Bitcoin is slipping after study claims its 2017 bull run was driven by market manipulation


bitcoin
Bitcoin
price on June 13.


Markets
Insider



  • Bitcoin fell 2% on Wednesday after a new academic paper
    was published claiming bitcoin’s price run to December last
    year was driven by manipulation.
  • The University of Texas paper alleges that exchange
    Bitfinex may have used Tether, a cryptocurrency it is closely
    linked to, to support the price.
  • Bitfinex’s CEO told BI: “Bitfinex nor
    Tether is, or has ever, engaged in any sort of market or price
    manipulation. Tether issuances cannot be used to prop up the
    price of Bitcoin or any other coin/token on Bitfinex.”

The price of bitcoin fell against the dollar on Wednesday after
an academic paper claimed the cryptocurrency’s 2017 bull run was
caused by market manipulation at a major exchange — allegations
denied by the CEO.

Academics at the University of Texas on Wednesday published
a paper analysing whether cryptocurrency Tether “influences
Bitcoin and other cryptocurrency prices during the recent
boom.”

The academics concluded that the price patterns are “most
consistent with the supply-based hypothesis where Tether is used
to provide price support and manipulate cryptocurrency prices.”

Tether is a cryptocurrency supposedly backed by the US dollar
one-for-one, offering the stability of the currency but the
flexibility and functionality of cryptocurrency. The
cryptocurrency was created by many of the same people behind
leading cryptocurrency exchange Bitfinex. (You
can read a full explanation of Tether here.
)

Bitfinex CEO JL van der Velde said in an emailed statement:
“Bitfinex nor Tether is, or has ever, engaged in any sort of
market or price manipulation. Tether issuances cannot be used to
prop up the price of Bitcoin or any other coin/token on
Bitfinex.”

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Bitcoin rallied over 1,000% against the dollar last year, peaking
at over $20,000 in December. It has since collapsed to below
$7,000.

The University of Texas paper looked at the relationship between
Tether and the price of bitcoin between March 2016 and March of
this year, but focused specifically on the year to March 2018.
The academics concluded: “Tether seems to be used both to
stabilize and manipulate Bitcoin prices,” with new Tether coins
seemingly created and used to buy up bitcoin at times of low
demand.

Prominent sceptic Bitfinex’d, an anonymous Twitter user, has
long argued that Tether
was being used to manipulate the price of bitcoin
by propping
up demand. Bitfinex has denied this.


The New York Times first reported the paper
and said that the
study was a strong indication of possible manipulation and would
require further investigation.

Bitcoin
fell 2% against the dollar
shortly after the New York Times
piece was published. The price has rallied slightly since then
and bitcoin is down 1.5% against the dollar as of 11.25 a.m. BST
(6.25 a.m. ET).

The US Commodities and Futures Trading Commission (CFTC)
issued subpoenas to Bitfinex and Tether last December, according
to Bloomberg.

Last month the US Justice Department
reportedly began investigating bitcoin price manipulation
,
focusing specifically on “spoofing” — the practice of placing
fake orders to drive up or down a price — and “wash trading” —
the practice of trading with yourself to simulate volume in a
market.

Professor John Griffin and his graduate student Amin Shams
conclude in their paper: “Our findings suggest that market
surveillance within a proper regulatory framework may be needed
for cryptocurrency markets to be legitimate stores of value and a
reliable medium for fair financial transactions. Additional
research is necessary to further understand these markets.”

Get the latest Bitcoin price here.>>

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