Market manipulation by Tether created the 2017 Bitcoin spike: Reports
According to their analysis, half of the cryptocurrency value spike took place within hours after a batch of Tether coins began hitting cryptocurrency exchanges.
June 15, 2018 / 03:27 PM IST
According to the University of Texas the big surge in Bitcoin and other cryptocurrencies during late 2017 was created artificially using another cryptocurrency called Tether. The detailed report has been written and published by a finance professor-student duo of John Griffin and Amin Shams.
According to a repor by Digital Trends, the massive bull-run in cryptocurrencies during late 2017-early 2018 period was manipulated by Bitfinex, one of the largest unregulated digital currency exchanges on the market.
It is to be noted that the owners of Bitfinex are also the creators of Tether. The price of bitcoin raced up to $19,549 at its peak and then tanked down to $6,417 in early February. Since then, it has reached a somewhat steady value now at $6,592. Other cryptocurrencies also experienced similar jump and sudden drop during that phase.
Griffin and Shams observed cryptocurrency charts during their highest peak values and noticed unusual activities stemming from Bitfinex. According to their study, one or more individuals were intentionally pushing the values higher on other exchanges. In order to inflate these values, they purchased the low-value cryptocurrency using Tether.
They used the millions of transaction records stored in public ledgers or blockchains to get the data for research. According to their analysis, half of the cryptocurrency value spike took place within hours after a batch of Tether coins began hitting cryptocurrency exchanges. Moreover, Tether entered the market when cryptocurrency market was going down exponentially.
Initially, the duo had intended to write a paper to understand how Tether flows through the currency markets. As of now, there are 2.5 billion Tether coins in circulation, and each trades at $1. It is an alternative to the volatile cryptocurrency market while providing the security benefits of digital currency.
Bitfinex, however, denied these allegations. Bitfinex Chief Executive Officer JL van der Velde said, "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation."