Just when you thought the ongoing tit-for-no-tat between the business media and the crypto pages couldn’t get any more entertaining, one of the smaller exchanges has returned fire.
Kraken, which was accused by Bloomberg last week of rigging the Tether game, shot back with a blog post that unmasked the technical incompetence that is characteristic of many journalists in the mainstream finance press.
The reply, punningly titled after Bloomberg’s ‘expose,’ was entitled “Journalists Defy Logic, Raising Red Flags.”
What follows is a Texan barbecue of slow burns and delicious roasting as the authors drag Bloomberg’s writer over the coals. “Bloomberg News inexplicably fails to comprehend basic market concepts such as arbitrage, order books and currency pegs,” the exchange replied, under the username KrakenFX. “More troubling, however, was the applause from other “journalist” lemmings as they followed in walking their reputations off a cliff. It defies logic.”
Bloomberg’s point was that trades were resulting in lower-than expected price movements, an argument which once again demonstrates that smart people can say dumb things. “Small trades and large trades may result in no change or similar changes in price because there is a much larger buy or sell order in the order book that has not been filled,” Kraken replied, in a tone that can best be compared to a parent explaining to a child how doors work.
“If an order book is too hard a concept to grasp, think about stock at your grocery store,” the exchange continued. “Why doesn’t the price on avocados change every time you put one in your basket?”
Then there’s the tinfoil-chapeau’d theory that traders are somehow communicating through the last few decimals of bid-ask spreads. It’s not quite clear why someone clever enough to design a trading bot wouldn’t communicate through encrypted channels, but Kraken took the time to ask. “We asked the botter responsible for the mysterious 13076.389 orders. The answer: ‘literally randomly selected,’ Kraken said. “So, there you have it.”
But there’s a lot more to this story than a big business media outlet taking potshots at a tiny exchange, and it discloses the underlying weakness of business journalism. One would expect a major business journal to at least double-check its tech stories*, but that kind of caution is not needed when reporting on crypto: mere suspicion is evidence enough.
For one thing, if you want to manipulate the crypto markets, there are much riper and lower fruit in the orchard, “Tether Moon” jokes aside. For another, the fact that Tethers and other tokens are routinely circulated to take advantage of microsecond-long arbitrage opportunities would, one imagines, put a slight damper on the stable coin’s volatility… which we would expect a journal of Bloomberg’s profile to know about.
Instead, we get the unironic suggestion that Tether should be trading for as much as $1.10.
There are certainly plenty of hard questions to ask about Tether. But if you’re going to hoist a scare piece to the top of your paper’s masthead, it should have more substance than “Why does a dollar still cost a dollar?”
Disclaimer: The author is invested in various cryptocurrencies and tokens.
*(Editor’s note: we recently got a detail in a Ripple article wrong. As soon as we were alerted, we researched the detail and found that we were in error. An immediate update was published. Nobody’s perfect. But we’re still waiting for that retraction from Bloomberg.)