Bitcoin's Major Boost Was Likely Manipulated, Research Finds

Eileen GuzmanJun 14, 2018

"Overall, the findings indicate that Tether is closely linked to Bitcoin price appreciation, and question the objective of Tether". "The buying of Bitcoin with Tether also occurs more aggressively right below salient round-number price thresholds where the price support might be most effective".

Bitcoin's massive price run-up late a year ago may have been the result of a price manipulation campaign, according to a new study released on Wednesday.

The product of two researchers at the University of Texas, the paper - titled Is Bitcoin Really Un-Tethered? - claims to have identified potential evidence of direct price manipulation since November 2017. Evidence of price manipulation was found in all of those, too.

The paper by John Griffin, a finance professor at the University of Texas who has researched fraud in other markets, and graduate student Amin Shams, found that the virtual coin Tether was likely used to prop up Bitcoin prices late past year.

"Overall, we find that Tether has a significant impact on the cryptocurrency market". These purchases alone accounted for 50 percent of the cryptocurrency's compounded gains, when its value skyrocketed from $1,200 to around $10,000.

Tether has always been accused of being insolvent, as they have been unable to provide legitimate audits, breaking off their relationship with their auditor earlier this year. Other digital currencies like Ethereum and Litecoin soared at around the same time by as much as 64 percent. Although their findings don't definitively prove collusion or price manipulation, the Tether-Bitcoin buys had obvious benefits.

As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year.

The CEO of Bitfinex, a cryptocurrency exchange, also runs Tether, and in December, a U.S. regulator sent a subpoena to both companies. In a nutshell, trades of Tether were "timed following market downturns" triggering "sizable increases in Bitcoin prices".

"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex CEO JL van der Velde told Bloomberg in an e-mailed statement.

The study focuses primarily on the supply-based explanation for the link, but the researchers also note that the demand for bitcoin can create a similar demand for tether, particularly by investors who cannot move large sums of money into cryptocurrency directly.

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