Tether linked to Bitcoin price manipulation, study finds

This calls into question 2017’s high of $19,000, claiming that Tether, a digital currency pegged to the US dollar, was “used to provide price support and manipulate cryptocurrency prices.”

The paper by John Griffin, a finance professor and Amin Shams, a graduate student, observes: “Using algorithms to analyse the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.”

“The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.”

Industry observers expressed concern at the time that prices were being pushed up at least partly by activity at cryptocurrency exchange Bitfinex. “Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation,” Bitfinex Chief Executive Officer JL van der Velde said in a statement. “Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.”