Tether appears to have stopped issuing new tethers as of recent times, possibly in fears of stricter regulation, or lack of legitimate deposits into the company's reserves that may prompt more printing; regardless of being due to the lack of new printed tokens or simply due to lack of demand leaving Tether's company in need of new deposits, Bitcoin's price drop past $6,500 has proved the researcher's hypotheses. Evidence of price manipulation was found in all of those, too. "Tether seems to be used both to stabilize and manipulate Bitcoin prices", they wrote in their paper, released on Wednesday.
Bitcoin's meteoric price rise may have been down to price manipulation using another virtual currency, researchers have suggested.
John Griffin and Amin Shams, in their research article, 'Is Bitcoin really Un-Tethered?' aim to investigate the relation between Bitcoin, other cryptocurrencies, and Tether, a cryptocurrency purportedly clinched to the US dollar that carries more transaction volume than dollars. The study explains that "tether is created, moved to Bitfinex, and then slowly moved out to other crypto-exchanges, mainly Poloniex and Bittrex". Tether is the 11th largest cryptocurrency and is pegged to the United States dollar.
"Overall, the findings indicate that Tether is closely linked to Bitcoin price appreciation, and question the goal of Tether".
Bitfinex has denied being involved in any price manipulation schemes.
The findings add to the growing concerns that Tether was used to artificially inflate Bitcoin for the benefit of a small group of big cryptocurrency holders, putting the rest of the market at risk.
The Commodity Futures Trading Commission subpoenaed both Bitfinex and Tether in December, over concerns about if Tether is actually by the reserve of US dollars it claims it has. "Tether issuances can not be used to prop up the price of bitcoin or any other coin/token on Bitfinex", he said. Bitcoin's all-time highs around $20,000 one month later - and those of major altcoins - were also a result of Tether flooding the market with coins, they say.
As evidence for this claim, the Griffin and Shams note that there tends to be negative end-of-month pressure on the bitcoin price in months when a large number of tethers have been issued but not in others.
"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation", Bitfinex CEO JL van der Velde told Bloomberg in an e-mailed statement.