The record growth in bitcoin a year ago was actually a coordinated market manipulation, according to recent research by University of Texas Finance Professor John Griffin. More than $2.2 billion of tether was issued between March 2017 and January 2018, according to the paper.
As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year.
Around the time of the bitcoin peak, cryptocurrency experts suspected Bitfinex was involved in manipulation, and the US Commodity Futures Trading Commission subpoenaed the exchange after concerns were raised. "Tether issuances can not be used to prop up the price of bitcoin or any other coin/token on Bitfinex", he said.
The algorithms the two developed were able to "cluster groups of related bitcoin wallets", according to the study.
Tether has always been accused of being insolvent, as they have been unable to provide legitimate audits, breaking off their relationship with their auditor earlier this year.
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"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex CEO JL van der Velde told Bloomberg in an e-mailed statement. It was at $6,624.45 on Wednesday afternoon. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention.
In addition, the paper provides evidence that Tether's reserves are lacking in comparison to the amount of USDT in circulation, based off patterns found in the issuance of new USDT tokens and price movements.
Their findings suggest that Bitfinex, an exchange which created and sold Tether, used their currency to snap up bitcoin and drive demand for it, bumping up prices. Bitfinex stopped issuing Tether earlier this year, though the currency, the value of which is pegged to the USA dollar, is still trading in large volumes.
The researchers then did 10,000 simulations looking in each case at 87 random hours from the data and were unable to find similar results.
Bitfinex has denied being involved in any price manipulation schemes.