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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, by University of Texas finance professor John M. Griffin and graduate student Amin Shams, explored how digital currency Tether could have been used to inflate prices of other cryptocurrencies. Tether is the 11th largest cryptocurrency and is pegged to the United States dollar.
Bitcoin prices were manipulated
The algorithms the two developed were able to "cluster groups of related bitcoin wallets", according to the study.
Bitfinex denied that tether issuances could be used to manipulate bitcoin.
The study focuses primarily on the supply-based explanation for the link, but the researchers also note that the demand for bitcoin can create a similar demand for tether, particularly by investors who cannot move large sums of money into cryptocurrency directly.More news: National Basketball Association title odds hint at LeBron’s next team
With intentions to investigate the price outsets of Tether to Bitcoin, they choose the sample of 87 of the largest purchases of Bitcoin with Tether from March 2017 to March 2018. They set out to know how less than 1% of hours with heavy Tether activity can explain nearly half of the meteoric rise in Bitcoin.
As CCN reported, Tether has increasingly come under scrutiny as the tether token's market cap has swelled over the past calendar year. The prices climbed faster on exchanges the dealt in Tether than on those that didn't.
Industry players had questioned if Tether, a virtual "stablecoin" that aims to create a digital currency equivalent of the US dollar, and the cryptocurrency exchange Bitfinex played a part in Bitcoin's explosion in value in late 2017 and early 2018.More news: 'Shocking' die-off of Africa's oldest baobabs
In December, the CFTC sent subpoenas to Tether and Bitfinex, a popular cryptocurrency exchange that is affiliated with, and shares executives with, Tether. A follow-up investigation from Bloomberg found that Bitfinex and Tether are likely banking with Noble, but neither company has confirmed it publicly.More news: NCAA changes redshirt rule in college football