New Research Claims Bitcoin Price was Manipulated using Tether in 2017

Record bitcoin price propped up by another digital currency

Bitcoin's impressive price surge at the end of 2017 was the result of price manipulation using a "digital currency" called Tether, according to a study conducted by researchers at the University of Texas.

Once issued, almost all tether was moved to Bitfinex and then shifted to other exchanges, where it was used to buy bitcoin, propping up the price, the paper said. "Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies". The price of bitcoin fell as much as 5 per cent after the report was published, approaching its lowest point of the year.

In particular, Mr Griffin and Mr Shams examined the flow of Tether, a token that is supposed to be tied to the value of the United States dollar and that is issued exclusively by Bitfinex in large batches.

The authors of the paper do not have an email or document trail to prove Bitfinex is responsible for the the price manipulation, but instead relied on the transaction records on the blockchain to sift out patterns, a method that has helped authorities spot suspicious activity in the past.

Again, in plain language: in periods right after the bitcoin price falls and Tether mints a bunch more USDT, that's when it's clear that somebody (who could it be?!) is artificially pushing the bitcoin price back up.

However, the two notably discovered that it does not take a large amount of tether to prop bitcoin's price - "even less than 1 percent of extreme exchange of tether for bitcoin has substantial aggregate price effects", the study said.

The researchers found that tether issuances rose a year ago during periods when the price of bitcoin was dropping. New analysis indicates that this is one of the most important factors that drove bitcoin's rally previous year. Griffin has previously written research identifying fraudulent patterns in other financial markets. He drew attention for a 2016 paper that suggested that a popular financial contract tied to the volatility in financial markets, known as the VIX, was being manipulated. Later, a whistleblower came forward to confirm those allegations.

If what the study hypothesis turns out to be true this would not be the first time Griffin has sniffed out fraud in the financial world.

Bitfinex denied that tether issuances could be used to manipulate bitcoin.

"There were obviously tremendous price increases a year ago, and this paper indicates that manipulation played a large part in those price increases".

Related:

Comments


Other news