The price of bitcoin fell against the dollar on Wednesday after an academic paper found signs the cryptocurrency’s 2017 bull run was caused by market manipulation at a major exchange — allegations denied by the CEO.
Academics at the University of Texas at Austin on Wednesday published a paper analyzing whether the cryptocurrency Tether “influences Bitcoin and other cryptocurrency prices during the recent boom.”
The academics concluded that the price patterns were “most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.”
Tether is a cryptocurrency supposedly backed by the US dollar one-for-one, offering the stability of the currency but the flexibility and functionality of cryptocurrency. The cryptocurrency was created by many of the same people behind the leading cryptocurrency exchange Bitfinex.
Bitfinex CEO JL van der Velde said in an emailed statement: “Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.”
Bitcoin rallied over 1,000% against the dollar last year, peaking at over $20,000 in December. It has since collapsed to below $7,000.
The New York Times first reported the paper and said the study was a strong indication of possible manipulation and would require further investigation.
Last month the US Justice Department reportedly began investigating bitcoin price manipulation, focusing specifically on spoofing — the practice of placing fake orders to drive up or down a price — and wash trading — the practice of trading with yourself to simulate volume in a market.