A whale-of-a-controversy: A single account on the cryptocurrency exchange Bitfinex manipulated the price of Bitcoin and helped fuel the market’s astronomical rise in 2017, according to new academic research published in an influential finance journal.
Last year, University of Texas professor John Griffin and Amin Shams, an instructor at Ohio State University, published controversial research concluding that in 2017 just a few big players used the stablecoin Tether to
prop up the price of Bitcoin following market downturns. Griffin and Shams have now
updated their conclusion: it was just one big player, they say.
The researchers studied Bitcoin and Tether transactions from March 1, 2017, to March 31, 2018, a period during which the cryptocurrency’s price spiked from just over $1,000 to nearly $20,000 in December before falling back to around $10,000. (It’s currently trading around $9,200.)
They say they observed a pattern of Bitcoin purchases, using Tether, when Bitcoin’s price fell by certain increments, and traced the activity to a single account on Bitfinex. “This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges,” the authors write. The paper does not name the supposed manipulator, but Griffin
told the Wall Street Journal: “If it’s not Bitfinex, it’s somebody they do business with.”
The same executives who own Bitfinex also control Tether, which is no stranger to controversy. In 2017, the two firms received subpoenas from the US Commodity Futures Trading Commission. In May of 2018, the US Justice Department
opened a criminal investigation into whether Tether was indeed being used to manipulate Bitcoin. And the New York attorney general has sued Tether and Bitfinex, accusing them of participating in a cover-up after losing $850 million worth of customer and corporate funds.
Tether claims it creates new tokens, which are supposed to be backed by dollars in reserve, in response to customer demand. But it has not provided reliable proof of those reserves. The researchers in this case conclude that Tether tokens were “printed” in response to certain downturns, regardless of demand. As the WSJ points out, however, the researchers did not have access to Tether and Bitfinex’s bank accounts, which would confirm whether the company had created unbacked tokens.
According to Tether’s general counsel Stuart Hoegner, the new paper is based on insufficient data and thus “foundationally flawed.” He told
Quartz: “Tether is profoundly successful simply because it is liquid, stable, and redeemable."
Trolliin astuin. Kiitos nauruista.
