Bitcoin price manipulation: the drama goes into the next round
Did the unrelated blockchain companies Tether and BitFinex knowingly operate Bitcoin price manipulation? Did the alleged manipulation even affect the futures markets? Or just all humbug? The story of the Bitcoin course, the stable coin tether and an out of favor crypto exchange.
The accusation: Bitcoin price manipulation on a large scale
In order to understand the extent of the putative Bitcoin price manipulation, one must first understand the mechanisms of the crypto market that theoretically make such manipulation possible. The basis of the whole is the stable coin tether (USDT). This is a digital representation of the US dollar. He has the original claim that each unit of the coin (USDT) is covered by a deposited US dollar.
Above all, this enables liquidity in the markets. Traders who want to switch quickly between Bitcoin and US dollars can use the stable coin. This eliminates the need to transfer actual money through bank accounts. This allows traders to save time. With the Bitcoin price, which is known for its strong fluctuations, this time can be worth a lot of money.
However, this also creates a problem. Since the new Tether is released by the private company Tether Limited, the digital printing of new USDT units could not always be checked properly.
Uncontrolled tether pressure is said to have favored Bitcoin profits
This also leads to the lawsuit currently facing both Tether and sister company BitFinex. She is said to have printed Tether unchecked in order to manipulate the Bitcoin price. By placing purchase orders with the freshly printed Tether on corresponding crypto exchanges, she was able to – presumably – artificially drive up the Bitcoin price.
In connection with the Bitcoin Futures of the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) introduced in December 2017, the companies could have benefited twice. Not only from the highly manipulated Bitcoin price, but also from its upcoming case. Finally, with Bitcoin Futures, also known as futures contracts, you can bet on a falling Bitcoin price. Targeted Bitcoin price manipulation could have benefited both from an increase (through the sale of BTC) and from a fall (futures).
Accordingly, the indictment states:
The accused [Bitfinex und Tether] through their sole control and access to pressure from USDT, have manipulated the Bitcoin rate by issuing USDT that were not backed by a 1: 1 reserve of US dollars. They have used the newly printed USDT to buy Bitcoin through the U.S.-based cryptocurrency exchanges Bittrex and Poliniex Bitcoin.
This complaint was initially withdrawn. However, it has now been renewed in a different jurisdiction and under the name of another plaintiff.
Bitfinex weighs down
Compared to the English-language crypto magazine Coindesk BitFinex now dismissed the allegations. Accordingly, Stuart Hoegner, head of BitFinex’s legal department, commented on a recent change in the jurisdiction of the lawsuit:
Apparently, the plaintiffs have decided that their lawsuit should be filed in the Southern District of New York, raising the question of why it was filed in Washington State in the first place. Regardless of whether this lawsuit is filed in Washington State or in the southern district of New York, it remains completely unfounded and will be disposed of in due course.
Study speaks for bitcoin price manipulation
This is not only opposed to the lawsuit itself, but also a study by John Griffin (University of Texas) and Amin Shams (University of Ohio). As early as 2018, they determined that BitFinex and Tether might have been involved in the Bitcoin Bull Run in late 2017. In an update published last year, they subsequently found that the Bitcoin price manipulation had only started from a single entity, a so-called whale.
But Bitfinex also weighed in here – the study was inadequate, Bitfinex described the lawsuit as “parasitic”. At the time, John Griffin told CriptomonedaseICO:
There are no shortcomings in our study. In the past it has always been the case that fraudsters attack facts until they are no longer possible.
The court’s response is pending. It is currently not possible to say with any certainty whether a bitcoin price manipulation actually took place. One thing is certain: the history of BitFinex does not inspire confidence.
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