According to recent reports, it appears that an investigation has commenced on whether Tether, the issuer of the stablecoin Tether (USDT) manipulated Bitcoin (BTC) price in order to kick it back up in the wake of massive Bitcoin sell orders and investors dumping their Bitcoin. Several speculations suggest that the entire crypto market fall has been a result of a Bitcoin Cash hard fork, which has seen Bitcoin cash drop massively in price. The hard fork created uncertainty in the market and led to panic which dropped the whole cryptocurrency market. The US Department of Justice is reportedly leading the investigation into the supposed market manipulation by Tether, the pioneer stablecoin.
Bitfinex Might Just Be the Platform Tether Used for the Bitcoin Price Manipulation
According to Bloomberg, the investigations are currently being made on Tether and Bitfinex, the digital assets exchange, which has an integrated management team with the stablecoin. The Tether token has a 1.8 billion supply currently in circulation, and it claims that each unit of its token, USDT is backed by a single dollar in their company’s bank account. Tether’s banking partner published a letter a short while ago supporting the claim made by Tether. Some lawyers who, however, scrutinized the letter said that it was written in a way to liberate the institution, Deltec Bank, from any liability concerning its authenticity.
USDT tokens are mostly traded on Bitfinex, the crypto exchange platform on which the value of Tether is always $1.00 not minding its price on the global market. Some critics have brought forward accusations against Tether claiming that the stablecoin operates a fractional reserve bank frequently, which pumps unbacked tethers into circulation to stabilize the price of Bitcoin and selling BTC to remedy its reserves.
Tether’s stakeholders have, however, rebuffed the claims stating that the ability of Tether being able to redeem more than its $1 billion worth of USDT when in October, the token dipped below its $1.00 peg shows that the token is fully backed by the USD. University of Queensland Business School researchers stated that tether grants had no influence on the price of bitcoin.
Previous Probes into Tether and Bitfinex
Earlier in the year, it was reported that subpoenas had been received by Tether and the crypto exchange giant, Bitfinex from the Commodity Futures Trading Commission (CFTC) during last year December. It has been conveyed that both the DOJ and CFTC have joined efforts in investigating both the token and the exchange. A Professor in the University of Texas, John Griffin, who wrote the paper concerning the use of Tether (USDT) to influence Bitcoin’s price has remitted his findings to the CFTC.
Worthy of note is a statement made in the report. It basically explains that illegal activity on Bitfinex may not incriminate the exchange operator’s executives. The statement reads thus;
“It couldn’t be determined whether government officials are solely investigating activity that occurred on Bitfinex or if exchange executives are suspected of illegal behavior. Neither the Justice Department nor the CFTC has accused anyone of wrongdoing, and authorities may ultimately conclude that nothing illicit occurred.”
It’s not sure if the DOJ’s investigations into the supposed Bitcoin price influence has contributed to the current crypto bear market, which has recorded a massive loss of about 60 billion dollars in just the space of a week.