Bitcoin Market manipulation responsible for 2017 boom! A forensic study has revealed that Bitcoin market manipulation via Tether and Bitcoin was largely responsible for the meteoric rise in Bitcoin, and the rest of the cryptocurrencies riding the coat tails, back in 2017.
John Griffin and Amin Shams, finance professors at the University of Texas and the Ohio State University, respectively, analyzed over 200 gigabytes of data for the transaction history between bitcoin and tether. Tether is a stablecoin that has its trading value pegged to the dollar. The professors revealed a pattern:
“We find that the identified patterns are not present on other flows, and almost the entire price impact can be attributed to this one large player,” Griffin and Shams wrote. “We map this data across both blockchains and find that the one player or entity (labeled as 1LSg throughout the paper) is behind the majority of the patterns we document.”
The two professors were able to follow the data to one source – an account holder at Bitfinex. Bitfinex is one of the largest exchanges in the world – the study found that through this large exchange, this single individual was able to manipulate demand for bitcoin via “extreme” liquidity of tether. This, according to the two professors, is what caused Bitcoin to rise to an all-time high of nearly $20,000 in late 2017. Bitcoin is trading currently at $9,330 as of writing.
This study comes after an analysis published in March found that 95% of bitcoin spot trading is fake. This will undoubtedly add even more scrutiny of bitcoin and cryptocurrency at large, especially from regulators and lawmakers.
This spells big trouble for Libra, Facebook’s cryptocurrency project. They’ve seen major partners drop out, as well as increased regulatory pressure to halt the project.
The professors suggest that, while they could not identify the manipulator, those that were running Bitfinex, at the time, either knew of the operation, or potentially even assisted in the scheme. Bitfinex and Tether Ltd are owned and operated by the same people. It is important to note that both companies are under investigations for alleged fraud by the Department of Justice and the New York Attorney General.
Here’s what our own Kurt Wuckert Jr. has to say about it.
“For years now, Matthew and I, and the entire team at Crypto Traders Pro, have said that this price action is non-sensical. There was lots of evidence of some foul play, and it has been slowly bubbling to the surface. We believe that most of the happenings of the entire crypto space are manipulated in one way or another: media, development teams, exchanges, and even the price action itself. Bitcoin was supposed to give us a tool for transparent commerce, but it has primarily been a tool for dishonesty. We desperately need this to change, or the corruption will lead to the collapse of this potentially life-changing technology.”
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