That is the premise being put out by a professor at the University of Texas.
According to him (and one of his graduate students) more than half of the crypto rally last year was due to artificial tether printing via Bitfinex.
In particular, they looked at the flow of Tethers, a token that is supposed to be tied to the value of the dollar and that is issued exclusively by Bitfinex.
They found that roughly half of the increase in Bitcoin’s price in 2017 could be traced to the hours immediately after Tether flowed to a handful of other exchanges, generally when the price was declining.
(Source: https://www.nytimes.com/2018/06/13/technology/bitcoin-price-manipulation.html)
This isn't the first time this theory has been put out.
This same theory was mentioned several times in late 2017 and early 2018 as well.
It reached fever pitch when the CFTC announced an investigation into Bitfinex regarding this very activity in late 2017.
As of this time, nothing has been released publicly regarding the CFTC investigation, but it is a bit troubling when more and more researchers are coming to the same conclusion.
Also quite troubling is the fact that when these tether's have stopped being issued like they were, the price of bitcoin has been on a very strong downward trajectory.
(Source: https://coindelite.com/news/quick-growth-in-tether-supply-raises-worries-of-control-manipulation/)
More than just a coincidence?
According to the professor, they ran simulations 10,000 times to see if they could come up with a similar patter to what happened last year in regards to the tether printing corresponding with market declines and they couldn't come up with a single match.
Meaning that in their eyes, it was not a random occurrence and in their eyes was done intentionally.
Bitfinex has claimed that they did not artificially prop up any markets using tethers and that tether demand came from their clients wanting to invest in a dollar stable coin.
The investigation from the CFTC is still ongoing.
Also keep in mind that nothing has been proven at this point, there is just strong circumstantial evidence.
What this means for crypto investors going forward?
On first glance this sounds like terrible news. It would imply that much of the rally in 2017 that took bitcoin to $20k was fake.
That would be very damaging psychology to the space if that were to be proven true.
However, at this point, prices of most coins are already down 75% or more from their peaks which might indicate that the market has already mostly priced in the news that the rally was artificially inflated.
That being said, I am sure we would drop lower if that news was confirmed, but I also have to think most of the drop is already behind us.
Stay informed my friends.
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I believe that it is fake.
As hard to believe that one exchange caused it.
There is still a lot of fart in the bubble, and it needs to be popped.
The panic was more due to people outside looking inside, than from people buying it with their money.
Media hype and financial hype are different things.
Talk is cheap, but how many bought BTC with their money?
Not denying that it happened too.
If plenty enough people will try to revert from USDT back to USD, they may be surprised.
Quite frightening that one exchange issues its own centralized fiat money (not just stocks).
This is similar to when each bank was allowed to issue its own gold backed currency.
Now wait for the run on BitFinEx.
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Great info my Friend! Keep up the good work @jcornel 👍🧐👍
Reminds me of the run up in 2013 where most of it was faked using wash trading by just a couple accounts. I took the market years to recover. Probably same here. Get settled in for the long haul!
That is what I have been afraid of...
If you really think about it, stock markets and banks have had to deal with people doing anything they can to milk a few extra cents out of the market.
With crypto, because there are no governments to intervene, systems will need to be put into place so that the system itself precludes this type of behavior.
Crypto space was defying gravity. Everything went up for the name tag without a real product or use case. Now show me the product and a working business model and money will follow!!!
I suggest using Brave browser.
If this premise is true, just think back to all of the fanboys who where pumping crypto to the moon! When pressed, they could not give one single solitary argument for their position, other than to label you as a "purveyor of FUD".
Yea, it also makes me wonder how much of a pop we can really have once things eventually find their price point, without manipulation.
I am intrigued by that news.
From my feelings, without any rational proof, I do assume that the Bitcoin and all others will fall for another 50% again.
Bitcoin at 2k$ seems likely, Ethereum at 200$ as well.
However I do assume that, after a couple of years from now, the Bitcoin will be at 12k$ or more again.
Other viable coins will develop their prices independently (from BTC) and might rise even more than they were in December 2017.
IOTA could end up at 10$, maybe.
*Though, this is all my "feelings"-speculation.
Is bitfinex now printing tethers? Because I imagine that now the demand should be huge. So... If it is printing more tether, why the price is still falling?
Fake or not, I'm sure most of us got trapped on the hype it brought. Specially most of the cryptocurrency investors are retail, and sadly aren't that knowledgeable in stocks and how the market works. I really hope we'll see some exchanges that would offer REAL fiat pairs rather than tokenized stablecoins. That way we could really finally see what these cryptos' real value are.
The time of this article is no accident. I can assure you of that!
Riiiiight...
It is interesting that it comes out when we are on the year to date lows...
Thanks for the heads up
hmmm... to explain to an idiot like me... like how would that even happen... or why ?
From what I see, it looks like Bitfinex was creating for themselves billions of dollars by selling tethers to exchanges. They used the proceeds from these sales to back the coin, instead of the other way around like it was supposed to be done.
wow
I was just talking about this with a friend....
This is because they want an excuse to have a USD crypto coin backed at the fed.
Everyone knows it was peak bitconnect. Lol
Tether is a scapegoat
Problem reaction solution they need to clear space for a fedcrypto..
Very good post. Very well explained.
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Great article! Followed. I hope it is not true, however that is wishful thinking. Most likely best to prepare and assume the worst. Personally I hope it goes down much further so I can buy much more. I have no doubts in my mind this is the means of exchange in the future, stay strong!
Yeah I m totally agree with you but this downfall also taken some authenticate cryptos too down.
So here is a very good indepth article that looks at what may have happened. https://medium.com/cryptomedication/uncovering-the-real-cartel-in-bitcoin-65b56a7a00a2
https://hackernoon.com/a-brief-history-of-bitcon-cf358da30bf0
http://www.tetherreport.com/
People have been sounding the alarm about this stuff for a very long time. Bitfinexed over at twitter for example, and there have been some good convos about tether and EUROT over on reddit.
You got a 25.00% upvote from @botcoin courtesy of @infoslink!
and yet another great piece of work @jrcornel
I was wondering few times already why there was so much FUD around Tether in the past but now noone even talks about it
upvoted :)
Yours
Piotr
I am new on your post. Rings a bell in my memory of the run-up in 2013 where most of it become faked using wash buying and selling via only a couple bills. I took the market years to recover. likely equal here. get settled in for the long haul!
I think this research is planned to pull down the growth of an economy which will be revolutionary in near future.
This type of stories planted for the FUD and panic sell off only,and their vision is clear when they said it on the basis of personal reasons.
It seemed to me that crypto was in a bit of a bubble last year. There was no real reason for it to go so high and it wouldn't surprise me if some clever folk manipulated it. It's still more about hype than utility. That said, I still think some coins have great potential and steem is one of them. When we see it being used more then a price rise is justified.