Tether and Bitfinex Used to Manipulate 2017 Bitcoin Price Surge

Research: A paper released by professor John Griffin at the University of Texas and Amin Shams, a graduate student, revealed that Tether (USDT), a digital currency that prides itself as a stable coin in the crypto market, has some transaction patterns that “Tether seems to be used both to stabilize and manipulate Bitcoin prices,” Bloomberg reports Wednesday June 13.


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The researchers claim that Tether and Bitfinex were both responsible for the increase in the price of Bitcoin in December last year when the value of the digital currency surged to almost $20,000.

“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,” the abstract reads.

Mr. Griffin is a prolific finance professor who has gained popularity for his interest in identifying fraudulent activities in the VIX benchmark.

In the paper titled “Is Bitcoin Really Un-Tethered?” the researcher focused on understanding the possibility of the how the existing 2.5 Tether coin circulated in the market.

Tether was launched in 2015 to address the issues of transferring fiat USD and was pegged on the $1 value. It has been able to maintain the same price as the USD since it was created, claiming to be a haven for investors in the crypto markets.

Griffin explained that the analysis showed a pattern of Bitcoin price support. Tether Ltd. creates all new tethers which are often in 200 million and almost all of the new coins were moved to Bitfinex exchange. He said the study found a drop in the bitcoin prices soon after the issuance of the Tethers. The Tethers at different exchanges including Bitfinex are being used to purchase bitcoin in a way that affects the price.

The CEO of Bitfinex, JL van der Velde has, however, denied the allegation saying that Tether issuances cannot be used in any way to manipulate the prices of cryptocurrencies.

“Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation, Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex,” Velde said in an emailed statement to Bloomberg.

While this research will likely spur up a hot debate about how Bitcoin’s surge last year was caused by the manipulative activities of a few top players in the industry, some prolific figures seem to agree with the research, claiming that the findings look convincing.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.


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