Why Wash-Trading is Not Evidence of Tether Being A Scam (or Fraud)
I recently have been engaging with very vocal Tether opponents. I call this faction “team red”. I think for many people the noise that has been created around Tether has led them to assume Tether is probably a scam. Just as many people probably wonder what all the hoopla is about considering there is an obvious campaign against Tether.
The opponents are claiming Tether is defrauding its customers (and somehow the greater crypto-community) based on inflating the prices of Bitcoin and crypto-currencies in general. However, upon further inquiry into the nature of their arguments I think that we can see it is nothing but a baseless agenda.
This article specifically deals with the assertion that wash trading is evidence of a nefarious Tether agenda.
What is the Negative Impact of Wash-trading?
Wash trading is a process whereby a trader buys and sells a security for the express purpose of feeding misleading information to the market. In some situations, wash trades are executed by a trader and a broker who are colluding with each other, and other times wash trades are executed by investors acting as both the buyer and the seller of the security.
I am not the person usually to ask what wash trading is as it is not my area of expertise. I had been putting off exploring this concept and complaint deeper as I wasn’t sure how well I could understand it. But recently one of the Team Red proponents came to tell me I should read about it (often a red flag to me) and they linked things I had basically already read which made me further solidify my conclusion that this group is nefarious and anti-bitcoin:
See I read the links and there is nothing that supports the assertion or implication that wash trading hurts the Tether/Bitfinex customers or greater crypto-community. And my device for talking with people that will never debunk their own argument is to show that they cannot simply pull out from the larger articles the exact point that they are making.
Nathan never responded. So he wants me to read these articles and implies they damn my counter arguments (and my assertion that there is not proper argument for me to counter anyways) but the truth is that he has no idea what he is referencing.
I do however read sources and counter-arguments.
Bennett Tomlin a very loud anti-Tether advocate responded for him. Let us inquire:
He is pointing to what also the investopedia link says is the negative implication of wash trading:
Wash trading is illegal under U.S. law, and the IRS bars taxpayers from deducting losses that result from wash trades from their taxable income.
Free Banking/Market Theory In Regard to Wash Trading
So we can see through the noise here. Wash trading is illegal and fraud not in the eyes of the sincere citizen-or in other words there is no direct observation of pain felt from the average Joe/Jane investor. It is simply a way of skirting paying taxes and this is why it is illegal.
But we have to understand that “wash-trading” is not blanket illegal. No doubt that the US will try to broaden its definition to include crypto-exchanges, that US citizens use, in their definition.
But it is obviously wholly wrong for a twitter account to extend existing laws to new technology that challenges the jurisdiction of those laws (I don’t think anyone from team read will understand this significant point).
Satoshi bestowed on us an interesting technology that has ramifications and implications. One such implication is the fight between forced taxes that the libertarian movement or the crypto-anarchist movement believes should be dissolved.
This is why even though Tether seems like a scam to everyone there is no significant movement to “oust” it. Tether price holds strong. There is only a small group that is trying to create enough FUD (fear, uncertainty, doubt) and noise to bring down Team Blue.
The reason these exchange wash trade is because it is not yet illegal as the laws have not evolved to encompass them in this regard and wash-trading has other benefits that help a free banking market emerge in what I call “crypto-exchangelandea”.
This free banking market was well envisioned by the cypherpunks that are believe to have created and developed Bitcoin and I dare suggest that wash trading is not something that crypto-anarchists believe should be regulated by governments.
Overall, our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies. These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free.
These papers play on peoples tacit assumptions and fears that all money issuers intend to inflate the supply of their money while obfuscating the irrational assertion that you can make a market freer by introducing more regulation.