“Bitcoin Price Manipulation”
Updated: Feb 28
Bitcoin has gone noticeably down this week, its lowest point being on June, 13th at
$6 133.31 USD. This downfall in the Bitcoin value has media speculating as to the reasons why the most popular cryptocurrency is deflating.
On June, 13th, 2018, John M Griffin and Amin Shams from the University of Texas released a study that investigates whether Tether, a digital currency linked to the U.S. dollar, has influenced Bitcoin and other alt-coin prices during their peaks. Curiously, it was released on the same day Bitcoin hit its lowest price in the past three months.
The study was carried out by analyzing blockchain data, where they found that purchases made with Tether were timed following market downturns; the result of these purchases noticeably increased Bitcoin prices. Finally, they concluded that Tether is being used to provide price support, thus manipulating crypto prices.
According to The New York Times, “Mr. Griffin looked at the flow of digital tokens going in and out of Bitfinex and identified several distinct patterns that suggest that someone or some people at the exchange successfully worked to push up prices when they sagged at other exchanges. To do that, the person or people used a secondary virtual currency known as Tether, which was created and sold by the owners of Bitfinex, to buy up those other cryptocurrencies.”
This scenario does not look good for the crypto exchange Bitfinex. Almost all of those who created the exchange are the same ones who created the cryptocurrency Tether. Conflict of interest?
Bitfinex has been very quiet regarding this matter. This is not the first time the exchange has been questioned by media or online users. In December 2017, the company sent a statement addressing the issue. “In a statement emailed late Thursday to reporters, Ronn Torossian, a newly hired outside spokesman for both companies, blamed "questionable actors" for raising doubts about their financials and controls. Notwithstanding critics, he wrote, 'Bitfinex is committed to becoming the most transparent crypto exchange in the industry.'" - you can read the full article at the following link.
Once you enter Tether´s website, one of their highlights is an update on proof of funds. The company has uploaded a paper with a status on their account, although all bank information is crossed out. It seems they are making an effort to show the world how legitimate their exchange is.
“Manipulation takes many forms in the markets. One way people can deflate the price of a security is by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example of manipulation would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, because of the higher volume, that there is increased interest in the security,” as stated by Investopedia.
Price manipulation is not something new; I believe it happens more than we think. The problem is that the crypto world is not entirely regulated. I´m not saying it should, but It shouldn’t mean people can do whatever they want and never get caught.
I have always been amazed by the creation of cryptocurrency and the technology that has been developed because of it. Bitcoin has come a long way since the Dark Web, and it’s a shame that the allegations about price manipulation (true or not) may tarnish the process.
Hope you enjoyed it! Feel free to comment.