Researchers have denied the findings of an article that spoke about the role of one major holder of crypto assets (“whales”) in the upward trend of bitcoin throughout 2017. The original work claimed manipulations through cryptocurrency transactions using unsecured Tether tokens. In fact, the purchasing power of all issued Tether assets was too small compared to the capitalization of bitcoin in 2017, the new analysis says.
Bitcoin is a payment system and a digital currency of the same name (cryptocurrency). The key features of bitcoin and many other cryptocurrencies are the decentralization and application of blockchain technology. This means that transactions occur directly between participants without mediation or administration by the Central Bank, and information about them is confirmed by others through special cryptographic algorithms and recorded in a registry distributed among users.
Today, there are several thousand different cryptocurrencies, which differ in implementation details, emission mechanism and many other parameters. However, the first bitcoin remains the most popular digital asset and also has the largest capitalization (about $ 150 billion at the moment).
Due to the lack of centralized regulation, the bitcoin exchange rate may experience sharp jumps and long-term trends. One such event is considered to be an increase in value throughout 2017, for which the value of the unit of bitcoin and its total capitalization increased by more than 15 times. The reason for this remains a matter of debate. As a rule, growth is considered to be associated with natural market factors, i.e. increased demand and the arrival of a large number of new users. However, some researchers claim to have targeted manipulation of the course.
The most famous example of the second point of view is presented in an article by American scientists John Griffin and Amin Shams. They claim that the only “whale” influenced the Bitcoin exchange rate, which artificially heated the market by buying cryptocurrency using unsecured Tether tokens. At the same time, the description of Tether says that the value of this asset is provided by US dollars and other reliable means. Representatives of Tether also rejected suspicions of manipulation.
The new analysis focuses on assessing Tether’s ability to influence the bitcoin exchange rate. One of the main statements of the original article is that Tether underwent a monthly asset audit, which was intended to make sure that the tokens were in place fiat money, which is why it is necessary to sell purchased bitcoins in the event of the issuance of a large amount of Tether during this period. However, the exception to the analysis of the most significant months (December 2017 and January 2018) draws conclusions about the correlation of the change in the price of bitcoin with the last numbers of the month statistically insignificant.
Then, the authors of the new work calculate the purchasing power of Tether as the ratio of its capitalization to the capitalization of bitcoin, that is, the share of the main cryptocurrency that can be bought by spending all existing tokens. It turns out that this parameter was small for Tether throughout 2017, reaching a maximum of 1% only for a short time at the end of summer, and on average in the second half of the year there is a downward trend.
At the same time, based on the findings of the original work, a class action lawsuit has been filed with Tether and the related Bitfinex cryptocurrency exchange with allegations of manipulation of exchange rates and money laundering. The lawsuit alleges that fraud was committed using unsecured tokens.