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Crypto Industry Players Dismiss Reports of Manipulated Bitcoin Rally

Linas Kmieliauskas
Last updated: | 2 min read

Academics who previously alleged that the Bitcoin (BTC) bull run in 2017 was manipulated, now claim that a single market whale was responsible for it. However, multiple industry players dismissed the report as flawed. (Updated at 16:10 UTC: updates in bold).

Source: iStock/Spencer_Whalen

One unnamed entity on Bitfinex appears capable of sending BTC higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams, Bloomberg reported. They claim that the transactions rely on the most popular stablecoin, Tether (USDT).

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, according to the report.

The academics claim that this pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges. Moreover, according them, 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,” their new peer-reviewed paper (not public yet) claims, according to Bloomberg.

Bitcoin price chart:


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 report said. The research was probably published to back a “parasitic lawsuit,” the general counsel added.

“Let me just say for the record, there is no methodology on the planet that will convince me that this narrative is accurate. The simple matter is that I personally witnessed the 2017 rally, as did many of you, and it wasn’t anything that could possibly have been caused by any single whale,” Mati Greenspan, Senior Market Analyst at eToro, said in his daily newsletter.

According to him, it was a “matter of unabashed enthusiasm for tens of millions of people around the world”:

“I’d not seen such mass excitement surrounding an emerging industry since the birth of the internet. Now you want to tell me that the entire rally was the result of a single whale?! Get out of here with that!”

Founder of Bitcoin alpha hedge fund Adamant Capital, Tuur Demeester, added that it’s totally logical that USDT “production” increased before rallies in Bitcoin, “if you understand that USDT was the most important crypto exchange onramp in 2017.”

“Stablecoin issuers respond to inflow and outflow demands from crypto traders and investors. So, for example, last week when there was a BTC rally on China news, we saw large inflows into USDC which led to a “single address” creating a lot of USDC [USD Coin] and then flowing to exchanges,” said Jeremy Allaire, co-founder of Circle.

While some other members of the Cryptoverse were also skeptical:

As reported in October, a major class-action lawsuit has been filed against Bitfinex and Tether. The lawsuit claims that Bitfinex and Tether manipulated the cryptocurrency market and caused “the biggest financial bubble in human history.” The plaintiffs insist that defendants’ liability to the putative class likely surpasses USD 1.4 trillion U.S. dollars.

At pixel time (16:09 UTC), bitcoin trades at c. USD 9,293 and is up by 0.5% in the past 24 hours, trimming its weekly loss to 1.2%. USDT trades above USD 1.