Bitcoin prices manipulated using tether, study says

June 13, 2018
Chris Wheal

Bitcoin prices are likely to have been manipulated during the past year suggested a new academic study published on Wednesday by the University of Texas.

Tether, backed by the US dollar was used to manipulate bitcoin, study says: Shutterstock

The paper, entitled “Is bitcoin really un-tethered?” by John Griffin, professor of finance and PhD candidate Amin Shams, suggested that tether, the dollar-backed cyptocurrency had been used to boost bitcoin and other altcoins.

Tether used

“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,” the paper said.

The authors added: “Such price supporting activities are successful, as bitcoin prices rise following the periods of intervention.”

Most of the “intervention” was carried out following the printing and issuance of tether tokens and the authors found that even less than 1% of extreme exchange of tether for bitcoin had substantial aggregate price effects.

Round numbers

They also found that the buying of bitcoin using tether occurred frequently at round number thresholds where the price support could be expected to be the strongest.

“Overall, our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies,” Griffin and Shams said in the paper.

“These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free.”

They concluded: “More generally, our findings support the historical narrative that dubious activities are not just a by-product of price appreciation, but can substantially contribute to price distortions and capital misallocation.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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