Bitcoin’s price was artificially inflated past year, researchers say

Ivan Schwartz
June 15, 2018

New research out of the University of Texas alleges that the price of Bitcoin throughout its bull run in 2017 was being manipulated using Bitfinex's Tether currency.

Scientists at the University of Texas analysed transactions on Bitfinex, where Bitcoin can be bought and sold and identified patterns which suggest that the prices were successfully pushed up when they slumped at other exchanges, by using another virtual currency called Tether.

John Griffin and Amin Shams, in their research article, 'Is Bitcoin really Un-Tethered?' aim to investigate the relation between Bitcoin, other cryptocurrencies, and Tether, a cryptocurrency purportedly clinched to the US dollar that carries more transaction volume than dollars. "Such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies", the researchers claim.

Research shows, that Bitcoin price was inflated artificially.

Tether, as its name suggests, is pegged to the value of the USA dollar and can be used to buy other crypto coins.

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The researchers sift through millions of transaction record available in public ledgers and came to the conclusion that a secondary virtual currency, known as Tether was used for that goal.

Cryptocurrency exchange Bitfinex is the creator of Tether and controls its supply, and its involvement in the price surges is mentioned extensively in the study. "Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation".

This flies in the face of a previous study which found little correlation between tether printing and BTC price increases. 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. He is most notably recognized for a 2016 paper that found manipulation in a financial contract known as VIX which was tied to flux in financial markets which were later confirmed by a whistleblower. "[The author's] testing does not support the claims that BTC prices are moved by USDT printing - although, Ivanov explains, his statistical analysis doesn't necessarily fully disprove tether manipulations", we wrote in February. This isn't the first time the dollar-pegged stablecoin has been blamed for market manipulation, but is the most compelling evidence to date that 2017's record highs may not have been entirely organic.

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

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