Confirmation of the allegations concerning manipulation within Wall Street’s VIX index has led to investigations.
Attributing Bitcoin’s extraordinary price escalation in late 2017 to various factors such as investor zeal, media attention, and Asian exchanges, a new academic paper renowned for uncovering fraud suggests Tether was pivotal in inflating the cryptocurrency’s valuation. Tether, a coin traded at par with the US dollar on Bitfinex, Bittrex, and Poloniex, is released by Bitfinex, which asserts it holds dollar reserves equal to the coin’s trading volume in a bank account, sustaining a consistent exchange rate with the dollar.
Exploring the dual nature—push and pull dynamics—of Tether trading, where supply changes or investor demand drives its flow, the paper notes that Tether often moves to other exchanges following negative bitcoin returns from Bitfinex. Simply put, Tether appears to be issued from Bitfinex as soon as bitcoin prices dip, significantly influencing future bitcoin valuations. This Tether dissemination is most evident after drops in return and post-Tether issuance periods.
Refuting the study’s findings, Bitfinex CEO J.L. van der Velde denied any market or price manipulation involvement by Bitfinex or Tether, stating to CNBC that Tether issuance cannot be leveraged to elevate Bitcoin or any token’s price on Bitfinex.
Had such suspicions arisen previously…
Regardless, the revelations didn’t impact Tether’s price or market cap, which remained stable.
Concluding the study, the authors advocate for tighter regulation, highlighting that “market oversight under a sound regulatory framework may be essential for crypto markets to serve as legitimate value stores and reliable mediums for equitable financial transactions.”
Investing in cryptocurrencies and ICOs presents significant risks and is speculative; thus, this article does not serve as investment advice for cryptocurrencies or ICOs. Individual circumstances vary, so seeking counsel from a qualified expert before making financial choices is advisable. No assurance on the precision or timeliness of this information is provided. On the article’s authorship date, the writer held minor positions in litecoin and bitcoin.
