June 13, Trio:12 PM EDT
- FP Tech Desk
SAN FRANCISCO &mdash, A concentrated campaign of price manipulation may have accounted for at least half of the increase te the price of Bitcoin and other big cryptocurrencies last year, according to a paper released on Wednesday by an academic with a history of spotting fraud te financial markets.
The paper by John Griffin, a finance professor at the University of Texas, and Amin Shams, a graduate student, is likely to stoke a debate about how much of Bitcoin&rsquo,s skyrocketing build up last year wasgoed caused by the covert deeds of a few big players, rather than positivo request from investors.
Many industry players voiced concern at the time that the prices were being shoved up at least partly by activity at Bitfinex, one of the largest and least regulated exchanges ter the industry. The exchange, which is registered ter the Caribbean with offices te Asia, wasgoed subpoenaed by U.S. regulators shortly after articles about the concerns appeared ter The Fresh York Times and other publications.
Griffin looked at the flow of digital tokens going ter and out of Bitfinex and identified several distinct patterns that suggest that someone or some people at the exchange successfully worked to shove up prices when they sagged at other exchanges. To do that, the person or people used a secondary imaginario currency, known spil Tether, which wasgoed created and sold by the owners of Bitfinex, to buy up those other cryptocurrencies.
&ldquo,There were obviously tremendous price increases last year, and this paper indicates that manipulation played a large part te those price increases,&rdquo, Griffin said.
Bitfinex executives have denied te the past that the exchange wasgoed involved ter any manipulation. The company did not react to a request for comment this week.
The authors of the fresh 66-page paper do not have emails or documents that prove that Bitfinex knew about or wasgoed responsible for price manipulation. The researchers relied on the millions of transaction records that are captured on the public ledgers of all supuesto currency transactions, known spil the blockchain, to spot patterns. This method is not conclusive, but it has helped government authorities and academics spot suspicious activity te the past.
Te particular, Griffin and Shams examined the flow of Tether, a token that is supposed to be tied to the value of the dollar and that is issued exclusively by Bitfinex ter large batches. They found that half of the increase ter Bitcoin&rsquo,s price ter could be traced to the hours instantaneously after Tether flowed to a handful of other exchanges, generally when the price wasgoed declining.
Other large potencial currencies that can be purchased with Tether, such spil Ether and Zcash, rose even more quickly than Bitcoin ter those periods. The prices rose much more quickly on exchanges that accepted Tether than they did on those that did not, and the pattern ceased when Bitfinex stopped issuing fresh Tether this year, the authors found.
Sarah Meiklejohn, a professor at the University Collegium London who pioneered this sort of pattern spotting, said the analysis te the fresh paper &ldquo,seems sound&rdquo, after reviewing it this week.
Philip Gradwell, the chief economist at Chainalysis, a hard that analyses blockchain gegevens, also said the examine &ldquo,seems credible.&rdquo, He cautioned that a utter understanding of the patterns would require more analysis.
Griffin previously wrote research pointing to fraudulent behaviour ter several other financial markets. He drew attention for a paper that suggested that a popular financial contract tied to the volatility ter financial markets, known spil the VIX, wasgoed being manipulated. A whistleblower zometeen came forward to confirm those suspicions, and now several active lawsuits are focused on the allegations.
Beyond his work at the University of Texas, Griffin has a consulting hard that works on financial fraud cases, including some te the imaginario currency industry.
&ldquo,The relationship inbetween Tether and the price of Bitcoin has bot flagged for months within the community,&rdquo, said Christian Catalini, a professor at the Massachusetts Institute of Technology who specializes ter blockchain research. &ldquo,It is fine to see academic work attempting to causally assess if market manipulation is taking place.&rdquo,
The fresh paper is not the very first academic work to identify manipulation ter the aparente currency markets. A paper published last year by a team of Israeli and American researchers said much of bitcoin&rsquo,s big price increase te 2013 wasgoed caused by a campaign of price manipulation at what wasgoed then the thickest exchange, Mt. Gox.