Last week, news portal Bloomberg did a story that talked about cryptocurrency exchange Kraken allegedly manipulating ‘stablecoin’ Tether (USDT) on their platform.
The report titled ‘Crypto Coin Tether Defies Logic on Kraken’s Market, Raising Red Flags’ stated, “Huge trades move prices about the same as small ones, ignoring the normal rules of economics, according to a review of Kraken’s public order book—a pattern that experts on market manipulation view as a red flag. The mystery is bracketed by another quirk: Oddly specific order sizes—many going out to five decimal points, with some repeating frequently.”
Certainly not pleased by this statement, Kraken unleashed its fury on the publication, through a blogpost.
Not holding back, the exchange hit back saying, “Huge trades move prices about the same as small ones, ignoring the normal rules of economics, according to a review of Kraken’s public order book—a pattern that experts on market manipulation view as a red flag. The mystery is bracketed by another quirk: Oddly specific order sizes—many going out to five decimal points, with some repeating frequently. ”
Clarifying its stand the exchange said that traders in the cryptocurrency market often buy and sell cryptocurrencies on different exchanges to take advantage of the best prices, which is no different for Tether. The blogpost states that Tether is unique because it’s price is always $1 (although there are minor fluctuations).
Referring to the order book, the blog post said 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.” It further invited media portals to test the hypothesis by going through their order books which are essentially public data or through their APIs.
Dispelling the allegations, the exchange stated that it is nearly impossible to take it seriously because Tether is well-known for its stability. The report said, “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?”
Apart from price manipulation, the exchange was accused of volume manipulation. It elaborated that Tether constituted less than 1% of the total Kraken volume and no the company had not been padding up volumes in a dishonest manner.
Although price manipulation is a serious issue, news publications need to conduct thorough research before levelling serious allegations against exchanges.
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