Of course, like other market manipulations, it’s endemic ter cryptos because that’s what “unregulated” means ter practice.

Of course, like other market manipulations, it's endemic in cryptos because that's what “unregulated” means in practice.

This morning on Twitter, I went “OH MY GOODNESS” at this depth chart for the USDT/USD pair on the Openleggen exchange, spil at 0700 UTC:

Everyone went, “uh, OK … what am I looking at, and why is this significant news?”

This is a picture of a market where lots of people want to sell tethers for dollars, almost nobody wants to buy tethers for dollars, and the price is suspending te the air like Wile E. Coyote about to get gravity lessons.

Why is this significant? Because Tether is a loterijlot of what emerges to be holding the price of Bitcoin up.

So here’s how to read a depth chart and what all this seems to mean!

Tether and audits

Reader Aranfan asks:

What I’m wondering is how a thing on a entirely different blockchain boosts the price of bitcoin.

To recap: a Tether (USDT) is a dollar-substitute token, that you can stir around more lightly than an coetáneo US dollar. It’s popular with exchanges that can’t or don’t want to overeenkomst ter USD.

Tether, Inc. which wasgoed set up by the people from the large crypto exchange Bitfinex, and remains closely associated kwestie thesis spil tokens running overheen other blockchains. They state that every USDT is backed by a US dollar on deposit. So far, the market has treated USDT spil if they are indeed pegged to USD.

There have bot a lotsbestemming of questions about this because Tether has bot furiously issuing fresh USDT, coinciding with dips te the price of a bitcoin. This accelerated recently overheen half a billion dollars’ worth of tethers have bot issued just this month.

They maintain that all of thesis fresh USDT are backed by USD on deposit that this isn’t just fictional reserve banking. Phil Potter from Bitfinex assured mij of this ter email, and Lao Mao, proprietor of the BigONE exchange, posted recently of how he discussed this with them, looked at the books and wasgoed reassured but there has never bot a zindelijk audit of all of this.

Bitfinex/Tether promised a total audit wasgoed ter progress but a few days ago, their auditor, Friedman LLC, scoured their webpagina of all mention of Bitfinex and Tether. Last night, Bitfinex confirmed that the two had ended their relationship:

Given the excruciatingly detailed procedures Friedman wasgoed undertaking for the relatively plain cálculo sheet of Tether, it became clear that an audit would be unattainable te a reasonable time framework.

The market has not responded well to this, and, overnight, seems to be pricing tethers at rather less than a dollar.

BTC is about $400 lower on GDAX/Coinbase than Bitfinex for merienda, because GDAX deals te flagrante dollars and Bitfinex ter tokens that the market doesn’t fairly so strongly believe are dollars any more so traders are selling their not-USD on Bitfinex and buying BTC, which they can take elsewhere to sell for USD. This raises the “price” on Bitfinex and lowers it on the other exchange.

The other problem is that there are no reports of anyone everzwijn successfully redeeming their USDT for USD from Tether themselves presente money goes te, it doesn’t come out.

There is literally one USDT/USD trading pair that you can specie out of tethers ter, on Openbreken go here and select “USDT/USD” at top-left. It’s not a very usable market, because there’s no depth to the order book hardly anyone wants to buy tethers, certainly not spil many spil want coetáneo money so if you desired to specie out 1,000,000 USDT then you’d be getting USD 0.30 each for the last ones. (Another example of “market cap” being a bad and meaningless number you could waterreservoir a $2b market cap with a $1m sale.) Most of the activity on it looks very like bot-based wash trading around 1 USDT = 1 USD. (On that movie, note the regular, repetitive transactions for the same amounts up a bit, then down a bit.)

Now people are attempting to use this lil’ gateway to get existente dollars out.

Reading a depth chart

Let’s look again at that tweet of Openleggen USDT/USD around 0700 UTC:

Left to right is USD price, bottom to top is quantity of USDT. The crimson (left) is “buy” orders for USDT when the USD price goes down that far, and the black (right) is “sell” orders for when it goes up that far. The bottom chart is the orders themselves, the top chart is cumulative.

Here’s the bitcoin depth chart from GDAX at 1:16pm today, which is a bit more routine. This is a snapshot of the state of the market at a particular ogenblik: 1316 UTC on 28 January 2018. The bit at the bottom, with the white line indicating it, is the last-traded price spil of this ogenblik.

This is a chart of the market makers the people putting up offers to buy or sell. On the left there’s a pile of people who want to buy BTC from you, at what price they’ll pay. On the right are a pile who want to sell BTC to you, at what price they’ll accept.

(The term “market maker” is a bit different ter security trading, but the crypto usage is often just “whoever puts up an offerande.”)

The lines vertoning how many BTC would need to be bought or sold to reach a given price point.

The green line (left) is cumulative “buy” orders below the current price if you have coins to sell, they will buy them from you. The crimson line (right) is cumulative “sell” orders above that price if you want to buy coins, they will sell them to you.

Orders are processed te order of price going down for buy orders, te order of price going up for sell orders. If you want to sell Ten BTC and there are buy orders for Two BTC at $11,300, Trio BTC at $11,295 and 6.Five BTC at $11,290, you’ll fulfill all of the very first two and most of the last, and you’ll receive $112,935 minus the exchange’s trading toverfee, since GDAX charges the market taker (that’s you).

On the GDAX chart, you can also see erecto lines thesis are “buy walls” and “sell walls”. For the price to keep going up or down through that wall, the order has to be fully sated. e.g., te the above chart, 150 BTC of sales would druppel the price to $11,200, but it wouldn’t go lower until the 50 BTC order at that price had bot packed.

Ter habitual security or commodity trading, the order book the set of all the buy and sell orders has a fair bit of depth. So the market is reasonably sturdy and the order book isn’t lean and it’s hard to manipulate it very much.

But this is crypto. So the order books are super-thin, separated into one order book vanaf exchange ‘cos the market’s structure is approximately the stupidest possible … and so the price is super-manipulable!

Spoofing

Look again at that GDAX chart. There’s a lotsbestemming of information ter there, te a klein at-a-glance format. You may get the feeling “wow, more people want to buy, Bitcoin’s on its way up. Maybe I should buy!”

But what if some of those orders … aren’t vivo? What if someone places some good big walls … but the orders are withdrawn spil soon spil the price gets anywhere near them?

This is called “spoofing” where you waterput ter orders you have no intention of letting go through, to manipulate other traders’ perceptions, and hence the market.

Spoofing is illegal te the US since the 2010 Dodd-Frank act the precise wording (747) is “bidding or suggesting with intent to biombo before execution.” For example, the CFTC just fined Deutsche Bankgebouw and HSBC for doing this ter US futures markets.

It’s not frequently prosecuted, because doing so involves proving intent. Fairly a lotsbestemming of people and high-frequency trading algorithms waterput ter orders they then withdraw.

Of course, like other market manipulations, it’s endemic te cryptos because that’s what “unregulated” means te practice. Bitfinex’ed’s postbode “Meet Spoofy” shows one apparent bot, Spoofy, te activity. The crash a duo of weeks ago involved a lotsbestemming of spoofed walls.

Margin trading

There aren’t enough USDT to just straight-up buy BTC or place spoof orders to prop up the price. But they can be used to fuel margin trading.

Margin trading is borrowing (from your broker or, te cryptos, the exchange) to multiply the effect of your trading so rather than just having $100, you can borrow and trade with $200, using the $100 spil collateral. If your trade pays off, you’ve done indeed well!

If your trade doesn’t pay off, or even if the price dips enough that it looks like it won’t, the lender compels you to liquidate the entire position and pay them back instantly, and you lose your collateral. The ratio of collateral to amount borrowed determines how far the market can dip from the price you bought ter at before your position is liquidated.

Ter crypto, margin traders have a habit of borrowing a lotsbestemming on margin. Five? or Ten? is not uncommon. Bitmex offers up to 100? margin trading.

(It’s absolutely nuts to margin-trade cryptos, because they’re so volatile, but tell crypto gamblers that.)

So a petite amount of USDT lent for margin trading can permit the creation of a large order.

(This is fine spil long spil tethers are positivo.)

Which may not exist when the price gets there.

(This is not so fine, either way.)

Conclusion

Tether has dipped before 1 USDT wasgoed 0.91 USD ter April 2018, around the time the present massive crypto bubble wasgoed commencing and reminisce that, vanaf chapter 8 of the book, this bubble wasgoed embarked by Bitfinex and Tether losing their US dollar banking and it’s peaked at 1.07 USD ter latest times. And more depth is demonstrating up.

But last night, and today’s spread inbetween USD and USDT exchanges, looks very like a worried market, attempting to get out.

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Related movie: Proprietary trading explained | Coinbase trading bot on GDAX | Volcker rule


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2 Responses

  1. oddduck says:

    Your BCH is now ter your Coin Almohadilla account, and if they did it for safety like they say I’m fine with it. Now that the Largest Brokerage is supporting BCH wij will see a big dump ? or a slow Pump ?

  2. Brummielassxx says:

    Your BCH is now te your Coin Saco account, and if they did it for safety like they say I’m fine with it. Now that the Fattest Brokerage is supporting BCH wij will see a big dump ? or a slow Pump ?

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