Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
According to recent findings, the surge of Bitcoin price in 2017was a result of market manipulation from one single whale, using USDT.
Most of the crypto community, especially Bitcoin hodlers, are almost always hoping for a spike like the one that happened in 2017, which saw the king coin hit its current all-time high of $20,000. Even though a terribly bearish market followed some months after, the spike is still often referred to as not just a game-changer, but a point where Bitcoin needs to reach again, to break out of its frequent periods of disappointing consolidation. However, some analysts have suggested that the thought that Bitcoin surged because of normal growth in the market is quite faulty because the spike was caused by manipulation, surprisingly initiated by one market whale.
According to a Bloomberg report, two academics including Professor John Griffin from the University of Texas, and Amin Shams from the Ohio State University, jointly published a paper in 2018, which suggested that the 2017 Bitcoin surge was a result of market manipulation and not a natural market movement. Now, the academics have backed their previous publication, claiming that not only was it market manipulation, but it was caused by one large whale, who initiated transactions that mostly used Tether’s USDT stablecoin. The paper also suggests that the whale in question ran the transactions from the Bitfinex crypto exchange.
In an interview referenced by the Bloomberg story, the Texas professor said:
“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one. Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.”
Tether has been named in the past, in accusations of market manipulation to deliberately affect Bitcoin’s price. Analysts for a long time have drawn parallels between new batches of large USDT mints and Bitcoin surges. The USDT is a dollar-backed stablecoin but the general idea with these manipulations is that Tether prints large batches of un-backed USDT which is then used to make large Bitcoin purchases, which then spike prices. The new paper explained this, specifically suggesting that the activity is unlikely to have been a coincidence each time.
“This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges. 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 small traders.”
Tether has however since rebuffed the conclusions from the paper that there is any manipulation involved. The company’s main attorney, Stuart Hoegner, has dismissed the claims stating that the paper is backed by poor data and has also described it as “foundationally flawed.”
“This is a transparent attempt to use the semblance of academia for a mercenary money grab. Updates or not, the paper lacks academic rigor,” said Hoegner.