Cryptocurrency tether used to spice up bitcoin costs, research finds

NEW YORK (Reuters) – There’s proof that tether, a digital foreign money pegged to the U.S. greenback, might have been used to govern the value of bitcoin BTC=BTSP and different cryptocurrencies, in keeping with a analysis paper launched by the College of Texas on Wednesday.

FILE PHOTO: A Bitcoin emblem is seen on a cryptocurrency ATM in Santa Monica, California, U.S., January four, 2018. REUTERS/Lucy Nicholson/File Photograph

“Tether appears to be used each to stabilize and manipulate bitcoin costs,” mentioned the paper’s co-authors, professor John Griffin and doctoral pupil Amin Shams.

Critics of tether have raised issues over the previous yr about whether or not Tether Restricted truly holds $1 in reserve for every tether issued, because it claims. Greater than $2.2 billion of tether was issued between March 2017 and January 2018, in keeping with the paper.

Regulators worldwide are growing their scrutiny of cryptocurrency markets. The Commodity Futures Buying and selling Fee and the U.S. Division of Justice have been investigating whether or not bitcoin and different cryptocurrency costs are being manipulated, Bloomberg reported final month.

In December, the CFTC despatched subpoenas to Tether and Bitfinex, a well-liked cryptocurrency alternate that’s affiliated with, and shares executives with, Tether. The rationale for the subpoena was unclear.

Bitfinex denied that tether issuances may very well be used to govern bitcoin.

“(Neither) Bitfinex nor Tether is, or has ever, engaged in any type of market or value manipulation,” Bitfinex and Tether Chief Government Officer JL van der Velde mentioned in a press release.

Bitcoin soared final yr, peaking at almost $20,000 in December, earlier than the value collapsed. It was at $6,624.45 on Wednesday afternoon.

The researchers discovered that tether issuances rose final yr during times when the value of bitcoin was dropping. When bitcoin was rising, the identical sample couldn’t be discovered.

As soon as issued, almost all tether was moved to Bitfinex after which shifted to different exchanges, the place it was used to purchase bitcoin, propping up the value, the paper mentioned.

The researchers used algorithms to research information from blockchains, the decentralized ledgers that underpin bitcoin and different digital currencies, between the start of March 2017 to the top of March 2018.

The intervals with the most important movement of tether accounted for 87 hours, or lower than 1 %, of the info, however have been related to 50 % of bitcoin’s compounded return, and 64 % of the returns on six different giant cryptocurrencies.

The researchers then did 10,000 simulations trying in every case at 87 random hours from the info and have been unable to search out comparable outcomes.

“General, our findings present substantial help for the view that value manipulation could also be behind substantial distortive results in cryptocurrencies,” they mentioned.

Reporting by John McCrank and Anna Irrera, Modifying by Rosalba O’Brien

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