Tether Directly Used to Manipulate Bitcoin Price, Finds Study

Evidence suggests that Tether may have been used to manipulate the price of bitcoin

Evidence suggests that Tether may have been used to manipulate the price of bitcoin

Bitcoin soared previous year, peaking at almost $20,000 in December, before the price collapsed.

Griffin and Amin Shams, the paper concludes that "purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices" through algorithms the researchers applied to the market and blockchain in order to detect patterns.

There is evidence that tether, a digital currency pegged to the US dollar, may have been used to manipulate the price of bitcoin (BTC=BTSP) and other cryptocurrencies, according to a research paper released by the University of Texas on Wednesday.

"Tether is "pushed" through a supply-driven scheme to make up a currency, convert it into Bitcoin, and then manipulate the price of Bitcoin and other cryptocurrencies.".

"By mapping the blockchains of bitcoin and tether, we are able to establish that entities associated with the Bitfinex exchange use tether to purchase bitcoin when prices are falling".

While that correlation could simply be due to the fact that an inflow of tethers signals a spike in demand from traders, the researchers claim that other data suggests that tether may not be fully-backed by Dollars - at least not all the time.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets.

While there is little public information on about how Tether was created, it generally exchanges for around $1 as each coin is supposed to be backed by $1 of fiat money in a bank.

The researchers found that tether issuances rose past year during periods when the price of bitcoin was dropping.

Around the time of the bitcoin peak, cryptocurrency experts suspected Bitfinex was involved in manipulation, and the US Commodity Futures Trading Commission subpoenaed the exchange after concerns were raised.

Industry players had questioned if Tether, a virtual "stablecoin" that aims to create a digital currency equivalent of the USA dollar, and the cryptocurrency exchange Bitfinex played a part in Bitcoin's explosion in value in late 2017 and early 2018. A follow-up investigation from Bloomberg found that Bitfinex and Tether are likely banking with Noble, but neither company has confirmed it publicly.

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