That is the premise being put out by a professor at the University of Texas.
According to him (and one of his graduate students) more than half of the crypto rally last year was due to artificial tether printing via Bitfinex.
In particular, they looked at the flow of Tethers, a token that is supposed to be tied to the value of the dollar and that is issued exclusively by Bitfinex.
They found that roughly half of the increase in Bitcoin’s price in 2017 could be traced to the hours immediately after Tether flowed to a handful of other exchanges, generally when the price was declining.
(Source: https://www.nytimes.com/2018/06/13/technology/bitcoin-price-manipulation.html)
This isn't the first time this theory has been put out.
This same theory was mentioned several times in late 2017 and early 2018 as well.
It reached fever pitch when the CFTC announced an investigation into Bitfinex regarding this very activity in late 2017.
As of this time, nothing has been released publicly regarding the CFTC investigation, but it is a bit troubling when more and more researchers are coming to the same conclusion.
Also quite troubling is the fact that when these tether's have stopped being issued like they were, the price of bitcoin has been on a very strong downward trajectory.
(Source: https://coindelite.com/news/quick-growth-in-tether-supply-raises-worries-of-control-manipulation/)
More than just a coincidence?
According to the professor, they ran simulations 10,000 times to see if they could come up with a similar patter to what happened last year in regards to the tether printing corresponding with market declines and they couldn't come up with a single match.
Meaning that in their eyes, it was not a random occurrence and in their eyes was done intentionally.
Bitfinex has claimed that they did not artificially prop up any markets using tethers and that tether demand came from their clients wanting to invest in a dollar stable coin.
The investigation from the CFTC is still ongoing.
Also keep in mind that nothing has been proven at this point, there is just strong circumstantial evidence.
What this means for crypto investors going forward?
On first glance this sounds like terrible news. It would imply that much of the rally in 2017 that took bitcoin to $20k was fake.
That would be very damaging psychology to the space if that were to be proven true.
However, at this point, prices of most coins are already down 75% or more from their peaks which might indicate that the market has already mostly priced in the news that the rally was artificially inflated.
That being said, I am sure we would drop lower if that news was confirmed, but I also have to think most of the drop is already behind us.
Stay informed my friends.
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