New research published this week by professors at the University of Texas allegedly found that Tether, a cryptocurrency pegged to the U.S. dollar, was used to manipulate the price of bitcoin during the peak of its rally in 2017. While Tether has routinely fallen under suspicion for its impact on bitcoin’s market price and its lack of stability, this latest report claims to have found a clear link between new tether tokens and bitcoin’s price increases.
Rafael Delfin, Head of Research at crypto asset research company Brave New Coin, has provided his unique insight on crypto market manipulation below.
Rafael Delfin, Head of Research at Brave New Coin:
"The authors of this study have accurately tracked Tether's issuance and it's role during bitcoin's recent bull run, but they are wrongly attributing the market dynamics of accumulation, price mark up, distribution, and mark down to that of manipulation. They even admitted that determining the magnitude of effects of Tether on crypto asset prices is difficult to assess. To account for the difficulty of such endeavor, the authors used a 'partial economic assessment,' which is statistically significant but can only explain less than 2% of their hypothesis.
To be clear, this is not to say that relationship between Tether and Bitfinex does not deserve scrutiny, but regulators have already stepped in. The U.S. Commodity Futures Trading Commission subpoenaed both Tether and Bitfinex in December 2017. As of today, Tether and Bitfinex have not been accused of any wrongdoing and Tether's total capitalization represents only 2% of bitcoin's market value and 1% of all crypto markets. It's misinformed at best and misleading at worst to claim that such tiny fraction of the industry's combined worth can be used to account for 200%+ growth, as the authors claim.
As for stable cryptocurrencies in general, they are a much-needed technology if the industry is to continue its growth and consolidation. Stable-value crypto assets allow individuals to avoid the volatility generally associated with other crypto assets while fully retaining the portability and auditability advantages of more volatile crypto assets. Evidence of this increasing need is the number and variety of projects building stable-value crypto assets and the high-profile individuals starting to get involved with these projects, including JPMorgan Chase International; Nobel Laureate Myron Scholes; and Leo Melamed, founder of financial futures and former Chairman of the CME."