Manipulation of Tether Pushed up Bitcoin’s Price
Bitcoin price manipulation
Tether which is pegged to the US dollar has been used to hold up Bitcoin’s price during hard times like the current downtime. This is according to a new study carried out by professors of the University of Texas at Austin.
The report which was published by John Griffin and Amin Shams from the University’s department of finance linked the stablecoin with Bitcoin’s prices during the price increases in 2017. This study has indicated that researcher used different algorithms to analyze Blockchain data found that purchases with Tether were well timed because of market downtime which resulted in increases in the price of Bitcoin.
There was a very clear link between the printing of new Tether tokens and rising of Bitcoin prices which were followed by bear runs according to the study. The study added that:
“The mapping of Bitcoin and Tether blockchains enabled us to establish different entities associated with the use of Tether to buy Bitcoin by Bitfinex Exchange when Bitcoin prices were falling. This price supporting mechanism worked very well in ensuring that the price remained stable when the markets were falling. These effects only become present after negative returns and times which fellow the printing of the manipulating coin.”
The two professors also established that it was not taking a huge amount of tether to turn around Bitcoin’s price. It was established that even 1 percent of extreme exchange of Tether had an effect on the price of Bitcoin. More to that the developed algorithms were able to gather related Bitcoin wallets. The researchers were also able to map how the distribution of Tether was done and how it affected the price of Bitcoin.
The study indicated that after the creation of Tether it would be sent to Bitfinex which would then move it to other cryptocurrency exchanges mainly Bittrex and Poloneix. The report continued to indicate that the tokens were never redeemed by the issuer. The main focus of this study mainly focused on the supply-based information and explanation for the link but the professors noted that the demand for Bitcoin can also lead to the demand for tether. This, however, applies to investors who cannot move huge amounts of money into digital currencies directly.
The study was also focused on establishing how the price of Bitcoin moves and possible manipulating factors which had the power to affect the movement of Bitcoin prices. More to that it also looked at possible players who could be behind the manipulation of Bitcoin prices.