Price manipulation caused Bitcoin's huge 2017 surge, researchers say

250 Million Tether Grant Here we Go Again

However, the two notably discovered that it does not take a large amount of tether to prop bitcoin's price - "even less than 1 percent of extreme exchange of tether for bitcoin has substantial aggregate price effects", the study said. Evidence of price manipulation was found in all of those, too.

"Overall, our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies", they said.

The paper by John Griffin, a finance professor at the University of Texas who has researched fraud in other markets, and graduate student Amin Shams, found that the virtual coin Tether was likely used to prop up Bitcoin prices late a year ago.

The study, by University of Texas finance professor John M. Griffin and graduate student Amin Shams, explored how digital currency Tether could have been used to inflate prices of other cryptocurrencies.

"Overall, the findings indicate that Tether is closely linked to Bitcoin price appreciation, and question the objective of Tether". Other digital currencies like Ethereum and Litecoin soared at around the same time by as much as 64 percent. Several exchanges have been using Tether as a way to quickly facilitate fund transfers, replacing the need to depend on banks.

"We investigate whether Tether is primarily demand-driven from investors, or supply-driven by Tether issuers pushing the currency on the market".

Bitfinex has denied being involved in any price manipulation schemes.

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Regulators worldwide are increasing their scrutiny of cryptocurrency markets.

"When prices are falling, the Tether creators can convert their Tether into Bitcoin in a way that pushes Bitcoin up and then sell some Bitcoin back into dollars to replenish Tether reserves as Bitcoin price rises", the researchers wrote.

Bitcoin reached its peak price of nearly $20,000 in December but is now trading at around $6,300 according to the Coin Market Cap.

The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of USA dollars it claims it has.

To prevent future price manipulation, the researchers say that "external capital market surveillance and monitoring" may be necessary to keep the market free from tampering.

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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