Was late 2017 cryptocurrency spike artificially inflated?

A new report stemming from the University of Texas at Austin claims that the big surge in cryptocurrency values during 2017 was artificially created using a digital currency called Tether. Written by finance professor John Griffin and graduate student Amin Shams, the report focuses on Bitfinex, one of the largest unregulated digital currency exchanges on the market. Its owners are also the creators of Tether. 

By December 19, 2017, the price of a Bitcoin surged up to $19,549 and then tanked to $6,417 in early February. Since then, Bitcoin’s value has peaked slightly above $11,000 but thereafter continued to take a slow drop to the current price of $6,592. Other cryptocurrencies experienced a similar rise and fall, such as Ethereum skyrocketing to $1,334 on January 10 and then down to the current value of $477. 

Griffin and Shams examined digital currency exchanges during the highest peaks and noticed unusual activities stemming from Bitfinex. According to the report, patterns indicated that one or more individuals were intentionally pushing digital currency values higher on other exchanges that had sagging prices. To inflate these values, they purchased the low-value cryptocurrency using Tether. 

For instance, when Bitcoin’s price would fall, purchases used with Tether increased. When Bitcoin would begin to surge, Tether usage didn’t decrease as expected. According to Griffin, the pattern suggests that someone or a group of individuals were purposely using Tether to “protect Bitcoin prices during downturns.” 

Data used by the research is based on millions of transaction records stored in public ledgers, or blockchains. This data showed that half of the digital coin value spike in 2017 took place within hours after a batch of Tether coins began hitting cryptocurrency exchanges. Coincidentally, Tether entered the exchanges when cryptocurrency prices were plunging. 

“I’ve looked at a lot of markets,” he said. “If there’s fraud or manipulation in a market it can leave tracks in the data. The tracks in the data here are very consistent with a manipulation hypothesis.” 

The 66-page paper originally set out to understand how Tether flows through the currency markets. Parent company Tether Ltd. supposedly creates Tether coins in batches of 200 million and moves them to Bitfinex. Currently there are 2.5 billion coins in circulation, and each trades at $1 because each digital coin is backed by $1 stored in a real-world bank. It’s an alternative to the volatile cryptocurrency market while providing the security benefits of digital currency.

Naturally Bitfinex denies these allegations. 

“Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation,” Bitfinex Chief Executive Officer JL van der Velde said. “Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.” 

Bitfinex is registered in a Caribbean jurisdiction but reportedly has offices in Asia. The U.S. Commodity Futures Trading Commission sent subpoenas to both Bitfinex and Tether on December 6, 2017 as cryptocurrency values continued to rocket skyward. At the time, Tether said it was hacked and lost around $30 million in digital coins. Tether had yet to provide any proof that it had money in reserve to back its digital currency. 

Cars

Amazon plugs in with $700 million investment in electric pickup company Rivian

Amazon invested $700 million for a minority stake in U.S. all-electric truck maker Rivian, according to a joint release. The announcement follows a Reuters report that GM and Amazon might invest $1 billion to $2 billion in the company.
Mobile

Smartwatch sales soared in 2018, with Apple leading the charge

The NPD Group, a market research organization, has reported smartwatch sales soared in 2018. Apple is leading the charge, but it's clear there's still room in the market for competitors, as Samsung and Fitbit also did well.
Mobile

Google might release a smartwatch and multiple Pixel phones in 2019

Google seems to have a lot planned for 2019. According to a report, Google is planning on releasing multiple new Pixel phones, a smartwatch, a new Google Home, and a Nest Security camera this year.
Computing

Blockchain does way more than power Bitcoin. Here's how it works

What is a blockchain? It was once merely an academic idea and today it's the backbone of the cryptographic industry, helping to send billions of dollars worth of digital assets all over the world.
Computing

These Windows 10 keyboard shortcuts will take your skills to a new level

Windows 10 has many new features, and they come flanked with useful new keyboard shortcuts. Check out some of the new Windows 10 keyboard shortcuts to improve your user experience and save more time!
Computing

What is Wi-Fi 6? Here's a look at the next evolution of the wireless standard

We're exploring the new naming convention for wireless standards, how it affects the devices you buy, and what the upcoming Wi-Fi generation is changing for the better.
Computing

Windows is getting a face-lift in 2020, but you can get a sneak peek right now

Microsoft is increasing the lead time for an upcoming major update to Windows 10, giving Windows Insiders the ability to test it right now, even though it's not set for release until 2020.
Emerging Tech

A.I.-powered website creates freakishly lifelike faces of people who don’t exist

No, this isn't a picture of a missing person. It's a face generated by a new artificial intelligence on the website ThisPersonDoesNotExist.com. Here's how the impressive A.I. works.
Deals

The best Presidents’ Day sales 2019: Amazon, Walmart, Dell, and more

Presidents' Day sales are a great chance to score electronics, clothing, home and office stuff, and other goodies at a discount. We’ve smoked out a large handful of the best of these Presidents' Day deals, from tech to bedding, to help…
Deals

Keep your MacBook safe and dry with an Under Armour backpack for under $50

Under Armour is having a huge sale this weekend to help you on your quest for a better backpack. The UA Outlet Exclusive sale is going on now through Monday, February 18th, offering great discounts on stormproof backpacks.
Deals

Walmart Presidents’ Day sale: Instant Pot, Google Home, and 4K TV deals

Presidents' Day weekend is one of the best times of the year to find deep discounts on 4K TVs, laptops, Instant Pots, clothes, mattresses, and furniture. And Walmart is offering deals on all of those things and more.
Computing

The HoloLens 2 will be announced at MWC. Here's what we know about it so far

The HoloLens 2 is ripe for an announcement. Here's what Microsoft has revealed so far, what's likely in store for the next generation HoloLens, and everything that we know about this mixed reality headset.
Computing

Don't know what to do with all your old DVDs? Here's how to convert them to MP4

Given today's rapid technological advancements, physical discs are quickly becoming a thing of the past. Check out our guide on how to convert a DVD to MP4, so you can ditch discs for digital files.
Computing

Wi-Fi helps connect all of our devices at high-speed, but what exactly is it?

What is Wi-Fi? It's a technology we all use everyday to connect all of our portable devices, but understanding how it works and how far it's come from its humble beginnings is another thing entirely.