Bitcoin’s impressive price surge at the end of 2017 was the result of price manipulation using a “digital currency” called Tether, according to a study conducted by researchers at the University of Texas.
The study found that a number of Tether-backed transactions were responsible for around half of Bitcoin’s price increase over the past year.
Tether, a cryptocurrency supposedly pegged to the US dollar, allowed cryptocurrency owners to use a “stable digital currency” within the volatile cryptocurrency market.
“Using algorithms to analyse the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizeable increases in Bitcoin prices,” stated the study.
“Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.”
The researchers reached the conclusion that the correlation patterns observed could not be explained by investor demand, and are consistent with a scenario where Tether was used to manipulate the price of cryptocurrencies.
Cryptocurrency exchange Bitfinex is the creator of Tether and controls its supply, and its involvement in the price surges is mentioned extensively in the study.