On November 4, 2019, a popular news platform, Bloomberg shared a story about a research paper suggested that the geometric rise in the price of Bitcoin in 2017 which led to its all-time high of $20,089 according to CoinMarketCap was as a result of market manipulation.
The research paper was written by John Griffin, a professor at the University of Texas, and Amin Shams, an assistant professor at the Ohio State University. Although the research paper had been first published in 2018 where the duo alleged that the price of Bitcoin was manipulated, it’s the updated version released further claimed that a single whale triggered the price hike on Bitfinex. This is not the first time that Tether and Bitfinex are in the middle of a controversy and this is Bitfinex and Tether shares a parent company, iFinex Inc. Earlier in April 2019, the New York Attorney General’s office said that the exchange (i.e., Bitfinex) used about $850 million from Tether’s reserves to cover alleged losses. It has also received subpoenas from the U.S. Commodity Futures Trading Commission in 2017.
According to the paper, the duo studied transactions between Bitcoin and Tether from March 1, 2017, to March 31, 2018, with claims that whenever the price of Bitcoin reduces, the sale of Bitcoin of Bitfinex increases. The identity of this whale, however, remains unknown.
In an earlier tweet by Stuart Hoegner, the General Counsel to Bitfinex, he said;
Saying that @tether_to & @bitfinex activity is the only thing driving bitcoin prices is like saying the earth is flat. #USDt users and experts who understand macroeconomics know why it is the most popular and successful stable coin in existence
He opined that the research paper was most likely published to back a lawsuit and lacks academic rigor.
In response to the allegations, on Nov 8, Tether published an official statement on its website stating that the research had “methodological defects” in its presentation of facts. The report further said that both authors were biased by thinking that the action of a single entity controls the activities of an ecosystem with millions of participants.
It assured its users and the cryptocurrency community that the company has never used the token to manipulate the market or control the price of crypto assets. Furthermore, it confirmed that all USDT tokens are backed by reserves and not used to control the price of cryptocurrencies. Therefore, it is false to conclude that the tokens were issued to promote fraudulent activities.