Kraken Answers Back to Bloomberg News Mistakes Understanding Market Structure

Bloomberg Journalists Make Mistakes Understanding Market Structure – Kraken Answers Back

In a recent article published at Bloomberg, the authors make inexplicably mistakes about basic market concepts such as arbitrage, order books and currency pegs. But surprisingly, other journalists applauded the article that talked about Tether, a virtual currency that is pegged to the US Dollar.

Other individuals commented on the matter saying that the piece was not accurate at all making mistakes with topics like order books, or other wrong assumptions.

More troubling is the fact that lawmakers are reading these articles and taking decisions after it. Regulators in the United States are closely following how Tether (USDT) is developing in the market and this may not be good for the whole ecosystem.

And about all this situation, Kraken gave an answer.

It is important to understand how arbitrage works. In any market, traders use different strategies to buy and sell assets to earn risk-less profits, an action known as arbitrage. And the cryptocurrency industry works in a similar way. There are several platforms and traders want to profit from the difference in price from one and another.

But Tether does not experience this level of volatility as in other cryptocurrencies because it is asset-backed. Behind each USDT there is a dollar. This encourages traders to place bigger orders within a tight range, which shows the important level of confidence in the currency.

Looking at Tether’s order book, it is possible to see that there are over $1 million dollars around a price level of $1 US dollar. This makes USDT a very stable asset.

At the moment, Kraken offers only one market on USDT, but there are over 400 traded markets on USDT, Kraken represents less than 0.1% of aggregate daily USDT volume.

Moreover, if 1 BTC is traded for $6,350 USDT in one platform and $6,350 US Dollars on Kraken, then Tether should be worth $1 dollar.

Kraken wrote:

“We take allegations of manipulation very seriously. We strive to operate a platform that is open and fair to all of our users. We understand the significant level of trust our customers place in use to custody their assets and to provide them a safe trading experience, and we would never jeopardize our reputation by engaging in or supporting manipulation on our platform.”

Kraken explains that they are not accountable to clients for the loss of value of any particular asset, and USDT is no different than bitcoin or Ether or any other public stock. If the asset goes to $0 the exchange will let individuals withdraw the virtual currency from it. If Tether loses its peg, the exchange will always owe the same number of tokens.

Additionally, Kraken explains that they have no reason to believe that the token supply is artificially inflated.

If you take a look at twitter, the on going conversation seems to still be a touchy one. Here is a few tweets by Co-Founder and CEO of Kraken, Jesse Powell:

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