Tether Manipulation Pushed Up Bitcoin's Price, Researchers Find


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The paper by John Griffin, a finance professor at the University of Texas who has researched fraud in other markets, and graduate student Amin Shams, found that the virtual coin Tether was likely used to prop up Bitcoin prices late past year.

The algorithms the two developed were able to "cluster groups of related bitcoin wallets", according to the study.

John Griffin and Amin Shams, of the University of Texas at Austin's Department of Finance, published a study Wednesday linking the stablecoin with bitcoin's prices during the 2017 price increases.

Writing in a 66-page report titled "Is Bitcoin Really Un-Tethered?", Griffin and Shams argue that tether, a "stablecoin" that is allegedly backed by United States dollars at a 1:1 ratio, has been repeatedly used to provide price support for bitcoin during market downturns.

However, the two notably discovered that it does not take a large amount of tether to prop bitcoin's price - "even less than 1 percent of extreme exchange of tether for bitcoin has substantial aggregate price effects", the study said.

Tether appears to have stopped issuing new tethers as of recent times, possibly in fears of stricter regulation, or lack of legitimate deposits into the company's reserves that may prompt more printing; regardless of being due to the lack of new printed tokens or simply due to lack of demand leaving Tether's company in need of new deposits, Bitcoin's price drop past $6,500 has proved the researcher's hypotheses. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention.

"Tether is "pushed" through a supply-driven scheme to make up a currency, convert it into Bitcoin, and then manipulate the price of Bitcoin and other cryptocurrencies.".

As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year.

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

The US Commodity Futures Trading Commission allegedly sent Tether - as well as cryptocurrency exchange Bitfinex, with whom it is closely affiliated - a subpoena in December, though it is not clear whether that investigation has or will result in any enforcement action.



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