'Really Un-Tethered?' Bitcoin Price Manipulation Returns With New Research

Bitcoin

Chainalysis, a research firm which last week produced its own overview of Bitcoin money supply trends, told The New York Times that the Tether theory "seems credible". Since exchanges often face difficulties finding the banking partners and achieving the regulatory compliance necessary to offer fiat-to-crypto trading pairs, many altcoin exchanges use tether as a proxy for physical United States dollars.

Bitcoin isn't all it has been cracked up to be, according to a new report by a University of Texas professor.

John Griffin and Amin Shams, of the University of Texas at Austin's Department of Finance, published a study Wednesday linking the stablecoin with bitcoin's prices during the 2017 price increases. Several exchanges have been using Tether as a way to quickly facilitate fund transfers, replacing the need to depend on banks. However, the currency may have had another shady objective; large amounts of Tether were also used buy Bitcoin, which propped up its value, the researchers claim. Tether is the 11th largest cryptocurrency and is pegged to the USA dollar. Evidence of price manipulation was found in all of those, too.

The findings add to the growing concerns that Tether was used to artificially inflate Bitcoin for the benefit of a small group of big cryptocurrency holders, putting the rest of the market at risk.

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The US Commodity Futures Trading Commission allegedly sent Tether - as well as cryptocurrency exchange Bitfinex, with whom it is closely affiliated - a subpoena in December, though it is not clear whether that investigation has or will result in any enforcement action. The paper does not prove definitively that Bitfinex was tangled in price manipulation, but the evidence gives a strong indicator that it was involved.

Bitcoin reached its peak price of nearly $20,000 in December but is now trading at around $6,300 according to the Coin Market Cap. "Such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies", the researchers claim.

To prevent future price manipulation, the researchers say that "external capital market surveillance and monitoring" may be necessary to keep the market free from tampering.

Their analysis of the flow of coins on Bitcoin's blockchain found that the three main Tether exchanges for most of 2017 - Bitfinex, Bittrex, and Poloniex - also created substantial cross-exchange Bitcoin flows among themselves. "Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation".

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