Published: Fri, June 15, 2018
Markets | By Noel Gibbs

Bitcoin Price was Manipulated by Tether, Researchers Claim

Bitcoin Price was Manipulated by Tether, Researchers Claim

"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", Griffin and Shams wrote.

Once issued, almost all tether was moved to Bitfinex and then shifted to other exchanges, where it was used to buy bitcoin, propping up the price, the paper said.

"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. "Such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies", the researchers claim.

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

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New research claims that a trio of cryptocurrency exchanges likely inflated Bitcoin's value by buying it up whenever the price began to fall.

Tether, as its name suggests, is pegged to the value of the U.S. dollar and can be used to buy other crypto coins.

Bitcoin and other virtual currencies fell yesterday.

In December, the CFTC sent subpoenas to Tether and Bitfinex, a popular cryptocurrency exchange that is affiliated with, and shares executives with, Tether.

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In addition, the paper provides evidence that Tether's reserves are lacking in comparison to the amount of USDT in circulation, based off patterns found in the issuance of new USDT tokens and price movements. The prices climbed faster on exchanges the dealt in Tether than on those that didn't.

This flies in the face of a previous study which found little correlation between tether printing and BTC price increases. At 66 pages, and complemented by meticulous charts, citations, and algorithmical analysis, the authors of today's report have produced the most comprehensive tether investigation to date.

Griffin has a history of spotting fraud and corruption in financial markets.

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

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"The relationship between Tether and the price of bitcoin has been flagged for months within the community", said Christian Catalini, a professor at the Massachusetts Institute of Technology who specialiszes in blockchain research. 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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