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How Bitfinex conspired with Tether to manipulate the market

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How Bitfinex manipulates the market in collusion with Tether

Hot on the trail of recent events: The analytics of what’s going on behind the scenes in the crypto market. Recently, Bitfinex has apparently been conspiring with Tether to manipulate the crypto market.

The sequence of events on the surface

If you follow the news of the cryptocurrency world you might have heard in the last couple of months some vague and unclear rumors related to the stable coin Tether and Bitfinex, one of the biggest cryptocurrency exchange platforms. This is what’s been happening on the surface:

  • October 7th: Bitfinex was caught in some unholy acts. The platform was accused of insolvency, the rumors were quickly spread across many medium blogs which motivated Bitfinex team to post a response to these rumors.
  • October 19th: Huobi announces the issuance of HUSD token which is, in fact, a package of 4 different stable coins: Paxos’ PAX, TrustToken’s TUSD, Circle’s USDC and the Gemini exchange’s GUSD.
  • November 20th: The authorities turn their attention to Tether which is suspected to be not as transparent as it claims to be. The rumors appear that Tether will soon be replaced by other stable coins on Binance including those that make up Huobi’s stable package.
  • November 27th: Tether announces enabling direct redemption of Tether to fiat through its native platform. Nothing critical for the end-users, all you need to do for this is to pass verification on their website.

On the same day, Bitfinex announces Tether neutrality and launches new stable coin pairs. With one small, but still important detail: It means that on the 27th of November at 14:30:00 UTC all USDT deposits have automatically become fiat.

These events may seem to be only distantly related to each other, but the truth lies much deeper. Now here’s the explanation of what it was all about.

What’s going on behind the scenes

The market is in the downtrend, Bitfinex and Tether are pressed by the authorities due to the opacity of all their deeds. How to get away with it and even make some profit? Here’s what could have happened, step by step:

  1. Launch fake rumors about the problems that you have. Add some problems with withdrawing and listing new stable coins. Get the plummeting graph of the “stable coin” price.
  2. Buy Tether at a very low price and burn it.
  3. Announce to the publicity that you have passed the audit and that you are all clean and white. The amount of tokens you issue equals the amount of money you really have.
  4. Make Tether deficient and raise its price back.
  5. ???
  6. Profit!

If there are winners, there also must be losers. The losers in this situation are margin traders, arbitrage and algorithmic traders. All other participants of the market are now depressed by the long-lasting downtrend and have hardly noticed anything.

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