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Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says:
A Texas academic created a stir last year by alleging that Bitcoin's astronomical surge in 2017 was probably triggered by manipulation. He's now doubling down with a striking new claim: a single market whale was likely behind the misconduct, seemingly with the power to move prices at will.
One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University's Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1.
"Our results suggest instead of thousands of investors moving the price of Bitcoin, it's just one large one," Griffin said in an interview. "Years from now, people will be surprised to learn investors handed over billions to people they didn't know and who faced little oversight."
Tether rejected the claims, with General Counsel Stuart Hoegner arguing in a statement that the paper is "foundationally flawed" because it is based on an insufficient data set. The research was probably published to back a "parasitic lawsuit," the general counsel added.
[...] Griffin and Shams's hypothesis that Bitcoin was manipulated is based partly on the theory that new Tethers are created without the dollars to back them and then used to buy Bitcoin, leading to rising prices. The authors examined Tether and Bitcoin transactions from March 1, 2017 to March 31, 2018, concluding that Bitcoin purchases on Bitfinex increased whenever Bitcoin's value fell by certain increments. Griffin and Shams didn't name the entity on Bitfinex that they think was responsible. They shared their updated research with Bloomberg News.
[Ed Note: If, like me, you didn't understand the term 'Whale' in the title then try this link for an explanation.--JR]
(Score: 1, Informative) by Anonymous Coward on Monday November 04 2019, @09:02PM (1 child)
That's exactly the point of this article. Supposedly "tether" is a Commodity Money [wikipedia.org], where each TetherCoin (or whatever) has an equivalent dollar somewhere (I know dollars are a fiat currency, but in this context they are pegging the tether to it, so effectively it is the stable source of value).
The article and study are saying that this is not true, and that tether is just printing coins as they go, effectively being a Fiat Money [wikipedia.org], and are trading under false pretenses. In other words, "yeah, each Zimbabwe Dollar is absolutely equal to one US Dollar, trust me."
Tether is disagreeing, and saying the study is flawed.
If the article and study are true, then you are right, it is scummy. It is false advertising in the least, if not fraud, or other worse should-be-crimes-but-BitCoin-isn't-regulated-so-good-luck-with-that.
If Tether is right, than this is really slanderous/libelous claims.
Regardless, it represents an existential threat to tether, as if people lose faith in its value, it goes to 0.
(Score: 1, Informative) by Anonymous Coward on Monday November 04 2019, @09:06PM
Sorry... I meant to say tether was allegedly Representative Money [wikipedia.org].
To answer your literal question, theoretically it would mean every new TetherCoin in existence, they would be on the hook to give you a dollar if you wanted it... You could go to them and say "here's my coin, give me a dollar," and they'd give you one, either from their reserve, by selling a hamburger and giving you the profit, getting a bank loan, or whatever.