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Crypto Community Critiques Bitcoin-Tether Manipulation Study

A study published earlier this week by economics professor John M Griffin concluding that the value of Bitcoin has been manipulated via Tether (USDT) has been rejected by portions of the cryptocurrency community, with the criticism that it had clearly not been peer-reviewed.

Findings of the study

Griffin claims in his research that Bitcoin has been routinely manipulated by supposedly USD-backed cryptocurrency USDT, while also implicating prominent trading platform Bitfinex. Much of the Bitfiniex management team overlaps with that of Tether, and the exchange site is the main conduit for USDT. In a statement given to Bloomberg, Bitfinex CEO JL van der Velde rejected any accusation of the company’s involvement.

A more detailed look into the findings of the original study was covered by Bitcoin News yesterday.

”Coordinated FUD”

Much of the backlash from the community online rejects it as a coordinated FUD attack, dismissing the analysis as ungrounded pessimism. Twitter user Whalepool, maintaining some 36,700 followers and describing itself as a “community of daytraders focused mainly on Bitcoin and other cryptocurrencies”, condemned the study as “a coordinated FUD attack against all of crypto”.

As reported by Finance Magnets, a Reddit user using the pseudonym Priest_of_Satoshi critiqued the study by noting that all it really proves is “people minting Tether are exceedingly good at ‘buying the dip’ and they probably bought about 50% of the dips”. Just like the stock exchange, those trading cryptocurrencies for maximum profits are required to note trends in order to buy and sell appropriately.

Another Twitter user pointed to Griffin’s work at a consulting firm specializing in fraud cases, as well as the fact that the SSRN library where the paper was posted does not require any form of peer-review before publication.

Tether’s actions ”exactly what should happen”

Matt Odell, who is described in his Twitter profile as working in “Bitcoin & distributed systems” with around 13,700 followers, said that the study neither proves price manipulation, nor lack of reserves. The falling price of Bitcoin sees people sell their holdings for USDT, initiating a USDT price rise which prompts Tether to issue more tokens so it again correlates with the price of one USD.

Odell describes Tether’s supply increase during market decline as “exactly what should happen”. He did note in November 2017, however, that the relationship between Bitfinex and Tether had “always been sketchy”, calling Tether “a centralized stop-gap solution until connections to fiat are unnecessary”.

I’ve said this countless times before, the fact that Tether supply increased during market declines doesn’t prove manipulation. That’s exactly what should happen if Tether is working as designed.

— Matt Odell (@matt_odell) June 13, 2018

Tether reserves

While Tether may be holding reserve supplies of its tokens in the same way responsible banks are required to, it cannot reveal where its money is held else it would face potential business closure. As some call for Tether to be more transparent in their processes, it is unable to categorically prove such reserves do or do not exist.


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