New Research Suggests Suspicious Tether (USDT) Trading on Kraken Exchange

Avi Rosten

New research published today has highlighted what appears to be very unusual trading of the stablecoin - Tether (USDT) - on the Kraken cryptocurrency exchange.

The new analysis published by Bloomberg examines Kraken’s trading data for USDT - drawing attention to several conspicuous features which it describes as “akin to defying gravity” in the world of exchanges.

Looking at more than 56,000 trades between May 1st and June 22nd - the study observed two very unusual features in particular:

  • Firstly, huge trades seemed to have moved prices almost exactly as much as small trades, and often even less - a feature experts view as a “red flag” for market manipulation.
  • Second, the data revealed a pattern of strangely specific order sizes - some of which extend to over 5 decimal places. Potentially used as a signal to automated trading programs, the report explains that these specific trades might be suggestive of “wash trading” - a tactic banned in regulated markets - where people trade with themselves to create a false impression of market demand.

Prompted by ex-poker player Andrew Rennhack’s speculations about Kraken exchange’s Tether trade data, Bloomberg News investigated the data themselves and shared it with several experts in the field - all of whom agreed that it points to suspicious activity.

Controversy Surrounding Tether

While there is no evidence whatsoever that Kraken exchange itself had any involvement, the study is an important development upon previous research into the stablecoin’s activity.

Examining Tether’s use on popular exchange Bitfinex, a paper published two weeks ago by University of Texas professor John Griffin also indicated that the coin appears to have been used to manipulate the price of bitcoin - a conclusion Bitfinex denies.

Undoubtedly further specific research is essential before more conclusions can be drawn, but crypto investors and regulatory officials alike will pay close attention to the story as it develops.

Bitfinex Launches Margin Trading on Tether Gold

On Thursday (January 30), digital asset exchange Bitfinex announced that it has added margin trading on Tether Gold (XAUt).

What is Tether Gold?

Exactly one week earlier, Tether launched a new product called Tether Gold (XAUt), which is a crypto token -- available as an ERC-20 token on the Ethereum blockchain and as a TRC20 token on the TRON blockchain -- representing "ownership of one troy fine ounce of physical gold on a specific gold bar" held in a Swiss vault. 

Paolo Ardoino, CTO at Tether and Bitfinex, had this to say at the time:

There is growing demand for digital exposure to physical gold, making the launch of Tether Gold a timely innovation in the crypto ecosystem. Tether Gold provides the combined benefits of both physical and digital assets, removing the drawbacks of holding gold in more traditional ways, such as high storage costs and restricted access.

The XAUt token "can be transferred to any on-chain address from the purchasers' Tether wallet where it is issued after purchase." A particular gold bar(s) "will be associated with each on-chain address where Tether Gold is held."

The allocated gold is "identifiable with a unique serial number, purity and weight" and XAUt token holders are able to verify "the details of the gold bars associated with their address" via the Tether Gold product page on the Tether website. 

Margin Trading on Tether Gold

In yesterday's press release, Bitfinex says that by launching margin trading for XAUt, it is "enabling traders to execute more advanced strategies on the metal in a digital form."

Margin trading for Tether Gold -- with up to 5x leverage -- is available for pairs against US Dollar (USD), Tether (USDT), and Bitcoin (BTC), was launched at 12:00 UTC on January 30. 

Also, Bitfinex stated that it has increased the maximum leverage for BTC/USD from 3.3x to 5x.

Ardoino offered this comment:

"The launch of margin trading on Tether Gold will allow more advanced trading strategies, enabling a more sophisticated means of hedging exposure and managing risk. Raising our leverage from 3.3x to 5x is a noteworthy development, and is also timely given growing interest in gold and other safe haven assets amid the recent turmoil that we've seen in equity markets."

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