Tether May Have Been Used to Influence Bitcoin
A paper recently published by Professor John Griffin and graduate student Amin Shams surveyed the cryptocurrency traffic on the Bitfinex platform and established a connexion between price collapses in Bitcoin and other coins and cases when Tether was issued and sold by the exchange owners.
The paper claims that the issuing of Tether may be responsible for around 50% of the price increases that Bitcoin experienced and 64% of others coins that were in the top ten.
In a recent interview with the New York Times, Professor Griffin pointed towards the pattern of the transactions that he and his student discovered was very important record price gains the crypto market went through the last years.
“There were obviously tremendous price increases last year, and this paper indicates that manipulation played a large part in those price increases,” Griffin told the paper.
Tether is a cryptocurrency that is pegged to a 1:1 ratio to the value of the US dollar. J.L. Van der Velde, the CEO of Bitfinex, answered to the allegations made in the paper with the following statement “Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex,”
The study monitored 87 separate instances that happened between March 2017 and March 2018 when Tether was moved from Bitfinex to other exchanges. The research states that “these 87 events account for less than 1 percent of our time series (over the period from the beginning of March 2017 to the end of March 2018), yet are associated with 50 percent of bitcoin’s compounded return, and 64 percent of the returns on six other large cryptocurrencies (Dash, Ethereum Classic, Ethereum, Litecoin, Monero and Zcash).”
Researcher Reveal Market Manipulation
This is not Griffin’s first research on frauds and market manipulation in the financial world. He also contributed to a 2016 paper that discovered manipulation in a market volatility index known as VIX. The index was subjected to financial markets manipulations which were later confirmed by a whistleblower.
This also wouldn’t be the first time someone accused that the price of Bitcoin has been manipulated. A previous paper released by researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberma also analyzed bitcoin’s price in 2013. This paper titled “Price Manipulation in the Bitcoin Ecosystem” was featured in an issue of the Journal of Monetary Economics report the degree to which the Bitcoin environment has been controlled.