Bitcoin market analysis

Bitcoin market analysis

The information provided in this report is for informational purposes only. It should not be considered legal or bitcoin market analysis advice.

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The author is concerned about backlash and has asked to remain pseudonymous by signing this report with a public hash of their name. Sometimes people express views and opinions that are not popular. A pseudonymous hash signature enables an author to share such views and opinions without facing personal backlash. If you have a valuable perspective you’d like to share, ask a mutual friend to introduce us. Author’s opinion – it is highly unlikely that Tether is growing through any organic business process, rather that they are printing in response to market conditions. BTC’s price rise in the period studied occurred in the two-hour periods following the arrival of 91 different Tether grants to the Bitfinex wallet. USD deposits from customers and exchanging them for an equal amount of USDT.

An advantage of Tether is the ability to price digital assets in USD without having USD-denominated bank accounts. Given the extreme difficulty many exchanges have faced in maintaining banking relationships around the world this arrangement is quite attractive. Omni network and another roughly 14M Tether denominated in Euro on the Ethereum network as ERC20 tokens. This analysis will focus on the USD denominated Tether on the Omni network. A number of worrying events have brought attention to Tether throughout 2017. 440M USDT, a figure that had increased ten-fold in only 5 months.

April report establishing the names of their earlier banking partners. Tether network code, allowing them to “freeze” funds worth over 30M USDT. Tether grants are due to organic behavior by market participants increasing their cryptocurrency holdings. Bitfinex controlled accounts, and that the timing of these grants are not only triggered by lower than average price movements but also followed by above-average gains in the Bitcoin price. The first and most important relationship to consider is the temporal one.

When are new Tethers created and what happens to the markets immediately after? The null hypotheses are that Tethers are created by purchasers staking their USD independently of Bitcoin market conditions, and that Tether creation has no net effect on Bitcoin price. Tether are created after periods of Bitcoin price stagnation or decline, and also that Tether injection at Bitfinex creates a significant rise in the price of Bitcoin. We are going to use the Kolmogorov-Smirnov test here, essentially asking if the two samples seem to be drawn from the same distribution. If Tether is issuing new tokens in response to market conditions then we would expect the distribution of conditions preceding an issuance to differ from the overall distribution. This index is chosen for its public availability, resolution over that timescale, and representation of the overall market price instead of the price solely at Bitfinex.

The first sample is created by taking all timestamped Tether issuances, rounding down to the hour, and then looking at the percentage price change in the past N hours. 18 and looks at all percentage price changes with a difference of N hours, N being fixed for both samples. We vary N from 1 to 24 hours and examine the p-values. If there is a relationship before Tether is granted then what is the distribution of Bitcoin price movements in the hours immediately following the movement of Tether grants from the temporary holding wallet to the Bitfinex exchange account?

Tether is not moving the market upwards once it reaches Bitfinex. This is difficult to quantify precisely for the entire market but upper bounds can be established for an individual market such as Bitfinex. For instance, one can sum the value of the open sell orders to ascertain how much it would cost to instantaneously move the market. If we take all the 2-hour periods after USDT grants arrive at Bitfinex’s wallet and compound them we can attribute 48.

Tether creation by simply examining the leading digits of the publicly available deposit and withdrawal transaction sizes. Briefly, Benford’s Law states that the leading digits of most natural number sets are not evenly distributed but instead have an overrepresentation of smaller digits. 9 different leading digits and evaluate whether they conform to the target distribution with a chi-squared test with 8 degrees of freedom. This gives us a p-value to accept or reject the null hypothesis that the data is following Benford’s Law. Before evaluating Bitfinex’s wallet it is instructive to look at an example that does conform, namely the Bittrex deposit wallet.