Bitcoin Price was Manipulated by Tether, Researchers Claim

250 Million Tether Grant Here we Go Again

250 Million Tether Grant Here we Go Again

"Due to the semi-transparent nature of the blockchain, we are able to use extensive algorithms to lump nodes of investors and match transactions on the Tether Blockchain to those on the Bitcoin Blockchain". In the last 24 hours, bitcoin has fallen almost seven percent, according to CoinMarketCap. Evidence of price manipulation was found in all of those, too.

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. 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 Dollars.

Released on June 13, 2018, the study by professor John Griffin and Ph.D. candidate Amin Shams suggests that Tether (USDT), a digital currency supposedly backed by US dollar reserves, has been used to prop up prices on the Bitfinex cryptocurrency exchange.

The CFTC and Securities and Exchange Commision have been ramping up their enforcement efforts against fraudulent cryptocurrency activity and scams as Bitcoin and other digital tokens gained prominence over the past year. This allowed the researchers to map how tether was distributed, and how it impacted bitcoin prices.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets.

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The periods with the largest flow of tether accounted for 87 hours, or less than 1 percent, of the data, but were associated with 50 percent of bitcoin's compounded return, and 64 percent of the returns on six other large cryptocurrencies.

Or, in layman's terms: to counteract price declines, it looks like somebody at Bitfinex is using Tether to buy bitcoin. In a nutshell, trades of Tether were "timed following market downturns" triggering "sizable increases in Bitcoin prices".

"When prices are falling, the Tether creators can convert their Tether into Bitcoin in a way that pushes Bitcoin up and then sell some Bitcoin back into dollars to replenish Tether reserves as Bitcoin price rises", the researchers wrote.

Both firms were subpoenaed in December by the Commodity Futures Trading Commission, which was seeking proof that Tether is backed by a reserve of U.S. dollars, as it claims. "These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free", they conclude. "Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation".

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