An academic paper claims that the rapid gains for Bitcoin last year were driven by market manipulation. The cryptocurrency lost 2% in value after the study was published on Wednesday.
Researchers at the University of Texas found that the major cryptocurrency exchange Bitfinex propped up Bitcoin’s bullish price via a shady cryptocurrency called Tether. Bitfinex’s CEO denied all allegations of price manipulation, arguing that Tether cannot keep any cryptocurrency’s price at a high level.
The recent research paper, however, has explained how Tether influenced the prices of other digital coins during the 2017 boom. Study authors claim that price pattern back their supply-based hypothesis which led to market manipulation.
Tether is a digital token backed by the U.S. currency. The cryptocurrency has the stability of the US dollar, but it benefits from the flexibility of a cryptocurrency. Tether is the work of the people behind Bitfinex.
The exchange’s CEO JL van der Velde denied any price or market manipulation in a recent e-mailed statement.
BitFinex Accused of Market Manipulation
In 2017, Bitcoin’s price surged to 1,000% against the U.S. dollar. The digital coin’s highest price was $20,000 in December 2017. Meanwhile, Bitcoin has sunk to $6,400.
Texas researchers analyzed price fluctuations from March 2016 to March 2018. They were especially interested in the Bitcoin’s price variations recorded in March of this year.
Tether seems to be used both to stabilize and manipulate Bitcoin prices,
the 66-page research paper states.
Study authors believe that Bitfinex is manipulating the prices by purchasing Bitcoin with Tether when the demand is low.
Twitter user Bitfinex’d has long suspected that the exchange has been manipulating Bitcoin’s price by creating artificial demand for the digital coin. Bitfinex has repeatedly denied the allegations.
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