Tether Manipulation Pushed Up Bitcoin's Price, Researchers Find

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Indeed, even less than 1% of extreme exchange of Tether for Bitcoin has substantial aggregate price effects.

Tether appears to have stopped issuing new tethers as of recent times, possibly in fears of stricter regulation, or lack of legitimate deposits into the company's reserves that may prompt more printing; regardless of being due to the lack of new printed tokens or simply due to lack of demand leaving Tether's company in need of new deposits, Bitcoin's price drop past $6,500 has proved the researcher's hypotheses.

The value of cryptocurrency's ringleader Bitcoin fell below $7,000 after two University of Texas academics released a paper on Wednesday claiming that 2017's high of $19,000 was the result of artificial market manipulation.

On Monday, researchers from the University of Texas at Austin published a study indicating that Tether was used to unduly influence bitcoin's 2017 ascent. The prices climbed faster on exchanges the dealt in Tether than on those that didn't. Evidence of price manipulation was found in all of those, too. Bitfinex stopped issuing Tether earlier this year, though the currency, the value of which is pegged to the United States dollar, is still trading in large volumes. In his paper, Griffin says that the U.S. dollar-pegged cryptocurrency tether was used to buy bitcoin at the times that the latter was falling, which helped "stabilize and manipulate" the cryptocurrency's price. These purchases alone accounted for 50 percent of the cryptocurrency's compounded gains, when its value skyrocketed from $1,200 to around $10,000.

As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year.

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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. In a nutshell, trades of Tether were "timed following market downturns" triggering "sizable increases in Bitcoin prices".

"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.".

To prevent future price manipulation, the researchers say that "external capital market surveillance and monitoring" may be necessary to keep the market free from tampering.

"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".

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