Hacker News new | ask | show | jobs
by alethiophile 2035 days ago
If arbitrage bots try to arbitrage between BTC-USDT and BTC-USD markets, and the USDT markets are the ones pushing the price up, then it's the arbitrage bots that would end up holding huge amounts of USDT. So what are they doing with it? They should mostly be trying to maintain equal holdings to handle arbitrage, so they would have to sell it on USDT-USD markets (or redeem it from Tether, if that's actually possible).

If the tethers are actually unbacked, then the USDT-USD markets should be dropping hard as arbitrageurs try to unload tether bags.
2 comments
shermanmccoy 2035 days ago
I think the ponzi continues to work for now, the arbitrageurs can cash out, while the illusion that tethers are backed prevails. So indeed if no one does redeem these USDT as I keep reading could the arbitrageurs just slowly buy the cross to USD over a period of time after the trade? Alternatively USDT seems to be a proxy-currency to move across exchanges and networks, so it may indeed be transferred off to other pairs/tokens to fund alternative trades...
link
alethiophile 2034 days ago
Arbitrage isn't magic. The only way arbitrage can push BTC-USD prices up to match BTC-USDT is if the arbitrageurs are selling a proportional amount of USDT for USD. Either they're redeeming them with Tether, which some claim isn't actually possible (?), or they're selling them on USDT-USD markets. Since those markets still trade around $1, it's safe to assume there is not some massive imbalance for selling USDT over buying it.

Tether might be shady in all kinds of ways -- their operation has a lot of red flags to it. But it basically can't be responsible for massive BTC rises all on its own, because the rises happen even at pure USD markets, and that can only happen when a lot of real USD actually got injected.

link
shermanmccoy 2034 days ago
>they're selling them on USDT-USD markets.

My hypothesis is they get dripfed onto these markets so as not to spook them. Or just transferred off to collateralize other trades - hey it's free money to them, why not set up another trade elsewhere while they are in?

It is not safe to assume anything based off market price action. You seem to be assuming there is some essential relationship between volume traded and price. These are market prices, they can be totally irrational, especially if there is some fake news (Tether is fully backed) behind them.

link
crasl 2035 days ago
There exist a pretty huge number of OTC desks in SE Asia (mostly in China) that deals with USDT, they provide significant liquidity and could feasibly support cashing out of the arbitrage bots.

Also, because the order book is pretty thin on most exchanges, it may not take much arbitrage for the USD price to catch up.

link