Published: Thu, June 14, 2018
Economy | By

Bitcoin prices were manipulated

Bitcoin prices were manipulated

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.

The CFTC and Securities and Exchange Commision have been ramping up their enforcement efforts against fraudulent cryptocurrency activity and scams as Bitcoin and other digital tokens gained prominence over the previous year.

Griffin and Shams' study shines a light on the possibility that Bitcoin's price manipulation was precipitated by a handful of cloak-and-dagger players and not genuine demand from investors.

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.

"Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices", Griffin and Shams wrote. Executives at the company previously denied any involvement in price manipulation, The New York Times reports, though did not respond to a request for comment by the newspaper over the study. These purchases alone accounted for 50 percent of the cryptocurrency's compounded gains, when its value skyrocketed from $1,200 to around $10,000.

"Across the six other crypto currencies, returns are 64 percent smaller on average when removing the 87 Tether-related [purchases]", the researchers added.


Bitfinex, a cryptocurrency exchange, distributed Tether and supplied it to other exchanges, mainly Poloniex and Bittrex, the researchers said.

Both Tether and Bitfinex have regularly come under suspicion over price manipulation in recent months. The Commodity Futures Trading Commission and the U.S. Department of Justice have been investigating whether bitcoin and other cryptocurrency prices are being manipulated, Bloomberg reported last month.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets.

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.

In response to the research, Bitfinex's CEO JL van der Velde told PCMag: "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation".

As evidence for this claim, the Griffin and Shams note that there tends to be negative end-of-month pressure on the bitcoin price in months when a large number of tethers have been issued but not in others.

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