Bitcoin Price was Manipulated by Tether, Researchers Claim

Record bitcoin price said propped up by another digital currency

Record bitcoin price said propped up by another digital currency

The record growth in bitcoin previous year was actually a coordinated market manipulation, according to recent research by University of Texas Finance Professor John Griffin. They were able to find several patterns that suggested someone or some people successfully pushed up bitcoin prices while they dipped at other exchanges.

The research, which was published by the Professor-Graduate pair of John Griffin and Amin Shams, looked at the stream of cryptocurrencies going in and out of Bitfinex, a cryptocurrency exchange that is closely associated with Tether. These patterns can not be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.

Bitcoin fell to its lowest price since February 6 on Wednesday, to $6,371, as it struggles to find a stable support level. The prices rose much more quickly on exchanges that accepted Tether than they did on those that did not, and the pattern ceased when Bitfinex stopped issuing new Tether this year, the authors found.

According to Griffin, Tether coins are created in large quantities, such as 100m.

"There were obviously tremendous price increases past year, and this paper indicates that manipulation played a large part in those price increases". However, the currency may have had another shady objective; large amounts of Tether were also used buy Bitcoin, which propped up its value, the researchers claim.


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.

New research claims that a trio of cryptocurrency exchanges likely inflated Bitcoin's value by buying it up whenever the price began to fall. Later, a whistleblower came forward to confirm those allegations.

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. Since exchanges often face difficulties finding the banking partners and achieving the regulatory compliance necessary to offer fiat-to-crypto trading pairs, many altcoin exchanges use tether as a proxy for physical United States dollars.

"It is great to see academic work trying to causally assess if market manipulation is taking place".

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