Tether Manipulation Pushed Up Bitcoin's Price, Researchers Find

Tether Manipulation Pushed Up Bitcoin's Price, Researchers Find

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

Critics of tether have raised concerns over the past year about whether Tether Limited actually holds $1 in reserve for each tether issued, as it claims.

Griffin's study didn't have access to email, texts or other communications that would provide evidence that both organizations were involved in price manipulation, but instead analyzed transaction records stored on Bitcoin's public ledger.

The US Commodity Futures Trading Commission allegedly sent Tether - as well as cryptocurrency exchange Bitfinex, with whom it is closely affiliated - a subpoena in December, though it is not clear whether that investigation has or will result in any enforcement action.

Tether has always been accused of being insolvent, as they have been unable to provide legitimate audits, breaking off their relationship with their auditor earlier this year. This, they say, may indicate a "month-end need for dollar reserves related to Tether", implying that Tether issues un-backed tokens to help buttress the bitcoin price and then sells enough BTC at the end of the month to fully back the outstanding USDT.

Bitcoin's massive price run-up late previous year may have been the result of a price manipulation campaign, according to a new study released on Wednesday. When bitcoin was rising, the same pattern could not be found.

What is interesting is that Griffin and Shams's paper describes Tether as being primarily used by Bitfinex, a major crypto-exchange, to purchase Bitcoin tokens from two other exchanges and most importantly did this only after periods of Bitcoin price declines.

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. Executives at the company previously denied any involvement in price manipulation, The New York Times reports, though did not respond to a request for comment by the newspaper over the study.

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