Bitcoin boom ‘caused by price manipulation’ say academics

Bitcoin boom ‘caused by price manipulation’ say academics

The Bitcoin price boom at the end of 2017, which saw the value of the cryptocurrency reach close to $20,000, was driven by price manipulation, according to academics.

John Griffin, a finance professor at the University of Texas and graduate student Amin Shams, examined the flow of tokens on the Bitfinex exchange, and concluded that at least half the increase in the price of Bitcoin and other major cryptocurrencies last year, was the result of price manipulation.

‘Substantial distortive effects’
The academics claim that Tether coins, created and sold by the Bitfinex exchange, were used to buy other cryptocurrencies and drive their prices up whenever they fell on other exchanges.

The researchers conclude: “Our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies.”

This is not the first time that the Bitfinex exchange has been accused of involvement in price manipulation. As it has in the past, the exchange issued a statement denying any role in manipulating prices.

“Bitfinex nor Tether [sic] 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,” Jan Ludovicus van der Velde, Bitfinex’s chief executive, said in a statement.

No hard evidence
Though the report shows a strong correlation between flows of Tether to other exchanges shortly before a rise in the price of Bitcoin, it remains only a correlation. The academics do not have any documentation or other evidence linking Bitfinex to the price changes.

The report says: “These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.”

However, the research will provide more ammunition for those arguing for stronger regulatory oversight of cryptocurrencies.

Since Bitfinex stopped printing new Tether in January, the price of Bitcoin has almost halved. The price of Bitcoin fell further following the publication of the report.

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This post is provided for informational purposes only. None of the information presented here should be considered investment advice. Everyone should always do their own research and due diligence before sending funds to any third party.