Bitcoin, Exchange and Two Bot Wallets or How Bitfinex Manipulates The Market
ExchangesBit News Today1 min read
The U.S. Department of Justice (DOJ) is increasingly focusing its months-long crypto market manipulation probe onto Tether, a stablecoin. Federal investigators have reportedly focused on suspicions that an intricate network involving bitcoin, Tether, and the crypto exchange Bitfinex may have been used to manipulate prices illegally. The U.S. Commodity Futures Trading Commission (CFTC) has already subpoenaed both Tether and Bitfinex, although it remains unclear what information the regulator sought in those subpoenas.
Accusations of price manipulation
Researchers at the University of Texas at Austin published a study this summer linking the issuance of the USDT stablecoin to Bitcoin price increases during the cryptocurrency's historic 2017 bull run.
The report claims that tether appears to be used to buy bitcoin at times of negative returns, thereby causing bitcoin's price to rise to a substantial aggregate extent. Griffin and Shams noted in their research that these price-supporting efforts succeed, with bitcoin prices rising after such interventions.
However, findings by Dr. Wang Chun Wei contradict widespread speculation that Tether has been issuing USDT to pump up bitcoin. A paper penned by Dr. Wang Chun Wei explains that while trading volume increases following grants, lagged variables show no direct impact on bitcoin returns.
Questions over the auditing process
Tether, the issuer of USDT, said it ended its relationship with audit firm Friedman LLP, confirming the dissolution of the engagement. The company claimed that an audit was "unattainable in a reasonable time frame," given the excruciatingly detailed procedures Friedman was undertaking for Tether's relatively simple balance sheet.
