Technology

Tether Manipulation Pushed Up Bitcoin’s Price, Researchers Find

A new research that was published earlier today by University of Texas professors revealed that Tether and Bitfinex have been involved in price manipulation that has led to the surge in Bitcoin price late last year.

The stablecoin (USDT) which is pegged to the US Dollars has been used to support the price of the flagship cryptocurrency, especially when the cryptocurrency markets are down, according to the study.

The study was published by John Griffin and Amin Shams, of the University of Texas at Austin’s Department of Finance, with the duo linking USDT with the price of Bitcoin as it rallied towards the end of last year. The researchers made use of “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.”

hermes_largeThe evidence led to a clear link between the minting of new tether tokens and increases in the prices of Bitcoin. The study further claimed that “By mapping the blockchains of bitcoin and tether, we are able to establish that entities associated with the Bitfinex exchange use tether to purchase bitcoin when prices are falling. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention. These effects are present only after negative returns and periods following the printing of tether.”

The two researchers further revealed that according to their findings, it takes just a small amount of tether to push the bitcoin price up, adding that “even less than 1 percent of extreme exchange of tether for bitcoin has substantial aggregate price effects,” According to the study, the algorithm developed by the researcher had the ability to “cluster groups of related bitcoin wallets.” This made it possible for them to know exactly how the USDT token was distributed and the level of impact it has on Bitcoin prices. According to the study, “tether is created, moved to Bitfinex, and then slowly moved out to other crypto-exchanges, mainly Poloniex and Bittrex.”

Market manipulation shouldn’t be ruled out

The study further went on to note that the USDT token isn’t gotten back by the issuer, adding that “the major exchange where tether can be exchanged for USD, Kraken, accounts for only a small proportion of transactions.”

The study was mostly concerned with the how the supply of tether affected the bitcoin price. The researcher did note that an increase in demand for Bitcoin could lead to a similar demand for the token, especially by big investors who don’t want to transfer huge funds into cryptocurrencies directly. U.S Department of Justice and Commodity Futures Trading Commission already looking market manipulation.

The findings of this research haven’t taken many people by surprise as some already suspect market manipulation after the U.S Department of Justice alongside commodity Futures Trading Commission (CFTC) opened a formal investigation, looking into cryptocurrency market manipulation. The investigation is looking into the practice of spoofing and flooding, according to a report by Bloomberg.

After the paper was published and news outlet picked it up, the Bitcoin price plunged to the $6,300 level in less than an hour, going down by 2%. This led to the general cryptocurrency market recording some losses too during this period, as the bear cycle continues.

 

Lia Almeida

Based in Paris,, Xavier is the founder and CEO of The Blockchain Group.

Related Articles

30 Comments

  1. I’ve been exploring for a bit for any high-quality articles or weblog posts on this kind of house . Exploring in Yahoo I finally stumbled upon this web site. Reading this information So i’m satisfied to express that I have an incredibly good uncanny feeling I discovered exactly what I needed. I so much undoubtedly will make certain to do not put out of your mind this web site and provides it a glance on a continuing basis.

  2. Thanks a lot for sharing this with all of us you actually know what you are talking about! Bookmarked. Please also visit my web site =). We could have a link exchange arrangement between us!

  3. Wow, marvelous blog layout! How long have you been blogging for? you make blogging look easy. The overall look of your site is magnificent, let alone the content!

  4. Thank you for the sensible critique. Me and my neighbor were just preparing to do a little research about this. We got a grab a book from our local library but I think I learned more from this post. I am very glad to see such great info being shared freely out there.

  5. Hi there, You have performed a great job. I will definitely digg it and personally recommend to my friends. I am confident they’ll be benefited from this website.

  6. Hello my friend! I wish to say that this article is awesome, nice written and come with approximately all significant infos. I would like to peer extra posts like this .

Close