Bitcoin’s massive price run-up late last year may have been the result of a price manipulation campaign, according to a new study released on Wednesday.
The paper by John Griffin, a finance professor at the University of Texas who has researched fraud in other markets, and graduate student Amin Shams, found that the virtual coin Tether was likely used to prop up Bitcoin prices late last year.
“By mapping the blockchains of Bitcoin and Tether, we are able to establish that entities associated with the Bitfinex exchange use Tether to purchase Bitcoin when prices are falling. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention,” they wrote.
Griffin’s study didn’t have access to email, texts or other communications that would provide evidence that both organizations were involved in price manipulation, but instead analyzed transaction records stored on Bitcoin’s public ledger.
Industry players had questioned if Tether, a virtual “stablecoin” that aims to create a digital currency equivalent of the U.S. dollar, and the cryptocurrency exchange Bitfinex played a part in Bitcoin’s explosion in value in late 2017 and early 2018.
The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of U.S. dollars it claims it has.
Bitfinex has denied being involved in any price manipulation schemes.
The CFTC and Securities and Exchange Commision have been ramping up their enforcement efforts against fraudulent cryptocurrency activity and scams as Bitcoin and other digital tokens gained prominence over the last year.
Bitcoin reached its peak price of almost $20,000 in December but is now trading at around $6,300 according to the Coin Market Cap.