In a new paper, titled ‘Is Bitcoin Really Un-Tethered?’, University of Texas finance professor John Griffin, and graduate student Amin Shams, look at how Bitcoin’s price may have been artificially inflated last year.
Bitcoins incredible rise in value in the last 12 months has been down to massive market manipulation, a new study has revealed. During the 2017 peak, which topped out at almost $20,000 (£15,000) per coin, traders were using a separate cryptocurrency called Tether to manipulate its value
The team looked at the flow of digital currency entering and leaving ocryptocurrency exchange, Bitfinex. They spotted several patterns that would suggest someone, or a group, had propped up Bitcoin prices when they’d fallen.
To do this, the scammers purchased Bitcoin using a secondary currency known as Tether.
Tether, created, and sold, by the owners of Bitfinex, is backed by the US dollar.
For every coin of Tether, there is $1 (£0.74) of real money in the bank, making it more stable than alternatives, such as Bitcoin.
This meant it also allowed investors to offload Bitcoin into Tether during wild price swings as a means to avoid substantial losses, according to the Nextweb.
‘Tether seems to be used both to stabilise and manipulate Bitcoin prices,’ finance professor John Griffin and co-author Amin Shams wrote in a paper released this week.
Professor Griffin is an academic with a history of spotting fraud in financial markets.