Time for the Sheriff to ride into the Wild West of Bitcoin?
Crypto-currencies continue to fall as more data suggests the market has been propped by 'wash trade' manipulation strategies
Another week, another downward descent for Bitcoin. After a sharp weekend drop, the coin rallied during the week, seemingly on positive news about Facebook lifting its crypto-currency ad ban and after the Tether crypto-currency announced it had printed another $250 million worth of tokens.
Tether says each of the 2.7 billion tokens it has issued are backed by a US dollar it holds in the bank – it hasn’t as yet 100% proved this – but previously when it has printed more tokens, the price of Bitcoin has moved upward.
However Bitcoin, in late US trading last night, slipped below the 6K line and currently trades at around $5,900. And many from the traditional investment community predict more of the same to come. Will Hobbs, head of Investment Strategy at Barclays Smart Investor told the UK’s Daily Express today that the “rout in crypto-currencies is still not finished.”
“We continue to argue that without a role in the global economy, the intrinsic value of many of these crypto-currencies still sits a long way below their current trading levels,” added Hobbs. “… while the arguments behind the idea of a future ‘bitcoin standard’ are still economically illiterate… None of the crypto-currencies currently fulfil any of the criteria that we would look for in an investible asset and we would continue to advise extreme caution.”
The recent drops come as increasing amounts of data from academic research becomes available into what actually moves crypto markets and also what actually sits behind them.
On June 13, John Griffin and Amin Shams from the University of Texas’ Department of Finance, published a 66-page report entitled “Is Bitcoin Really Un-Tethered?” The report examined whether Tether has influenced Bitcoin and other crypto-currency prices during the boom. Griffin and Shams looked at major Bitcoin purchases made with Tether and saw that they follow “market downturns and result in sizeable increases in Bitcoin prices.” The data, say the pair, indicates signs of market manipulation.
This week, two other academics – Neil Gandal, Professor of Economics at Tel Aviv University and Tyler Moore, Assistant Professor of Computer Science and Tandy Chair of Cyber Security and Information Assurance at the University of Tulsa – who say they have researched digital currencies for “the last several years” also wrote that they have found “evidence of fraudulent behavior” when crypto markets rise. These two predict the ongoing US Justice Department into crypto- market price manipulation will hone in on “the sharp rise and fall that occurred in late 2017 and early 2018.”
And more data was published today, this time from by Bloomberg, that examines bizarre crypto-trading patterns between Tether and the Kraken crypto exchange. These patterns are “suggestive of wash trading” where rogue players trade with themselves to create a false impression of market demand. The report describes Tether’s exchange activities as “akin to defying gravity” and also “ignoring the normal rules of economics.”
We’ve said it before about the weird weird world that is crypto and will surely say it again but… just what will next week bring?
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