Record bitcoin price propped up by another digital currency

Irving Hamilton
June 13, 2018

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Bitcoin's massive price run-up late a year ago may have been the result of a price manipulation campaign, according to a new study released on Wednesday.

Bitcoin's meteoric price rise may have been down to price manipulation using another virtual currency, researchers have suggested.

Griffin, known for spotting fraud in financial markets, co-authored the study, titled "Is Bitcoin Really Un-Tethered?", with graduate student Amin Shams. Tether is the 11th largest cryptocurrency and is pegged to the U.S. dollar.

Griffin's study didn't have access to email, texts or other communications that would provide evidence that both organizations were involved in price manipulation, but instead analyzed transaction records stored on Bitcoin's public ledger.

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While that correlation could simply be due to the fact that an inflow of tethers signals a spike in demand from traders, the researchers claim that other data suggests that tether may not be fully-backed by Dollars - at least not all the time.

Tether appears to have stopped issuing new tethers as of recent times, possibly in fears of stricter regulation, or lack of legitimate deposits into the company's reserves that may prompt more printing; regardless of being due to the lack of new printed tokens or simply due to lack of demand leaving Tether's company in need of new deposits, Bitcoin's price drop past $6,500 has proved the researcher's hypotheses. Since exchanges often face difficulties finding the banking partners and achieving the regulatory compliance necessary to offer fiat-to-crypto trading pairs, many altcoin exchanges use tether as a proxy for physical United States dollars.

However, earlier this year, a report from BitMEX Research found that Tether's reserves are likely housed in the Puerto Rico-based Noble Bank.

The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of US dollars it claims it has.

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