fbpx
Money

Cryptocurrency Tether Used To Boost Bitcoin Prices

There is evidence that tether, a digital currency pegged to the U.S. dollar, may have been used to manipulate the price of bitcoin BTC=BTSP and other cryptocurrencies, according to a research paper released by the University of Texas on Wednesday.

“Tether seems to be used both to stabilize and manipulate bitcoin prices,” said the paper’s co-authors, professor John Griffin and doctoral student Amin Shams.

Critics of tether have raised concerns over the past year about whether Tether Limited actually holds $1 in reserve for each tether issued, as it claims. More than $2.2 billion of tether was issued between March 2017 and January 2018, according to the paper.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets. The Commodity Futures Trading Commission and the U.S. Department of Justice have been investigating whether bitcoin and other cryptocurrency prices are being manipulated, Bloomberg reported last month.

In December, the CFTC sent subpoenas to Tether and Bitfinex, a popular cryptocurrency exchange that is affiliated with, and shares executives with, Tether. The reason for the subpoena was unclear.

Bitfinex denied that tether issuances could be used to manipulate bitcoin.

“(Neither) Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation,” Bitfinex and Tether Chief Executive Officer JL van der Velde said in a statement.

Bitcoin soared last year, peaking at nearly $20,000 in December before the price collapsed. It was at $6,624.45 on Wednesday afternoon.

The researchers found that tether issuances rose last year during periods when the price of bitcoin was dropping. When bitcoin was rising, the same pattern could not be found.

Once issued, nearly all tether was moved to Bitfinex and then shifted to other exchanges, where it was used to buy bitcoin, propping up the price, the paper said.

The researchers used algorithms to analyze data from blockchains, the decentralized ledgers that underpin bitcoin and other virtual currencies, between the beginning of March 2017 to the end of March 2018.

The periods with the largest flow of tether accounted for 87 hours, or less than 1 percent, of the data, but were associated with 50 percent of bitcoin’s compounded return, and 64 percent of the returns on six other large cryptocurrencies.

The researchers then did 10,000 simulations looking in each case at 87 random hours from the data and were unable to find similar results.

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

This story originally appeared in Reuters. Image courtesy of Seung-il Ryu/NurPhoto/Getty Images.

Join The Discussion

May's Brexit Plan Goes Pop After 'Humiliation' By EU
May’s Brexit Plan Goes Pop After ‘Humiliation’ By EU [Video]
Putin Seeks To Defuse Downing Of Russian Plane Off Syria
Putin Seeks To Defuse Downing Of Russian Plane Off Syria [Video]
Kim Agrees To Dismantle Main Nuke Site If US Takes Steps Too
Kim Agrees To Dismantle Main Nuke Site If US Takes Steps Too [Video]
Trump Imposes $200 Billion Of New Import Tariffs On China
Trump Imposes $200 Billion Of New Import Tariffs On China [Video]
Decentralized Crypto Exchange Is Solution To Hacks
Decentralized Crypto Exchange Is Solution To Hacks
Cryptocurrency Has Hit Bottom, Bitcoin Due To Bounce Back
Cryptocurrency Has Hit Bottom, Bitcoin Due To Bounce Back
Time To Regulate Bitcoin, Says Treasury Committee Report
Time To Regulate Bitcoin, Says Treasury Committee Report
Dubai Police Warns Against Crypto Scams
Dubai Police Warns Against Crypto Scams, Predicts Electronic Money Will Replace Cash
4 Ways To Turn Your Blog Or Website Into Revenue
4 Simple Ways To Turn Your Blog Or Website Into Revenue
5 Psychological Reasons 'Social Proof' Beats Everything Else In Marketing
5 Psychological Reasons ‘Social Proof’ Beats Everything Else In Marketing
15 Big Reasons Your Business Needs Online Reviews
15 Big Reasons Your Business Needs Online Reviews [Infographic]
Why Video Content Is A Must Have Sales Tool [Infographic]
Vertical Video Ads Are Coming To YouTube
Vertical Video Ads Are Coming To YouTube
5 Tips For Brands On How To Use Facebook's 'Brand Collabs Manager' Tool
5 Tips For Brands On How To Use Facebook’s ‘Brand Collabs Manager’ Tool
How This Former Monk Became A Social Media Superstar
How This Former Monk Became A Social Media Superstar [Video]
Twitter Lite Expands To 21 More Countries
Twitter Lite Expands To 21 More Countries, Adds Push Notifications