After Bloomberg News reported on an alleged market manipulation of controversial crypto token Tether (USDT) on the US-based exchange Kraken, the company in question retaliated by contesting these accusations in a blog post which derided journalists and sustained their business’ reliability.
Kraken Fires Back at Bloomberg
The blog post entitled “On Tether: Journalists Defy Logic, Raising Red Flags” reveals that Bloomberg’s expose “Crypto Coin Tether Defies Logic on Kraken’s Market, Raising Red Flags” did not sit well with the exchange.
The post explicitly states that the title “is a nod to a recent article in which a reporter covering market structure for Bloomberg News inexplicably fails to comprehend basic market concepts such as arbitrage, order books and currency pegs. More troubling, however, was the applause from other ‘journalist’ lemmings as they followed in walking their reputations off a cliff. It defies logic.”
Kraken is known in the crypto world for its combative spirit, which was evident in its verbal argument with none other than the New York Attorney General. The AG dispensed its notorious Virtual Markets Integrity Initiative Questionnaire to the main cryptocurrency exchanges which operated across the United States, and then, as now, Kraken also shot back. CEO Jesse Powell mentioned the AG’s demands directly, “When I saw this 34-point demand, with a deadline 2 weeks out, I immediately thought ‘The audacity of these guys — the entitlement, the disrespect for our business, our time!’”
Kraken Retaliates Against Tether Manipulation Accusations
The journalist that wrote the article, Matt Leising was also criticized in the exchange’s post.
“The would-be Tether takedown was indefensible and handily dismantled by the community. Each comment a prelude to a thorough evisceration,” and a Twitter spat of almost half a dozen scathing messages ensued. Since the dispute, Mr. Leising has announced that he is “off Twitter until July 9. Go yell at someone else.”
Kraken condemned Mr. Leising’s work practice, accusing him of making just clickbait- able title with no real evidence to back it up.
“The title sure was sensational, and it undoubtedly grabbed eyeballs but what of the readers who are not following the outrage on Reddit and Twitter? What of those who rely on the journalistic integrity and expertise of their news sources? If we are to take up our pitchforks against market manipulation, guide your torches toward this illumination: the Bloomberg News piece was published on June 29th, the last business day of trading for Q2, and expiration date of numerous futures contracts. It raises red flags.”
“Taking a look at a snapshot of the order book, we see that there is well over $1 million dollars of resting buy and sell orders within a very close range around a price level of $1 US dollar. As a result, price changes in USDT are typically very small.”
Kraken Denies Being Involved in Tether Price Manipulation
After stating that USDT’s price stability is an intrinsic trait of the token’s, the exchange then discusses its overall impact on the tether market.
“As much as we pride ourselves on the level of recognition we enjoy in the industry,” Kraken clarifies, “we sadly cannot claim to be the arbiters of the price of USDT. It is more likely determined by the billions of USDT traded over markets like BTC/USDT or ETH/USDT on other platforms. If 1 BTC trades for ~6,350 USDT on one platform and ~$6,350 US dollars on Kraken, then the implied price of each USDT is logically $1 US dollar. This level of USDT price discovery happens on markets with hundreds of millions of dollars of volume, not on Kraken’s USDT/USD market, which has currently traded less than $1 million in the last 24 hours.”
The exchange promotes itself when it comes to euro liquidity and volume as “the world’s largest bitcoin exchange.” It offers its services in the United States, European Union, Canada, and Japan. Owned by Payward Inc., it oddly provides bitcoin (BTC) pricing to the Bloomberg Terminal. The exchange was founded largely following the Mt. Gox collapse and established itself as a reliable service provider. It was founded by Mr. Powell in the fall of 2013, over time becoming a main platform in the crypto market.
“We take allegations of manipulation very seriously,” the exchange maintained. “We strive to operate a platform that is open and fair to all of our users.” However, “After reading the Bloomberg article, we scratched our heads, questioning just what type of manipulation was being claimed.”
“Is it so hard to believe that an asset-backed stablecoin could trade, well… with so much stability? As we discussed previously, one need only take a look at the order book to understand why trades of different sizes result in little-to-no change in price levels. If an order book is too hard a concept to grasp, think about stock at your grocery store. Why doesn’t the price on avocados change every time you put one in your basket?”
Regarding the allegations of wash trading, “If you’re looking around for potential wash trading in USDT, we recommend you look elsewhere. That said, it’s not clear what harm could come from wash trading of a pegged asset against its peg. In Kraken’s case, USDT is only traded against its peg, USD, which itself is an explicitly manipulated asset.”
On the matter of the 13,076.389 number, the exchange said that they “asked the botter responsible for the mysterious 13076.389 orders. The answer: ‘literally randomly selected.’ So, there you have it,” they said in closing.