A new academic study suggests Bitcoin's dramatic price surge in late 2017 was largely driven by market manipulation through Tether cryptocurrency. The research, conducted by University of Texas finance professor John M. Griffin and graduate student Amin Shams, found that just 87 hours of Tether trading (1% of total trading) may have contributed to a 50% increase in Bitcoin's price.

The study, titled "Is Bitcoin Really Un-Tethered?", analyzed the relationship between Tether flows and Bitcoin prices. Researchers discovered that Tether issuance from Bitfinex typically followed Bitcoin price dips, with subsequent Tether flows to other exchanges appearing to boost Bitcoin prices significantly.

Key findings of the study:

• Tether flows increased after periods of negative Bitcoin returns
• Trading patterns suggest coordinated price support for Bitcoin
• Price effects were most noticeable after new Tether issuance
• 87 hours of strategic Tether trading may have influenced 50% of Bitcoin's 2017 price rise

Bitfinex CEO J.L. van der Velde strongly denied these allegations, stating that neither Bitfinex nor Tether has ever engaged in market manipulation. However, this isn't the first time Tether has faced such accusations. The CFTC issued subpoenas to both companies in December 2017 to investigate similar claims.

The controversy has sparked interest in alternative stablecoins with better transparency and auditing measures. Notable projects include:

• Basis, backed by prominent venture capital firms
• US Dollar Coin (USDC), a collaboration between Circle and Bitmain
• Various other stablecoin initiatives focused on regulatory compliance

The researchers conclude that cryptocurrency markets may require proper regulatory frameworks and market surveillance to function as legitimate stores of value and reliable mediums for financial transactions.

This development highlights the ongoing debate about cryptocurrency market integrity and the need for transparent stablecoin alternatives in the digital asset ecosystem.

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