Cryptocurrency tether used to boost bitcoin prices, study finds

The value of cryptocurrency's ringleader Bitcoin fell below $7,000 after two University of Texas academics released a paper on Wednesday claiming that 2017's high of $19,000 was the result of artificial market manipulation.

The findings come from University of Texas at Austin professor John Griffin and graduate student Amin Shams, who examined the role of another cryptocurrency called Tether, which is pegged to the USA dollar.

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. 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 Dollars.

There is evidence that tether, a digital currency pegged to the USA dollar, may have been used to manipulate the price of bitcoin BTC=BTSP and other cryptocurrencies, according to a research paper released by the University of Texas on Wednesday.

"Overall, the findings indicate that Tether is closely linked to Bitcoin price appreciation, and question the objective of Tether". These purchases alone accounted for 50 percent of the cryptocurrency's compounded gains, when its value skyrocketed from $1,200 to around $10,000.

Around the time of the bitcoin peak, cryptocurrency experts suspected Bitfinex was involved in manipulation, and the US Commodity Futures Trading Commission subpoenaed the exchange after concerns were raised.

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. The paper does not prove definitively that Bitfinex was tangled in price manipulation, but the evidence gives a strong indicator that it was involved. "Tether issuances can not be used to prop up the price of Bitcoin or any other coin/token on Bitfinex". "These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free", they conclude.

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.

"(Neither) Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex and Tether Chief Executive Officer JL van der Velde said in a statement.

(Copyright © 2015. All Rights Reserved.)
 
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