Published: Fri, June 15, 2018
Money | By Armando Alvarado

Cryptocurrency tether used to boost bitcoin prices, study finds

Cryptocurrency tether used to boost bitcoin prices, study finds

Again, in plain language: in periods right after the bitcoin price falls and Tether mints a bunch more USDT, that's when it's clear that somebody (who could it be?!) is artificially pushing the bitcoin price back up.

This flies in the face of a previous study which found little correlation between tether printing and BTC price increases.

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

The new paper is not the first academic work to identify manipulation in the virtual currency markets.

"Using algorithms to analyse the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizeable increases in Bitcoin prices", stated the study.

"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.".

Bloomberg's Tweet about the research paper | Source Bloomberg Twitter page
Bloomberg’s Tweet about the research paper | Source Bloomberg Twitter page

"Tether seems to be used both to stabilise and manipulate bitcoin prices", said the paper's co-authors, professor John Griffin and doctoral student Amin Shams.

There is evidence that tether, a digital currency pegged to the US dollar, may have been used to manipulate the price of bitcoin BTC=BTSP and other cryptocurrencies, according to a research paper released by the University of Texas on Wednesday.

The authors of the new 66-page paper do not have emails or documents that prove that Bitfinex knew about or was responsible for price manipulation. They set out to know how less than 1% of hours with heavy Tether activity can explain nearly half of the meteoric rise in Bitcoin. This feat is due to the decline of the cryptocurrency market in general, which now stands at $273 billion.

Other large virtual currencies that can be purchased with Tether, such as Ether and Zcash, rose even more quickly than bitcoin in those periods. A follow-up investigation from Bloomberg found that Bitfinex and Tether are likely banking with Noble, but neither company has confirmed it publicly.

"Overall, our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies". A paper published previous year by a team of Israeli and American researchers said much of bitcoin's big price increase in 2013 was caused by a campaign of price manipulation at what was then the biggest exchange, Mt Gox.

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