Bitcoin isn't all it has been cracked up to be, according to a new report by a University of Texas professor.
That's according to explosive new research from University of Texas finance processors John Griffin and Amin Shams, best known for identifying suspicious activity in the VIX a year ago. The prices climbed faster on exchanges the dealt in Tether than on those that didn't. Price manipulation and collusion may be to blame.
"We investigate whether Tether is primarily demand-driven from investors, or supply-driven by Tether issuers pushing the currency on the market".
The researchers analyzed 87 of the largest Bitcoin purchases made with Tether from March 2017 to March 2018.
There is evidence that tether, a digital currency pegged to the USA dollar, may have been used to manipulate the price of bitcoin BTC=BTSP and other cryptocurrencies, according to a research paper released by the University of Texas on Wednesday.
New research claims that a trio of cryptocurrency exchanges likely inflated Bitcoin's value by buying it up whenever the price began to fall.
Record bitcoin price propped up by another digital currency
As evidence for this claim, the Griffin and Shams note that there tends to be negative end-of-month pressure on the bitcoin price in months when a large number of tethers have been issued but not in others. Other digital currencies like Ethereum and Litecoin soared at around the same time by as much as 64 percent.
The findings add to the growing concerns that Tether was used to artificially inflate Bitcoin for the benefit of a small group of big cryptocurrency holders, putting the rest of the market at risk.
Both Tether and Bitfinex have regularly come under suspicion over price manipulation in recent months.
The US Commodity Futures Trading Commission allegedly sent Tether - as well as cryptocurrency exchange Bitfinex, with whom it is closely affiliated - a subpoena in December, though it is not clear whether that investigation has or will result in any enforcement action. Bitcoin's price reached a record high of $20,000 in December, but its value has since dramatically fallen to $6,300. "These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free", they conclude.
"(Neither) Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex and Tether Chief Executive Officer JL van der Velde said in a statement.