The Strategist

Study: Bitcoin price can be influenced

06/15/2018 - 14:49

Professors of the Faculty of Finance at the University of Texas at Austin seem to have found the reason why Bitcoin’s cost nearly tripled last year. In their study, they argue that it is fault of the Tether crypto currency. Its owners used it to manipulate Bitcoin and other digital currencies.

Developers of the Tether crypto currency claim that it is provided with fiat money. Now it turns out that the crypto currency could be used to manipulate Bitcoin course, say John Griffin and Amin Shams of the University of Texas at Austin. They argue that throughout 2017, the growth of Bitcoin prices was largely dependent on behavior of large investors in Tether: "It seems that Tether was used to stabilize and manipulate prices for Bitcoins."

Tether is a project of the same name. Its essence is issuance of the crypto currency, which is supposedly tied to fiat money, such as the dollar and the euro. That is, for example, one Tether coin is equal to the US dollar or euro, and is accordingly as USDT or EURT. The first exchange, which integrated this crypto currency, was Bitfinex.

The authors of the study analyzed Bitcoin's and Tether's blockchains and concluded that release of the new Tether tokens coincided with the growth of the price for Bitcoin: "Comparing blockchains of Bitcoin and Tether allowed us to conclude that subjects related to the Bitfinex exchange used USDT to buy Bitcoin during the periods of its fall prices ". "This activity aimed at supporting the price is successful, as the price of Bitcoin grows during such interventions," the study said.

There is nothing bad in this behavior of the crypto currency investors: everyone tries to invest in an asset when it is traded at a low price, and get rid of it at the expected peaks of value. However, in the case of Tether, this practice can be considered a fraud.

The fact is that when the Paradise Papers investigation was published, it turned out that the owners of Bitfinex are connected with the Tether project. And in January, the US Securities and Exchange Commission sent subpoenas to the both companies: the regulator doubted that the Tether tokens were actually provided with dollars.

Banks that traded in the BTC/USDT pair may also be involved, as Tether was closely affiliated with one of them. It is needless to explain the extent to which an exchange can influence markets, if it has its own dollars printing machine.

At the same time, the report notes, it was sufficient to increase the Tether offer by only 1% for a significant manipulation of Bitcoin price.