Market manipulation caused surge in prices of bitcoin and other cryptocurrencies, researchers say
DUNCAN RILEY, 13 June 2018
A new research paper has confirmed long-held suspicions that the Tether cryptocurrency was used by people linked to the Bitfinex exchange to drive up the price of bitcoin and other cryptocurrencies last year.
The paper, written by University of Texas Professor John Griffin, who is known for catching fraud in financial markets, and graduate student Amin Shams, details the direct relationship between the issuing of Tether during bitcoin price drops and how it was used to buy bitcoin on the drop, artificially creating demand and driving the price up.
Tether is a cryptocurrency known as a “stablecoin” in that it’s linked to the U.S. dollar and backed by physical dollar holdings, making it a digital substitute for dollars directly. Tether is the creation of Bitfinex, formally known as iFinex Inc. Unlike typical cryptocurrencies that are mined, Tether is simply issued by Bitfinex if and when it pleases.
The issue of new Tether is meant to be relative to U.S. dollars held in reserve to back its value. But to the suspicion of some, those reserves may not actually exist. That claim is currently subject to an investigation by the U.S. Commodity Futures Trading Commission.
