Has Tether Been Used to Manipulate Bitcoin’s Value Boost?

According to two researchers from University of Texas, there is a particular reason that blew the price of Bitcoin out of proportion last year. Professor John Griffin and graduate student Amin Shams believe that Bitcoin’s value boost was due to price manipulation and collusion, and they have written a paper to prove their point.

Was Bitcoin’s Value Manipulated? Two Researchers Say ‘Yes’

Three cryptocurrency exchanges are likely behind it – the researchers think that these exchanges inflated Bitcoin’s value by buying it up each time the price started to drop down. This manipulation turned out so successful that it accounted for at least 50% of the gains Bitcoin and Ethereum, among other cryptocurrencies, made last year.

To be more specific, the researchers also analyzed the role of another cryptocurrency known as Tether which is pegged to the US dollar. Some exchanges have been using Tether as a way to quickly aid fund transfers, replacing the need of banks. On top of that, large amounts of Tether were also used to purchase Bitcoin which then increased its value.

Here’s what the abstract of the researchers’ paper says:

This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom. Using 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. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is (Read more...)

*** This is a Security Bloggers Network syndicated blog from How to, Technology and PC Security Forum authored by Milena Dimitrova. Read the original post at: https://sensorstechforum.com/tether-bitcoin-value-manipulation/