A New Study Reveals Crypto Manipulations Trends

A New Study Reveals Crypto Manipulations Trends

A study paper was published by John Griffin, a finance professor at the University of Texas, Austin and Amin Shams, a graduate student, about bitcoin price manipulation.  Since its launch, the paper has received extensive media coverage but there a distinct difference between the paper and media’s articles.

The researchers found that Bitfinex, a crypto exchange, buys bitcoin against another digital coin, tether, to push former’s prices.  It was estimated that four basis points per bitcoin were raised.  They further believe that purchases are not random and are deliberately conducted every time bitcoin prices face a dump.

Author’s claim that 72 extra bitcoin’s were purchased after the massive drop in its prices.  They added that over 100,000 bitcoin are continuously traded within an hour, and the value can go much higher in periods of high volatility. For 87 hours the most significant flows of bitcoin and tether were examined which revealed that hours that followed them contributed 50 percent of bitcoin’s unexpected rise. The recorded rise was from $1000 to $8000.

It should be noted that the four basis point increase in bitcoin’s prices signifies not more than 1 percent of the deviation. Although the numbers do hold some statistical significance yet if one includes the amount of guesswork authors went through to collect data, the accuracy of the data makes the study irrelevant.

To back the 72 extra bitcoin claims, the authors only have 20 data points used through a model of six parameters.  As per the traditional rule, a research should include 30 observations per parameter to authenticate the results. Further, the complexity of acquiring data makes the account less believable.

But, the claims of 50 percent meteoric rise can be respected as the study included 10,000 sets of 87 hours randomly and no set averaged a 1.2 percent return on bitcoin. The numbers clearly show that the 87 hours’ time period and the extreme rise in prices were not accidental.

In his defense, JL van der Velde, Chief Executive Officer, said, “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.”

In spite of the study, one would argue that investors were aware of the situation as the time period recorded a rise in transaction volume. Price volatility was bound to surpass the average mark which resulted in greater trading volume on the upswings than the downswings.

However, the study was applauded as it reflects a new dimension over the ever wild crypto space. As of now, very few people are aware of crypto dynamics excluding investors who have gained enormous profits.  It has always been reported that crypto prices are manipulated as it does not act’s like a store of value. Thus, the study has great importance even after some negatives pointed out by media platforms.

Eventually, it should be accepted that a decentralized market will have its own evils which cannot be countered in the absence of a regulative authority. Now, all eyes are on SEC to come up with policies to tame the unconventional and unapologetic crypto space.

About the author


Megan Mayle

Megan, while pursuing MBA in California, started writing blogs on the financial developments and revolutions around the globe and soon got caught up with cryptocurrencies. She has been giving consultancy about smart contracts. Megan focuses on latest updates on cryptos from banks and on regulations by governments worldwide.

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