Bitfinex, which shares co-founders with the Tether stablecoin, is once again attracting controversy over the manipulation of the Bitcoin price.
Per a paper published by the University of Texas Professor John Griffin and Ohio State University’s Amin Shams, Bitcoin’s run to a record high near $20,000 in 2017 was caused by a single market whale.
Initially reported by Bloomberg, the paper, which is an update on an earlier one by the same authors, states that the single market whale operates on Bitfinex with the transactions relying on Tether:
“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one.”
The two academics based their study on transactions of Tether and Bitcoin between March 1, 2017, and March 31, 2018.
They concluded that whenever Bitcoin’s value dropped by certain amounts, purchases of the cryptocurrency on the Bitfinex exchange rose.
The assertion by the two academics that Bitcoin was manipulated is based on the belief that the issuance of Tether coins that are not backed by dollars is used to purchase the leading cryptocurrency and consequently leading to increasing prices. Tether is currently the leading cryptocurrency by volume.
In several instances, the two academics have asserted that the Bitcoin price rose after the printing of tethers. The academics also ruled out chance occurrences:
“Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”
Tether’s General Counsel Stuart Hoegner denied the allegations arguing that the paper lacked ‘academic rigor’. Earlier last month Bitfinex had also come out to quell bad press ahead of the release of an unnamed paper critical of the exchange and the Tether stablecoin.
This is not the first time that John Griffins and Amin Shams are making claims of Bitcoin price manipulation by Bitfinex and its sister company Tether.
Mid last year the two wrote a paper observing patterns of Tether being used to purchase Bitcoin around market downturns. This almost always leads to ‘sizable increases in Bitcoin prices’ the two academics wrote then. The two then went on to conclude that ‘these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices’.
Last modified: March 4, 2021 2:41 PM