Bitcoin's soaring value down to manipulation, scientists claim

Marco Green
June 13, 2018

That's according to explosive new research from University of Texas finance processors John Griffin and Amin Shams, best known for identifying suspicious activity in the VIX past year.

Bitcoin's meteoric price rise may have been down to price manipulation using another virtual currency, researchers have suggested. In his paper, Griffin says that the USA dollar-pegged cryptocurrency tether was used to buy bitcoin at the times that the latter was falling, which helped "stabilize and manipulate" the cryptocurrency's price. Tether is the 11th largest cryptocurrency and is pegged to the United States dollar. The published study states that the researchers used "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". Neither Tether nor Bitfinex have been accused of wrongdoing. This, they say, may indicate a "month-end need for dollar reserves related to Tether", implying that Tether issues un-backed tokens to help buttress the bitcoin price and then sells enough BTC at the end of the month to fully back the outstanding USDT.

The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of US dollars it claims it has.

Questions about Tether and Bitfinex have dogged the cryptocurrency world since previous year, when Bitfinex lost banking relationships yet continued to operate, Bloomberg reported.

"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.

Other reports by Click Lancashire

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