Cryptocurrency tether used to boost bitcoin prices, study finds

Cryptocurrency tether used to boost bitcoin prices, study finds

NEW YORK (Reuters) – There is proof that tether, a digital foreign money pegged to the U.S. greenback, might have been used to manipulate the worth of bitcoin BTC=BTSP and different cryptocurrencies, in accordance to a analysis paper launched by the University of Texas on Wednesday.

FILE PHOTO: A Bitcoin emblem is seen on a cryptocurrency ATM in Santa Monica, California, U.S., January four, 2018. REUTERS/Lucy Nicholson/File Photo

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

Critics of tether have raised issues over the previous yr about whether or not Tether Limited truly holds $1 in reserve for every tether issued, because it claims. More than $2.2 billion of tether was issued between March 2017 and January 2018, in accordance to the paper.

Regulators worldwide are growing their scrutiny of cryptocurrency markets. The Commodity Futures Trading Commission and the U.S. Department of Justice have been investigating whether or not bitcoin and different cryptocurrency costs are being manipulated, Bloomberg reported final month.

In December, the CFTC despatched subpoenas to Tether and Bitfinex, a preferred cryptocurrency trade that’s affiliated with, and shares executives with, Tether. The cause for the subpoena was unclear.

Bitfinex denied that tether issuances might 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 stated in a press release.

Bitcoin soared final yr, peaking at almost $20,000 in December, earlier than the worth collapsed. It was at $6,624.45 on Wednesday afternoon.

The researchers discovered that tether issuances rose final yr in periods when the worth of bitcoin was dropping. When bitcoin was rising, the identical sample couldn’t be discovered.

Once issued, almost all tether was moved to Bitfinex after which shifted to different exchanges, the place it was used to purchase bitcoin, propping up the worth, the paper stated.

The researchers used algorithms to analyze knowledge from blockchains, the decentralized ledgers that underpin bitcoin and different digital currencies, between the start of March 2017 to the tip of March 2018.

The intervals with the most important circulation of tether accounted for 87 hours, or lower than 1 p.c, of the info, however had been related to 50 p.c of bitcoin’s compounded return, and 64 p.c of the returns on six different massive cryptocurrencies.

The researchers then did 10,000 simulations trying in every case at 87 random hours from the info and had been unable to discover comparable outcomes.

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

Reporting by John McCrank and Anna Irrera, Editing by Rosalba O’Brien

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