"Is Bitcoin [BTC] really Un-Tethered?" - John Griffin and Amin Shams

Bitcoin price hits four-month low amid Wednesday crypto slump

"Is Bitcoin [BTC] really Un-Tethered?" - John Griffin and Amin Shams

A paper released Wednesday by a professor at the University of Texas titled "Is Bitcoin Really Un-Tethered?" claims that fraudulent transactions of Tether, a digital currency pegged to the United States dollars, were responsible for approximately 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.

"There were obviously tremendous price increases a year ago, and this paper indicates that manipulation played a large part in those price increases", Mr. Griffin said, as quoted by The New York Times.

Critics of tether have raised concerns over the past year about whether Tether Limited actually holds $1 in reserve for each tether issued, as it claims.

The researchers analyzed 87 of the largest Bitcoin purchases made with Tether from March 2017 to March 2018.

Regulators worldwide are increasing their scrutiny of cryptocurrency markets.

"Tether issuances can not be used to prop up the price of Bitcoin or any other coin/token on Bitfinex", Jan Ludovicus van der Velde, Bitfinex's chief executive, said in a statement.

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The US Commodity Futures Trading Commission allegedly sent Tether - as well as cryptocurrency exchange Bitfinex, with whom it is closely affiliated - a subpoena in December, though it is not clear whether that investigation has or will result in any enforcement action.

"Overall, the findings indicate that Tether is closely linked to Bitcoin price appreciation, and question the goal of Tether". In U.S. and European financial markets, attempts to influence prices like this are considered "market manipulation" and can be criminally prosecuted.

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. Once it is broken, Wednesday's low at $6,154 will come into view once again. In a nutshell, trades of Tether were "timed following market downturns" triggering "sizable increases in Bitcoin prices". When bitcoin was rising, the same pattern could not be found.

Scientists at the University of Texas analysed transactions on Bitfinex, where Bitcoin can be bought and sold and identified patterns which suggest that the prices were successfully pushed up when they slumped at other exchanges, by using another virtual currency called Tether.

In Wednesday's Daily Market Commentary webinar I was asked a few questions about bitcoin and its continued decline. The paper alleges that these instances may account for about 50% of the price increases of Bitcoin and 64% of others trading in the top ten.

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