Bitfinex Is Publishing Data for a Tether Market That Doesn't Exist

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FEATURE

David Floyd

Oct 23, 2018 at 18:30 UTC |  Updated Oct 24, 2018 at 04:00 UTC

Pop over to CoinMarketCap and check Bitfinex's page.

You'll see that the trading pair with the second-highest volume on the exchange over the past 24 hours – nearly $48 million at the time of writing – is USDT/USD: the tether stablecoin, which aims for parity with the U.S. dollar, and the U.S. dollar itself.

From this data point, you could be forgiven for concluding that Bitfinex's customers trade huge quantities of tethers for dollars, and vice-versa – more than they trade ether, XRP and EOS combined for dollars.

But you'd be wrong.

According to a Bitfinex spokesperson, the exchange does not offer a USDT/USD trading pair, and no such pair is shown on Bitfinex's site. Customers can deposit and withdraw both dollars and tethers at Bitfinex, meaning that it is possible to transfer one for the other through the exchange, but this process is far slower and more involved than placing a trade on the exchange.

If there's no USDT/USD trading on Bitfinex, then, why does the pair appear on CoinMarketCap – easily the most-visited aggregator of cryptocurrency data, according to Amazon's Alexa rankings?

The question is more than an academic curiosity, given that Bitfinex shares common owners and managers with Tether Ltd., the entity that issues USDT, and that the stablecoin is under increased scrutiny since losing its parity with the dollar more than a week ago.

According to Carylyne Chan, CoinMarketCap's global head of marketing, the data comes from Bitfinex's own public application program interface (API), which feeds exchange data to outside applications. Here is the API link Chan provided for the volume data point.

$48 million of what?

Chan made it clear that CoinMarketCap is as confused as anyone about the meaning of the non-trading pair.

"With this endpoint, as with others on the site, we try to represent all the pairs that the exchange offers in their API," she told CoinDesk, adding, "we are continuing to follow up with our contacts at Bitfinex to have them clarify exactly what this endpoint represents, as you asked, but they have not responded to multiple direct requests from our team members."

In particular, it is unclear what the "volume" data point represents for the apparently non-existent trading pair.

Bitfinex's exchange page on CoinMarketCap, showing the USDT/USD pair that customers can't actually trade, as of 17:00 UTC Tuesday.

In an earlier email, Bitfinex's head of marketing, Kasper Rasmussen, told CoinDesk, "We do not have a direct USD/USDT pair on Bitfinex so I believe it represents deposits/withdrawals of some kind."

He added that "USDT is only used as a transport layer on Bitfinex," meaning that it can be withdrawn more quickly than fiat and deposited more simply on other exchanges. Dollar trading pairs on Bitfinex, he continued, refer to U.S. dollars and not tethers.

Following the publication of this article, Rasmussen emailed CoinDesk to explain that the USDT/USD pair "tracks deposits and withdrawals to the following wallet."

He added:

"CoinMarketCap displaying a pair does not equate to Bitfinex publicising data that doesn't exist. CoinMarketCap track our API's and them displaying this pair is not something which we have control over, nor is it something we have pushed for."

Affecting USDT price?

Stepping back, few exchanges offer direct trading between tethers and U.S. dollars.

Kraken is one example; tether flooded onto the exchange last week after the USDT peg to the dollar broke amid worries about the issuer's access to banking services. Bittrex, which did not see a similar influx of tethers, also offers the trading pair.

Given the relative scarcity of options for direct tether-to-dollar trading, it is fair to ask if the data from Bitfinex would have a distorting effect on the composite price displayed on CoinMarketCap.

The USDT/USD exchange rate shown by Bitfinex's API has consistently been $1.00, even since the peg broke. On Kraken, by contrast, tether's price briefly fell as low as $0.85. It has yet to fully recover, trading at $0.972 on the exchange late Tuesday and $0.985 in CoinMarketCap's aggregated calculation.

However, Luke Wagman, chief evangelist at CoinMarketCap, said there has been no "noticeable effect" on the aggregate tether price.

"The price we display is a volume-weighted average," he explained, whereas the mysterious Bitfinex USD/USDT market "contributes less than 2% to the average."

As for whether the site plans to adjust or remove the data point, Chan said CoinMarketCap "will have a better idea about the exact steps to be taken" when the Bitfinex team responds to its inquiries.

UPDATE (20:05 UTC, Oct. 23, 2018 ): This article has been updated to incorporate additional comments from Bitfinex.

Bitfinex image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Tether Floods Into Kraken Exchange, Where Crypto Traders Can Get Dollars

FEATURE

David Floyd

Oct 19, 2018 at 19:10 UTC |  Updated Oct 22, 2018 at 11:42 UTC

Tether (USDT) tokens are flooding into a wallet address controlled by the Kraken exchange, one of the few places where the troubled stablecoin can be converted into U.S. dollars.

The exchange's wallet balance stands at nearly 47.8 million USDT at the time of writing, making it the eighth-most valuable wallet holding this asset, according to the Tether Rich List.

Contrast that to the situation less than two weeks ago, on Oct. 7, when Kraken's tether wallet ranked much lower – 22nd place – and held less than half its current balance: 21.6 million USDT. Archived versions of the rich list show the wallet balance fluctuating between around 10 million and 24 million USDT in the period from late December 2017 to early October.

The current balance, in other words, is a notable outlier. The implication, some market watchers have argued, is that traders wish to exchange their USDT for dollars.

Kraken is one of the few exchanges that offer direct trades between USDT and dollars. (Others include Bitfinex, which is closely tied to Tether Ltd., the issuer of USDT, and Bittrex.) So the influx is a sign that the cryptocurrency market may still harbor doubts about USDT, which saw its exchange rate fall significantly below its $1.00 peg earlier this week.

For instance, on Thursday a Twitter user going by the name Soleil Du Soir posed the question, "What are the reasons to transfer USDT to [Kraken]?" Another user answered, "You can get USD there."

Indeed, Kraken only offers one Tether pair, USDT/USD, so traders cannot exchange USDT for other cryptocurrencies on Kraken.

There are other indications that traders are heading to Kraken to offload USDT. On Oct. 15, the date that saw tether's exchange rate fall the farthest against the dollar, the greatest selling pressure was on Kraken, where USDT briefly touched $0.85. Tether trading volume for that day was the highest it's ever been on the exchange.

Since being listed on Kraken in March 2017, USDT volume has never been higher than its level on Oct. 15 – and its price (depicted) has never been lower than on that date.

Seeking redemption

According to the 2016 white paper for tether, token holders are able to redeem their USDT for U.S. dollars by returning them directly to Tether Ltd. In practice, a number of users have been unable to do so in recent months.

Jeff Perrin, the founder of Spiga, a fintech startup, told CoinDesk that he tried to redeem tether tokens for dollars through the company's site in January or February. He provided all the necessary know-your-customer information, he said, but did not receive any responses from customer support. As of mid-October, he said, his account was "pending approval."

Oguz Serdar, a full-stack developer and the CEO of the marketing startup Limk, described a similar experience in December 2017, saying his account had been "stuck in their verification process for months."

Some have claimed that redeeming tether is still possible. Dovey Wan, a partner at the investment firm Primitive Ventures, wrote recently, "two of my trader friends have successfully redeem[ed]," and posted a screenshot.

Yet a Twitter user going by "Auditcarlo," who is a virulent critic of Bitfinex and Tether, said the screenshot appeared to show trades on an exchange, not redemption through Tether Ltd. Wan did not immediately respond to a request for clarification.

With users apparently unable to convert their USDT into dollars in the way envisioned by Tether's white paper, they seem to be trying to accomplish the same goal by moving tokens onto Kraken.

A spokeswoman for the exchange did not immediately respond to questions sent by CoinDesk (nor did a Tether representative).

But the official Kraken Support Twitter account addressed potential reasons for the increase in Kraken's Tether balance: "traders will transfer USDT to Kraken, sell it for USD at whatever rate the market is willing to pay for it at the time, and then they can use the actual USD to buy other cryptocurrencies."

Soleil Du Soir responded to that tweet, asking whether USDT was likely to crash, and Kraken Support replied, "Not necessarily. Not everyone who transfers USDT will sell right away or at any price. Some might be using it for margin trading. Some might be using it for [over-the counter trading]. There are many possibilities."

Despite being the eighth-most valuable cryptocurrency by market capitalization, Tether has long been a subject of concern in the cryptocurrency community, since many doubt that its tokens are fully collateralized by U.S. dollar deposits, and the company has not provided regular public audits, as it said it would in the white paper.

Safe image via Shutterstock; charts by Trading View

Sam Ouimet contributed reporting

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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