Sat. Jul 2nd, 2022

There are certain periods in the financial markets that become etched into people’s minds, even if they’re weren’t present at the time. Take for example the Great Depression that began in 1929, or the dot-com bubble from 1994 into the early 2000’s and the Great Recession of 2007-2009. Probably one of the most recent historic periods was the rise of cryptocurrencies to infamy in 2017. 

Despite Bitcoin having been around for almost a decade, it was in 2017 that the crypto market really surged to life and everywhere you turned there were stories of people becoming overnight millionaires. At the end of 2017, anyone with Bitcoin was rejoicing in the streets as the price of a single Bitcoin moved into the $20,000 range. But, then the house of cards came tumbling down and hundreds of billions of dollars were lost in the blink of an eye. 

Even before the crypto markets took a turn for the worse, analysts and finance gurus were calling foul that prices were being manipulated, yet most of these warnings were ignored as everyone was chasing profits. It really didn’t take a genius to see something was fishy and recently more light has been shone on the matter suggesting that not only was there clear manipulation of the prices, but more alarmingly, the data suggests it was a single trader or entity. 

If it walks like a duck, and it talks like duck…. It must be….

In 2018, John Griffin, a professor at the University of Texas and Amin Shams from Ohio State University wrote a paper that was published which focused on the issue of manipulation and the connection to the digital token, Tether. Tether is considered a “stablecoin” which is supposed to maintain a 1:1 value with the US dollar. Griffin and Shams recently updated their paper based on further studies that shows distinct patterns of a connection between Tether, Bitcoin and the suggestion that it was a single entity involved in the manipulation. 

Tether was originally intended that each token would be backed one US dollar, and its purpose was to provide a “digital dollar” that would enable traders to easily buy and sell cryptocurrencies without having to constantly convert their digital currencies into fiat. However, Tether has faced plenty of controversy and in March 2019, they announced that its value is also backed by loans to affiliate companies. 

Probably the largest concern around Tether is that iFinex the parent company of Tether, is also the parent of BitFinex, one of the largest crypto exchanges that has been accused of being at the heart of the manipulation. In April 2019, a lawsuit was filed by the Attorney General of New York and the U.S. Justice Department that claims BitFinex accessed around $700 million of Tether reserves to cover losses of client and corporate funds that went missing, estimated at $850 million. 

The results speak for themselves

The study by Griffin and Shams looked at data from March 2017 till end of March 2018 and they concluded that the number purchases of Bitcoin on BitFinex increased whenever the Bitcoin price would fall by certain increments. Their hypothesis claims that new Tethers were created without the dollars to back them and were then used to purchase Bitcoin which lead to the rising price. In conjunction with these findings, the patterns suggest it was a single large player or entity that was responsible, as the results did not reflect the typical aggregate flows of multiple small traders. As you can imagine, legal counsel for BitFinex are claiming otherwise. Maybe one day we’ll all know the truth, and who knows, we might even find out the true identity of Satoshi Nakamoto. 

By Dov Herman

Dov is a Blockchain and Forex trading enthusiast, who spends most of his time trading and examining software who are related to cryptocurrencies and forex trading. You can follow on Dov’s reviews and articles here on TrustedBrokerz and across the web.