Bitcoin's bubble was the result of one big player: Study

Bitcoin’s massive surge in 2017 was the result of market manipulation by one big player, a study has found.

The digital currency market grew from “nearly nothing to over $300 billion in market capitalization in only a few years,” but the time period between March 2017 and March 2018 was especially notable as it was responsible for 58.8 percent of bitcoin’s compounded return and 64.5 percent of the returns of six other cryptocurrencies, according to the study’s authors. Bitcoin reached a high of about $20,000 a coin on Dec. 17, 2017.

The huge gains associated with that period are the result of a single player at Bitfinex, the world’s largest crypto exchange at the time, using a cryptocurrency called tether to increase the demand for bitcoin, the study’s authors, John Griffin, a professor at the University of Texas at Austin’s Red McCombs School of Business, and Amin Shams, assistant professor of finance at The Ohio State University’s Fisher College of Business, found.

They say the single largest player on Bitfinex “either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in the aggregate flows from other small traders.”

Griffin and Shams did not say who was behind the manipulation.


“This is a transparent attempt to use the semblance of academia for a mercenary money grab,” Stuart Hoegner, general counsel to Bitfinex, told FOX Business. “Updates or not, the paper lacks academic rigor and is foundationally flawed because it employs a grossly incomplete data set, erroneous statistical methodology and offers no proof of market manipulation to support its conclusions."

Like bitcoin, tether is a digital currency; however, it is considered a “stablecoin” because it said to have $1 in reserve for every tether that is issued.

The report, out on Oct. 28, was an update from a study the duo released in June 2018, which found tether was “used both to stabilize and manipulate” bitcoin’s price in 2017.


Bitcoin’s price has fallen by 53.6 percent to $9,310 a coin since topping out at $20,089 on Dec. 17, 2017, according to The market for digital currencies is down to $249.6 billion.