United States researchers claim bitcoin's price was manipulated during 2017 spike


"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.

Scientists at the University of Texas analysed transactions on Bitfinex, where Bitcoin can be bought and sold and identified patterns which suggest that the prices were successfully pushed up when they slumped at other exchanges, by using another virtual currency called Tether. The academics concluded "Tether seems to be used both to stabilise and manipulate Bitcoin prices", with new Tether coins seemingly created and used to buy up bitcoin at times of low demand. "Tether issuances can not be used to prop up the price of bitcoin or any other coin/token on Bitfinex", he said.

In particular, Mr Griffin and Mr Shams examined the flow of Tether, a token that is supposed to be tied to the value of the United States dollar and that is issued exclusively by Bitfinex in large batches. Twitter accounts and websites such as Tether Printer which tracks the movement of new tokens issued by Tether's central organization show that millions of dollars' worth of USDT were printed through the 2017 and early 2018 market seasons - correlated with the rise of Bitcoin and other cryptocurrencies. Other digital currencies like Ethereum and Litecoin soared at around the same time by as much as 64 percent.

Bitfinex, a cryptocurrency exchange, distributed Tether and supplied it to other exchanges, mainly Poloniex and Bittrex, the researchers said. This allowed the researchers to map how tether was distributed, and how it impacted bitcoin prices.

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Bitcoin's massive price run-up late previous year may have been the result of a price manipulation campaign, according to a new study released on Wednesday.

Beyond his work at the University of Texas, Mr Griffin has a consulting firm that works on financial fraud cases, including some in the virtual currency industry. He drew attention for a 2016 paper that suggested that a popular financial contract tied to the volatility in financial markets, known as the VIX, was being manipulated. This isn't the first time the dollar-pegged stablecoin has been blamed for market manipulation, but is the most compelling evidence to date that 2017's record highs may not have been entirely organic.

"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.

Do you think tether played a part in inflating prices previous year?