Saturday, 23 June, 2018

Record bitcoin price propped up by another digital currency

Record bitcoin price propped up by another digital currency Tether Manipulation Pushed Up Bitcoin's Price, Researchers Find
Priscilla Morrison | 14 June, 2018, 03:16

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".

However, the two notably discovered that it does not take a large amount of tether to prop bitcoin's price - "even less than 1 percent of extreme exchange of tether for bitcoin has substantial aggregate price effects", the study said.

Tether [USDT], one of the most traded cryptocurrencies supported by platforms like Bitfinix, ShapeShift, Bittrex, and Omni, shows an indication of being spent on Bitcoin in its critical moments, according to research by a University of Texas professor.

That's according to explosive new research from University of Texas finance processors John Griffin and Amin Shams, best known for identifying suspicious activity in the VIX past year. Several exchanges have been using Tether as a way to quickly facilitate fund transfers, replacing the need to depend on banks. Price manipulation and collusion may be to blame.

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.

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Market manipulators used Tether's USDT token to artificially inflate the bitcoin price during 2017's prolonged bull run.

As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year. The paper does not prove definitively that Bitfinex was tangled in price manipulation, but the evidence gives a strong indicator that it was involved.

Both firms were subpoenaed in December by the Commodity Futures Trading Commission, which was seeking proof that Tether is backed by a reserve of United States dollars, as it claims. 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.

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. "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". "Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation".

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