Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says

BNN Bloomberg | Matthew Leising and Matt Robinson | Nov 4, 2019

bitcoin whale - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says(Bloomberg) -- A Texas academic created a stir last year by alleging that Bitcoin’s astronomical surge in 2017 was probably triggered by manipulation. He’s now doubling down with a striking new claim: a single market whale was likely behind the misconduct, seemingly with the power to move prices at will.

One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1.

“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one,” Griffin said in an interview. “Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.”

Tether rejected the claims, with General Counsel Stuart Hoegner arguing in a statement that the paper is “foundationally flawed” because it is based on an insufficient data set. The research was probably published to back a “parasitic lawsuit,” the general counsel added.

See:  Regular investors are cut out of a major financial market and the SEC chief wants to change that

Bitfinex and Tether aren’t new to controversy. The exchange is owned and operated by the same executives who control Tether, and multiple traders have questioned a key assertion about the coins -- that each one is backed by one U.S. dollar. The tangled web has attracted scrutiny from the U.S. Justice Department and New York’s attorney general, who accused Bitfinex in an April lawsuit of trying to hide the loss of hundreds of millions in customer funds.

Griffin and Shams’s hypothesis that Bitcoin was manipulated is based partly on the theory that new Tethers are created without the dollars to back them and then used to buy Bitcoin, leading to rising prices. The authors examined Tether and Bitcoin transactions from March 1, 2017 to March 31, 2018, concluding that Bitcoin purchases on Bitfinex increased whenever Bitcoin’s value fell by certain increments. Griffin and Shams didn’t name the entity on Bitfinex that they think was responsible. They shared their updated research with Bloomberg News.

“This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges,” they wrote in their new peer-reviewed paper, set to be published in a forthcoming Journal of Finance.

“Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”

‘Money Grab’

In his statement, Tether’s Hoegner was adamant that the allegations laid out in the paper have no merit.

“This is a transparent attempt to use the semblance of academia for a mercenary money grab,” Hoegner said. “Updates or not, the paper lacks academic rigor.”

He added that “macroeconomic experts and stakeholders in the cryptocurrency ecosystem understand that it is the global rise of digital currency that has driven the markets and demand for Tether.”

 

See:  Investors, ‘starved for returns,’ flood private markets in search of high-growth opportunities

Both Bitfinex and Tether received subpoenas in 2017 from the U.S. Commodity Futures Trading Commission, Bloomberg reported at the time. The Justice Department has since opened a criminal investigation into whether Tether was being used to manipulate Bitcoin. Neither the CFTC nor federal U.S. prosecutors have accused Bitfinex or Tether of any wrongdoing.

$850 Million

In her lawsuit, New York Attorney General Letitia James said Tether and Bitfinex executives participated in a cover-up after about $850 million in client and corporate funds allegedly went missing. Bitfinex has said that James’ suit is riddled with erroneous assertions.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study SaysFF Logo 400 v3 - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Sayscommunity social impact - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says
NCFA Newsletter subscribe600 - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says

REGISTER WITH NCFA 25% DISCOUNT CODE -> BLOCKCHAIN-19 (case sensitive)


NCFA Newsletter Banner Ad Blockchain  - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says

NCFA Fintech Confidential Issue 2 FINAL COVER - Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says