Water is a really weird substance. It’s one of a few liquids that, when frozen, it’s density decreases. That’s why icebergs float instead of sink. They’re so much lighter than water, that even a little piece of them juts above the surface.

But 90% of the iceberg, by volume, is hidden below.

There’s nowhere to hide in a public blockchain like Bitcoin’s, though. And Tether’s secrets are starting to emerge. As The Tether Report pointed out, 48.8% of Bitcoin’s price increases occurred within a 2 hour window of 93 Tether grants. It claims that Bitcoin’s price would have only increased 6.5% without any intervention on behalf of Tether.

It’s a little hard to digest, so here’s a chart that’s a little easier:

Here’s a comparison to 74 randomly selected times:

There’s a few things to make clear. In this time frame, Tether granted $2.5B+. J.P. Morgan estimated that, by October of 2017, the entire cryptomarket had inflows of only $6B. By now, that number could be between $8–12B+. Whatever it is, in the time frame of these grants, Tether’s $2.5B+ in inflows is considerable.

Naysayers are quick to point out that, obviously, with this much money flooding the market in short windows, volatility would skyrocket. They also point out that, one could select 93 ideal points in the stock market, and draw a similar conclusion. As the saying goes, seek and you shall find, and so on and so forth…

The HODLer version of the story is that there’s nothing wrong with BitFinex or Tether. That large, institutional investors are simply putting in $100M orders when the price of Bitcoin dips.

First of all, that’s not what’s happening. We’re dealing with a public Blockchain. Follow the transactions…

But regardless, even if that’s the whole story. BitFinex knows when Tether tokens will be granted. And given the volatility this creates, it’s a perfect opportunity for arbitrage.

Funny thing about BitFinex, Giancarlo Devasini — the CFO — started the company as an arbitrage Ponzi Scheme:

Hi fellows, I’m mainly gauging interest here. It is possible that I will need large amount of coins in the future, for my new business. Now, considering the recent history in bitcoinland and the continuous antitbusiness trolling and attacks on this forum, I wouldn’t even think of offering a continuous deposit program, you all guess why. I did however made a poll and if there’s enough interest for a continuous deposit plan I might consider it. So I’m thinking of the following plan: when I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some btc. After 7 days, I will return all of it, principal + 2% interests. For you to be contacted, you would have to post here or in PM to say you might lend me bitcoins, and approx. how many you’d be willing to lend me. Now the questions you might have: What could you do to make so much profit? Let just say that I do “arbitrage”: I buy low and sell high.Those of you who understand it are already doing it, or don’t have the time to do it and might be interested by my offer. Those that don’t understand please forget about it and move on, I don’t want anyone to invest in something they don’t understand. - Giancarlo Devasini (source)

If he knows Tether tokens will be granted (and he does), and if he’s trading on his exchange (and he is), that type of knowledge is called “Insider Trading”. Specifically, it’s called tipping. It’s illegal.

What exactly is the tip, here? Well, $17,427 of Bitcoin’s total value “appeared” within a six hour window of 74 Tether grants. That’s 88% of Bitcoin’s total price increases. And it occurs within just 0.6% of all Bitcoin’s trading time.

When compared to the list of randomly selected times within the same range, I see a $3193 price increase.

Now you might think, hey wait a minute, $3193 + $17,427 — that’s more than Bitcoin’s peak price. And you’re right. The critical thing is: the price isn’t sticky. It goes down and back up outside of this window.

Everyone thinks BitFinex / Tether is trying to pump up the market. Considering this all happened before at Mt. Gox, and considering that Giancarlo Devasini admitted to doing so himself, it’s an easy assumption to make. And probably, it is an end goal of his — a side-quest, so to speak. But, short term, he’s interested in capturing your inflows.

See, in the 6 hour window following Tether grants, volatility is more than twice that of the randomly selected times. The price highs are nearly 5 times higher on average. But, the really strange thing is — in a six-hour window — the Tether grants actually have a net-negative impact on pricing.

There’s a couple reasons for that: One, most of the grants come during HUGE sell-offs when the price drops 20% or more in a matter of hours. In every case, the Tether grants are able to stop the sell-off, but not without losing a bit of ground. And two, the huge highs are followed by massive sell-offs — meaning, he’s pumping up the market and selling Bitcoins to make a quick buck.

When Tether grants create the perfect opportunity for arbitrage, and you got your start in the Crypto World as a self-proclaimed arbitrage guru, and when you trade on your own exchange, and that exchange allows illegal wash-trading, and when you admit to doing all this publicly on Bitcoin Talk, is there really any case that needs to be made?

BitFinex and Tether crashed into an iceberg when they lost their banking capabilities in March. But there’s a lot more beneath the surface. If you’re interested, I wrote A Brief History of BitCon — detailing the many cases of cryptocurrency related fraud.

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The code I used along with instructions to reproduce is available on GitHub.

BTC: 19QK13CPNwNuzVcLgHxjqRWzGtAWv7SWwr