Bitcoin Price was Manipulated by Tether, Researchers Claim

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Bitcoin Price was Manipulated by Tether, Researchers Claim

Chainalysis, a research firm which last week produced its own overview of Bitcoin money supply trends, told The New York Times that the Tether theory "seems credible". 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.

The product of two researchers at the University of Texas, the paper - titled Is Bitcoin Really Un-Tethered? - claims to have identified potential evidence of direct price manipulation since November 2017. The prices climbed faster on exchanges the dealt in Tether than on those that didn't.

Their findings suggest that Bitfinex, an exchange which created and sold Tether, used their currency to snap up bitcoin and drive demand for it, bumping up prices. Price manipulation and collusion may be to blame. Bitfinex stopped issuing Tether earlier this year, though the currency, the value of which is pegged to the U.S. dollar, is still trading in large volumes.

The findings add to the growing concerns that Tether was used to artificially inflate Bitcoin for the benefit of a small group of big cryptocurrency holders, putting the rest of the market at risk.

Or, in layman's terms: to counteract price declines, it looks like somebody at Bitfinex is using Tether to buy bitcoin.

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

Both firms were subpoenaed in December by the Commodity Futures Trading Commission, which was seeking proof that Tether is backed by a reserve of USA dollars, as it claims. Bitcoin's price reached a record high of $20,000 in December, but its value has since dramatically fallen to $6,300. The Commodity Futures Trading Commission and the U.S. Department of Justice have been investigating whether bitcoin and other cryptocurrency prices are being manipulated, Bloomberg reported last month.

To prevent future price manipulation, the researchers say that "external capital market surveillance and monitoring" may be necessary to keep the market free from tampering.

The results came following transaction analysis of Tether creator and issuer cryptocurrency exchange Bitfinex.

"(Neither) Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex and Tether Chief Executive Officer JL van der Velde said in a statement.

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