Bitcoin soared previous year, peaking at almost $20,000 in December, before the price collapsed. Price manipulation and collusion may be to blame.
Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices.
The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends.
What is interesting is that Griffin and Shams's paper describes Tether as being primarily used by Bitfinex, a major crypto-exchange, to purchase Bitcoin tokens from two other exchanges and most importantly did this only after periods of Bitcoin price declines.
The CFTC and Securities and Exchange Commision have been ramping up their enforcement efforts against fraudulent cryptocurrency activity and scams as Bitcoin and other digital tokens gained prominence over the a year ago. The prices climbed faster on exchanges the dealt in Tether than on those that didn't. Indeed, even less than 1% of extreme exchange of Tether for Bitcoin has substantial aggregate price effects. Bitfinex stopped issuing Tether earlier this year, though the currency, the value of which is pegged to the USA dollar, is still trading in large volumes.
Record bitcoin price propped up by another digital currency
As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year.
The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of US dollars it claims it has. Although their findings don't definitively prove collusion or price manipulation, the Tether-Bitcoin buys had obvious benefits.
In other words, it looks like cryptocurrency buyers aren't really interested in Tether, and the researchers are fairly confident that the manufacturing of Tether has a lot to do with bitcoin prices staying high.
Bitcoin reached its peak price of nearly $20,000 in December but is now trading at around $6,300 according to the Coin Market Cap.
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. "Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation".