A polemic study that affirms last December’s cryptocurrency price hike was likely caused in part by market manipulation has been published yesterday. The study declares that there is a clear relationship between the high prices of crypto assets and suspicious movements of a cryptocurrency called Tether, according to an article by CNBC.
The report, ironically named “Is Bitcoin Really Un-tethered“, is written by two authors: John M Griffin, a professor of finance in the University of Texas, and Amin Shams, a Ph. D. Candidate of the same university. They are not new in this type of research: in the past, their analysis also evidenced manipulations in the Chicago Board Options Exchange related to their Volatility Index; a thing that was then confirmed by a letter from a whistleblower.
The study claims that Tether, a stable coin used mostly by Bitfinex clients, is used mostly to buy Bitcoin from other exchanges. The thing is, that these Tether-Bitcoin purchases were made mostly in bulk after global Bitcoin prices were low as if they meant to push prices up. The paper abstract states:
“LESS THAN 1% OF HOURS WITH HEAVY TETHER ACTIVITY CAN EXPLAIN ALMOST HALF OF THE METEORIC RISE IN BITCOIN.”
The authors also question the issuance and the utility of such cryptocurrency. Tether, a cryptocurrency that is artificially pegged to the US dollar, has been highly criticised since its inception, being issued by a company with close ties to the poorly regulated, Caribbean based exchange Bitfinex. They had also transparency issues in the past, firing their own auditors, Friedman LLP, over “excruciatingly detailed procedures” over the realization of an audit.
But this study raises concerns to a new level. Bitfinex and tether were subpoenaed in the past by the US Commodities and Futures Trading Commission (CFTC), but nothing of interest was found. This report is outed when there is an official ongoing price manipulation investigation that has sent subpoenas to the four biggest exchanges in the whole market.