not clear what harm could come from wash trading of a pegged asset against its peg. In Kraken’s case, USDT is only traded against its peg, USD, which itself is an explicitly manipulated asset.” And that pesky 13,076.389 number thought to be so very maniacal? They “asked the botter responsible for the mysterious 13076.389 orders. The answer: ‘literally randomly selected.’ So, there you have it,” they conclude.
Is tether’s price being manipulated? Let us know in the comments.
Images via the Pixabay, Twitter.
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