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 Dollars, were responsible for approximately 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.
"Tether seems to be used both to stabilise and manipulate bitcoin prices", said the paper's co-authors, professor John Griffin and doctoral student Amin Shams. They analyzed publicly available blockchain transaction records and found that there was a pattern of Tether being used to buy bitcoin at certain moments, typically following price drops.
Tether is a token that's directly linked to the United States dollar. The currency is plunged as a stable alternative to Bitcoin's levity, acting as a harbor for crypto investors.
In addition, the paper provides evidence that Tether's reserves are lacking in comparison to the amount of USDT in circulation, based off patterns found in the issuance of new USDT tokens and price movements.
The U.S. dollar-pegged tether has been used to support bitcoin's price during market downturns, a new study published by University of Texas at Austin professors.
Many industry players expressed concern at the time that the prices were being pushed up at least partly by activity at Bitfinex, one of the largest and least regulated exchanges in the industry.
Industry players had questioned if Tether, a virtual "stablecoin" that aims to create a digital currency equivalent of the US dollar, and the cryptocurrency exchange Bitfinex played a part in Bitcoin's explosion in value in late 2017 and early 2018.
In December, the CFTC sent subpoenas to Tether and Bitfinex, a popular cryptocurrency exchange that is affiliated with, and shares executives with, Tether. A whistleblower later came forward to confirm those suspicions, and now several active lawsuits are focused on the allegations.
If what the study hypothesis turns out to be true this would not be the first time Griffin has sniffed out fraud in the financial world. They set out to know how less than 1% of hours with heavy Tether activity can explain nearly half of the meteoric rise in Bitcoin.
"It is great to see academic work trying to causally assess if market manipulation is taking place".
Do you think tether played a part in inflating prices previous year?
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