One Bitcoin "whale" may have fueled the currency's price spike in 2017

Darnell Taylor
November 7, 2019

The cryptocurrency market went through a parabolic price surge in late 2017 causing a stir around the financial world.

Bitfinex and Tether are again under the limelight as two United States academics are claiming that a single Bitcoin whale was responsible for the digital currency's astronomical price surge in 2017.

"Tether seems to be used both to stabilize and manipulate Bitcoin prices", Griffin and Shams wrote in their controversial paper that took the crypto industry by the storm in June 2018.

Griffin and Shams now tell Bloomberg that just a single whale was likely behind the behavior. Purportedly, the largest bubble in human history was created only to burst in a month's time drowning $450 Billion of value.

Crypto-controversy: The same executives who own Bitfinex also control Tether, which is no stranger to controversy. "Updates or not, the paper lacks academic rigor and is foundationally flawed because it employs a grossly incomplete data set, erroneous statistical methodology and offers no proof of market manipulation to support its conclusions". The tangled web has attracted scrutiny from the U.S. Justice Department and New York's attorney general, who accused Bitfinex in an April lawsuit of trying to hide the loss of hundreds of millions in customer funds.

Asian European markets rise on fresh China-US trade hopes
BEIJING-Beijing and Washington have agreed to remove existing tariffs in tranches, China's Commerce Ministry said Thursday. He didn't give any information on when and where a deal could be signed.

The study's finance professor authors argue the so-called whale used a dollar-pegged cryptocurrency called tether to ratchet up demand for bitcoin when bitcoin fell below certain price thresholds. They alleged that a single entity on cryptocurrency exchange Bitfinex might be responsible for the insane uptrend.

Griffin and Shams did not say who was behind the manipulation. According to Bloomberg, which saw a prepublication version of a paper set to be published in the Journal of Finance, the authors conclude: "This pattern is only present in periods following the printing of Tether, driven by a single large account holder, and not observed by other exchanges". "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", it adds.

In his statement, Tether's Hoegner was adamant that the allegations laid out in the paper are a farce and have no solid ground. This was their finding in a paper published in 2018, a paper that has since been updated.

Bitcoin's rise as a form of digital currency was solidified by the cryptocurrency's massive hike in 2017.

Other reports by

Discuss This Article