Bitcoin crash accelerates as Tether fingered

250 Million Tether Grant Here we Go Again

John Griffin and Amin Shams, in their research article, 'Is Bitcoin really Un-Tethered?' aim to investigate the relation between Bitcoin, other cryptocurrencies, and Tether, a cryptocurrency purportedly clinched to the USA dollar that carries more transaction volume than dollars.

The researchers noted that the "bitcoin reversal did not exist before Tether was prevalent in the market and disappears during the period when Tether stops being printed". "The buying of Bitcoin with Tether also occurs more aggressively right below salient round-number price thresholds where the price support might be most effective". 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. Evidence of price manipulation was found in all of those, too.

A study by the Department of Finance at the University of Texas at Austin finds that the Bitcoin price through much of 2017 was directly manipulated through the use of Tether, the largest stablecoin by market cap and adoption. The prices climbed faster on exchanges the dealt in Tether than on those that didn't.

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.

Bitfinex, a cryptocurrency exchange, distributed Tether and supplied it to other exchanges, mainly Poloniex and Bittrex, the researchers said.

Or, in layman's terms: to counteract price declines, it looks like somebody at Bitfinex is using Tether to buy bitcoin.

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"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.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets. Bitcoin's price reached a record high of $20,000 in December, but its value has since dramatically fallen to $6,300.

Note: Readers may remember that in December, the Commodity Futures Trading Commission subpoenaed Bitfinex and Tether, which have overlapping management teams.

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.

"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex CEO JL van der Velde told Bloomberg in an e-mailed statement.

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