Kraken Exchange & Tether (USDT) Show Odd Trading Volume Patterns (Analysis)

Tether Thrives On Kraken’s Market, Against All Odds, But Everything Isn’t As It Seems

Tether seems to thrive in the market when nothing else does, urging consumers to wonder if the coin is an anomaly, or if it is a scam to drive more revenue. It functions as a security token, and the recent sales through the Kraken marketplace.

There are a few ways that a price can change that signal a red flag to experts. Both small and big trades change the value of tokens in the same way, which experts believe is its own red flag on the platform. Furthermore, seemingly random order sizes tend to repeat themselves, which should be completely unheard of.

In the case of Tether, they have experienced inconsistent changes in value, altered by a range of order sizes. Bitcoin has not performed in the same way, and it is supposed to be the most dominant on the market.

The apparent origins of these concerns start with Andrew Rennhack, who used to professionally play poker but now turns his attention to cryptocurrency. He took personal time to download information from the order book that Kraken maintains and made a public post that caught the attention of Bloomberg News. When Bloomberg News initiated their own research, they shared their information with both NYU Professor Abrantes-Metz and former bank examiner Mark Williams. Among the group, they’ve all commented about how the performance seen on Kraken’s Market is unlike others seen before.

There are a lot of questions about Tether and Kraken right now. Professor John Griffin, who has become popular for his ability to decipher suspicious activity on Wall Street, created a research paper, where he discusses the use of Tether tokens to buy Bitcoin, with the use of the Bitfinex Exchange. He hypothesized that the rise in Bitcoin’s price were manipulated, though Bitfinex does not agree with the “discovery.” Shortly after the research was release, Bitcoin started to fall.

One of the ways that Kraken’s Market was examined with Tether, as referenced above, was with the “random” amounts. The third-most common amount for trading was 13,076.389. Since most orders have at least five places after the decimal, both Abrantes-Metz and Williams said that this could be a sign of trading programs being used. The only other theory is that the numbers are the direct result of wash trading, which is not permitted on financial markets because of the way that it alters the perception of supply and demand. However, since Kraken is a crypto platform, it does not fall under the same regulations that would prohibit wash trading.

Even though the trading with Tether is quite alarming for some investors, no evidence has shown that Kraken has had anything to do with the manipulation. The Chief of Staff at Kraken, Allan Stevo, spoke instead of CEO Jesse Powell, but he assured consumers in an interview, “nothing looks out of place to us in our publicly available trade data feed.” He also told Bloomberg that he and Powell have “not been able to confirm that the data set you sent to us is accurate.”

Powell seems to be a standoffish CEO, completely ignoring the idea that cryptocurrencies need to be monitored for potentially cheating in the industry. Protection “doesn’t matter to most crypto traders,” he says, and he also claims that they also do not care about the recent investigation started by Attorney General Eric Schneiderman of New York. Despite their lack of interest, Powell also noted that he is not against working with the government.

Regardless of Kraken’s compliance and Tether’s performance, investors should be aware that the United States government is paying close attention to the goings-ons of the $248 billion crypto market. Even the Justice Department has launched a criminal probe to see if traders in the industry are falsely adjusting the price of the various cryptocurrencies. In fact, they are even examining for wash trades, which is normally only searched for in general financial fields.

While the government examines cryptocurrency as a whole, the U.S. Commodity Futures Trading Commission has focused on Tether specifically. In fact, in December, both Tether and Bitfinex received subpoenas, requiring them to prove that Tether is funded with a reserve. Though neither were accused of anything officially, Tether made a major deposit of $2.55 billion on June 1^st. Luckily, the examination did not qualify as an official audit.

Right now, Tether trades at a 1:1 ratio, which is because they claim to be backed up equivalently by USD in the bank. Much of the attention on Tether comes from their promises of stability, which is valued by bank-less venues that need to pay their customers in a traditional currency. Right now, Kraken is one of the only exchanges where consumers will be able to trade with Tether, so it would be easy to assume that they have a major impression on the price of tokens. However, the typical supply-and-demand concept of value with cryptocurrency or stocks do not impact Tether, which seems odd to many investors and critics.

While large trades would automatically trigger a change in price, that has not been the case with Tether. After thorough research, Abrantes-Metz has said, “I’ve looked through lots and lots of data, and I don’t think this is real.” The only variations that Tether has shown in their price has been between $1.0095 to $0.989. On their blockchain, it is common to see trades involving 34.05478, 30.06946, or even 34.14089. Abrantes-Metz suggests that the unique amounts “could be a signal, because it is really, really strange.”

In William’s review, which involved studying the transactions for risks, said,

“Many of the trade amounts are frequently occurring to the fifth decimal point, a unique identifier which increases the probability it is being generated by the same person or entity.”

He also noted the lack of influence that sales have had on the token, whether they are big or small. He believes that the unique transactions referenced above are indicative of wash trading, which is most common for currencies that want to make their tokens look more appealing, though it changes nothing.

Other professionals in the industry have been questioning the validity of the transactions as well, because they just do not make sense. The unusual amounts appearing frequently should be enough for regulators to question them, and the lack of attention to them could be what is keeping investors out of this platform.

Dave Weisberger, who is the creator of CoinRoutes, noted,

“Is there manipulation? I don’t know, but I know they’d be digging into it. Institutional investors, before they commit their capital, want to see the market is fair.”

Matt Leising started a thread on twitter to talk about some of their findings:

This story wouldn't be possible without the common sense and coding skill of @andr3w321 who thought he was seeing something weird with Tether trading on Kraken and set out to prove it https://t.co/ZXH5IsmTQs

— Matt Leising (@mattleising) June 29, 2018

for example I don't have an easy explanation for how this type of trading doesn't move the USDT price up pic.twitter.com/FGK72qzMqz

— Matt Leising (@mattleising) June 29, 2018

or this in the other direction pic.twitter.com/4JunVzBiO9

— Matt Leising (@mattleising) June 29, 2018

here's how we did this analysis pic.twitter.com/tJNVloOGCK

— Matt Leising (@mattleising) June 29, 2018

and here's the data we pulled from Kraken on our Github site, so you can look at it for yourself https://t.co/PrYnzaELkn

— Matt Leising (@mattleising) June 29, 2018

Taking a look at twitter you will see many are taking a different stance:

The market for intelligent reporting in crypto hit an all-time low today on @Bloomberg. https://t.co/XDOpzLaoiH. @cryptoscopia slays: https://t.co/Hfy7rM4dVv

— Jesse Powell (@jespow) June 29, 2018

This is something I'd expect from CNBC, not Bloomberg. I'm awestruck by the ignorance

"Many other orders go out to five decimal places, numbers like 34.08652. Abrantes-Metz and Williams suspect that such numbers could be signals to cheaters’ automated trading programs." https://t.co/osXaeE1ePN

— lowstrife (@lowstrife) June 29, 2018

Is this a serious article?

"the foremost experts in the inner workings of the $30 trillion U.S. stock market …He can’t wrap his mind around why orders for 13,076.389 Tethers keep popping up on Kraken. “No human would enter that order,” he said. “It doesn’t make sense.”"

— lowstrife (@lowstrife) June 29, 2018

My brain hurts when non-traders write about trading and manipulation.

— Alex Krüger (@krugermacro) June 29, 2018

/3 "Both agreed that they’d never seen a market behave like Kraken, where large Tether orders fail to sway prices much."

Bloomberg is close to solving the mystery of how arbitrage works on an asset backed by another asset.

— light (@LightCrypto) June 29, 2018

You also have some individuals that “tested” their own theories, going against what the Andrew Rennhack had pointed out and poking fun at the authors:

https://twitter.com/IamNomad/status/1012730529555402752

https://twitter.com/IamNomad/status/1012731118284664833

https://twitter.com/IamNomad/status/1012747123392176128