Research: One Buyer on Bitfinex Manipulated Bitcoin’s Price in 2017

Bitfinex crypto exchange

Bitcoin(BTC)trade touched its all-time high of nearly $20,000 in December 2017, and now researchers at the University of Texas and Ohio State University believe that this rally was fueled by a single big money movement in a new research paper.

The academic paper also alleges that the USD-backed stablecoin Tether (USDT) is responsible for the astronomical rise in the BTC price in 2017, allegation which has already been raised previously and that is investigated by the U.S. Justice Department and has earned the company a class action lawsuit.

According to the University of Texas professor John Griffin and Ohio State University’s Amin Shams, the only entity which is capable of sending Bitcoin’s price to such extraordinary height through a single whale is the crypto exchange and Tether’s sister company Bitfinex. The academic paper, which was initially published in 2018 and now updated, claims that Tether was the digital asset behind Bitcoin’s price manipulation.

Professor Griffin stated:

“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one. Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.”

Bitfinex and Tether have released a statement regarding the claim and completely denied the allegation, saying that the published paper is “foundationally flawed” and it is based on insufficient data points. “This is a transparent attempt to use the semblance of academia for a mercenary money grab. Updates or not, the paper lacks academic rigor,” Bitfinex general counsel Stuart Hoegner said, rejecting the claim.

Tether and Bitfinex are also embroiled in a $850M cover up controversy where Bitfinex used funds from Tether to cover losses of the company. Tether was further alleged for not holding the appropriate USD to Tether ratio last year.

Griffin and Shams’s academic paper further claim that new Tether coins were minted without having an equivalent amount of USD in Tether’s reserve. The newly minted USDT was then used to buy Bitcoin, leading to the soaring price.

Bitcoin Price Manipulation on Bitfinex?

They went on further by observing the transaction history on Bitfinex from March 1, 2017 to March 31, 2018, and concluded that Bitcoin was being bought whenever the BTC’s value fell by a certain degree. The researchers didn’t reveal the name and identity of the entity on Bitfinex who might be responsible for this action.

“This pattern is only present in periods following the pattern of Tether, driven by a single large account holder, and not observed by other exchanges,” they wrote in their update paper which is set to be published in a soon-to-be out Journal of Finance.

“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.”

It is important to mention that in spite of all the controversies and lawsuits, Tether keeps on growing as more and more crypto traders and businesses are adopting the stablecoin.

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