Bitfinex, which shares co-founders with the Tether stablecoin, is once again attracting controversy over the manipulation of the Bitcoin price.
Per a paper published by the University of Texas Professor John Griffin and Ohio State University’s Amin Shams, Bitcoin’s run to a record high near $20,000 in 2017 was caused by a single market whale.
Bitfinex whale manipulating Bitcoin price surges
Initially reported by Bloomberg, the paper, which is an update on an earlier one by the same authors, states that the single market whale operates on Bitfinex with the transactions relying on Tether:
“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one.”
The two academics based their study on transactions of Tether and Bitcoin between March 1, 2017, and March 31, 2018.
They concluded that whenever Bitcoin’s value dropped by certain amounts, purchases of the cryptocurrency on the Bitfinex exchange rose.
The assertion by the two academics that Bitcoin was manipulated is based on the belief that the issuance of Tether coins that are not backed by dollars is used to purchase the leading cryptocurrency and consequently leading to increasing prices. Tether is currently the leading cryptocurrency by volume.
Cryptocurrency trading volumes | Source: CoinCap
Pre-meditated action, not happenstance
In several instances, the two academics have asserted that the Bitcoin price rose after the printing of tethers. The academics also ruled out chance occurrences:
“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.”
Tether’s General Counsel Stuart Hoegner denied the allegations arguing that the paper lacked ‘academic rigor’.