Bitcoin’s Price Was Manipulated Last Year, Says New Study From University Of Texas

News | June 14, 2018 By:

Bitcoin’s 2017 bull run was caused by market manipulation, according to a paper published by researchers at the University of Texas at Austin.

Titled “Is Bitcoin Really Un-Tethered?,” the paper was written by John M. Griffin, a professor of finance at the University of Texas, and Amin Shams, a Ph.D. candidate at the same university. The paper suggests that transaction patterns show Tether, a digital currency pegged to the US dollar, was “used to provide price support and manipulate cryptocurrency prices.”

Bitcoin rallied over 1,000% against the dollar last year, peaking at over $20,000 in December. According to the paper, periods of heightened Tether activity are “associated with 50% of the meteoric rise in bitcoin and 64% of other top cryptocurrencies.”

“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,” the paper said. “The flow clusters below round prices, induces asymmetric autocorrelations in bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis.”

Tether was created by Bitfinex, one of the largest cryptocurrency platforms in the world by trading volume. It is registered in the Caribbean and owned by a British Virgin Islands company. The exchange also has offices in Asia and Europe.

Bitfinex CEO JL van der Velde said in a statement that “Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation,” adding that Tether issuances cannot be used to prop up the price of bitcoin or any other cryptocurrencies on Bitfinex.

In December, the US Commodity Futures Trading Commission (CFTC) subpoenaed Tether and Bitfinex, after investors expressed concerns over these very same price manipulation issues. In 2016, the CFTC fined Bitfinex $75,000 for failing to register with the agency and for offering “illegal” cryptocurrency transactions.