Record bitcoin price propped up by another digital currency

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Bitcoin's impressive price surge at the end of 2017 was the result of price manipulation using a "digital currency" called Tether, according to a study conducted by researchers at the University of Texas. They analyzed publicly available blockchain transaction records and found that there was a pattern of Tether being used to buy bitcoin at certain moments, typically following price drops.

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.

"When prices are falling, the Tether creators can convert their Tether into Bitcoin in a way that pushes Bitcoin up and then sell some Bitcoin back into dollars to replenish Tether reserves as Bitcoin price rises", the researchers wrote.


BTC/USD is changing hands at $6,480, the price of the digital coin No. 1 recovered strongly from a new low reached late on Wednesday at $6,154.

Bitfinex CEO J.L. van der Velde told CNBC that neither the exchange nor tether helped to boost bitcoin prices.

In particular, Mr Griffin and Mr Shams examined the flow of Tether, a token that is supposed to be tied to the value of the United States dollar and that is issued exclusively by Bitfinex in large batches. Indeed, even less than 1% of extreme exchange of Tether for Bitcoin has substantial aggregate price effects. However, the currency may have had another shady goal; large amounts of Tether were also used buy Bitcoin, which propped up its value, the researchers claim.


Bitcoin's massive price run-up late past year may have been the result of a price manipulation campaign, according to a new study released on Wednesday. That's according to explosive new research from University of Texas finance processors John Griffin and Amin Shams, best known for identifying suspicious activity in the VIX previous year. New analysis indicates that this is one of the most important factors that drove bitcoin's rally a year ago. He drew attention for a 2016 paper that suggested that a popular financial contract tied to the volatility in financial markets, known as the VIX, was being manipulated.

Beyond his work at the University of Texas, Mr Griffin has a consulting firm that works on financial fraud cases, including some in the virtual currency industry.

Bitfinex denied that tether issuances could be used to manipulate bitcoin. A paper published past year by a team of Israeli and American researchers said much of bitcoin's big price increase in 2013 was caused by a campaign of price manipulation at what was then the biggest exchange, Mt Gox.


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