Kraken is a US-based cryptocurrency exchange founded in 2011. Last week, Bloomberg accused Kraken of price fixing in connection to USDT. Kraken was quick to respond to the Bloomberg Tether allegation. Tether (USDT) is a stablecoin where one USDT is backed with one dollar. The stablecoin has been incredibly controversial in recent months.
Bloomberg Tether Allegation
In the initial article on June 29th, Bloomberg asserted that data from Tether trading showed red flags which regulators must pick up on. This is not a sole reporter, but four. The article is presented in straight black and white with an impressive title, no advertising, graphs, expert references, and a professional format.
The main point made by the piece is that small and large trades are having an irregular impact on the price. The point is also made that high trades have specific amounts that are unlikely to be made by humans.
“Unlike the price of Bitcoin, which fluctuates in tandem with shifts in trading volume, the price of Tether is inconsistently changed by large and small orders to buy or sell the coin.”
Kraken Responds in Kind
Kraken was swift and ruthless in pointing out some of the logical fallacies in the post itself. A post titled ‘On Tether: Journalists Defy Logic, Raising Red Flags’ on July 1st took the piece apart. Before investigating the points made, Kraken made reference to comments within the community and indicated that it was scary to believe that lawmakers were actually relying on that kind of material to make their decisions – “The would-be Tether takedown was indefensible and handily dismantled by the community.”
Kraken then outlined that USDT is not going to experience the same level of volatility that other assets are. This is because it is a stablecoin, backed with USD reserves. Large and small trades are not going to have much of an effect on the price. Additionally, the lack of volatility means that traders are going to place larger trades. Essentially, this cuts through all of the graphs, stats, references, and arguments made in the initial piece.
“Small trades and large trades may result in no change or similar changes in price because there is a much larger buy or sell order in the order book that has not been filled. Anyone, including Bloomberg, is welcome to test this hypothesis by looking at our order books and placing a trade. All the data is publicly available.”
Kraken got in touch with the trader who made a specific trade of 13,076.389. Bloomberg alleged that such specific numbers were red flags and are indicative of market manipulation, which is quite a leap. The response from the trader was that he picked it randomly.
The post is quite detailed and examines the allegation of Tether manipulation thoroughly. But it is more humorous in nature, essentially making fun of shody Bloomberg journalism. It starts with a Will Ferrell meme saying – “That doesn’t make any sense.”
Bloomberg journalists will likely think twice before commenting on exchanges without doing their due research. The Bloomberg Tether allegation made them look, at best, unprofessional.
Kraken suspects foul play, finding it hard to believe that an established outlet can display such a fundamental misunderstanding of basic economics. One of the experts consulted by Bloomberg was former Federal Reserve bank examiner Mark Williams, who predicted that one BTC would be worth less than $10 by mid-2014.