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Cryptocurrency prices are manipulated, new study reveals

 

The results of a study conducted on the pricing of cryptocurrency has just been released and some industry players aren`t too happy about it. This study was conducted by a finance professor John Griffin and graduate student Amin Shams, both from the University of Texas, Austin.

 

The paper, so released has generated a lot of interest in the media. The results of the research carried out suggests in clear unambiguous terms that deliberate efforts are made to manipulate cryptocurrency prices by some industry players.

 

According to Griffin and Shams, one of the most widely known cryptocurrency exchanges, Bitfinex uses another cryptocurrency, tether to purchase bitcoin so as to ensure that the prices of Bitcoin rises and that this points to a calculated attempt to manipulate the prices of bitcoin; purchases are not done randomly but was observed to occurs as and when bitcoin`s prices plummets.

 

“The authors examined the 87 hours with the largest flows of bitcoin and tether and found that the hours following them accounted for 50 percent of the "meteoric rise" in bitcoin. That sounds impressive, but the rise over the period discussed was from about $1,000 to $8,000. The authors used compounded returns, which mean returns in those 87 hours averaged 1.2 percent. For the S&P 500 Index, a 1.2 percent move is a big hour. For Bitcoin, not so much”, Brown explained.

 

Aaron Brown does quite an exhaustive discussion about the recently released paper that is making the rounds. He holds the view that this paper is by no means authoritative and that the study incorporates a great deal of speculations and guess work rather than deal entirely with plain facts and figures.

 

Brown argued that the conclusions the study arrives at are at best suggestive considering the fact that there is an observable rapidly evolving trend in the variable under study over the course of the study period. He however concedes that “…in areas as little understood as cryptocurrency trading dynamics, even suggestions are valuable.”

 

Brown admitted that the cryptocurrency market is both novel and complex, and that inconsistencies therein are easily traceable. This he opined creates uncertainties as to whether certain actions constitute rationalization or manipulation. He also states that the released research-based paper does not constitute a denunciation of cryptocurrency but is a significant first step towards a better comprehension of the dynamics and workings of cryptocurrency.

 

Brown further stated: “I also don't mean to deny that cryptocurrency prices are manipulated. I'm a crypto-believer, and am impressed by the huge amount of honest developer talent and innovative vision improving the crypto code base every day, whether prices are soaring or crashing, more for love than money. That is where I put my faith. But there are plenty of crooks and profiteers as well. It would be extraordinary if some of them weren't trying to manipulate prices - and worse.”

 

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