TL;DR: Embattled cryptocurrency exchange Bitfinex released a formal statement today, slamming a headline-grabbing academic study as “embarrassing” and “clumsy.” Researchers claimed it and stablecoin company Tether conspired to facilitate a lone whale’s pump and dump of the 2017 market bubble, where prices for BTC reached nearly $20,000 per coin.
Bitfinex, Tether Respond to Griffin and Shams
Is Bitcoin Really Un-Tethered? is a massive, graph-filled, nearly year in the making 119-page study asserting the historic cryptocurrency price run-up of late 2017 was at least 50% chimera, fake, manufactured. Academics John M. Griffin and Amin Shams detailed how the exchange Bitfinex and its longtime partner Tether allegedly conspired to at least allow a single wealthy trader, known colloquially as a whale, to effectively steer what many experts call a kind of speculation mania.
Seemingly everyone participated back in 2017 as mainstream media accounts marveled at the Bitcoin phenomenon, showcasing how moms and pops, rich and poor, college students and degenerate gamblers were making crazy gains for doing nothing more than watching the price go up, up, up. Documentaries were made. New gurus minted as modern financial geniuses. And then the market collapsed, sending BTC not too long after all-time-highs crashing to just over $3,000.
Griffin and Shams claim it was significantly an inside job, and this week their paper was accepted by a scholarly finance publication, causing notice from legacy outfits such as The Wall Street Journal and Bloomberg to dedicate considerable press coverage.
The paper was actually a revision, an updating of the working title, a fact Bitfinex seized upon in their rebuttal today. “The revised paper is a watered-down and embarrassing walk-back of its predecessor that still suffers from the same methodological defects, coupled with the clumsy assertion that one lone whale may be responsible for the rise of bitcoin in 2017,” the exchange shot back through a statement from Tether.
Bitfinex dismissed Griffin and Shams’ work out of hand. The exchange accused researchers of lacking enough data to arrive at any substantive conclusion, insisting “the authors openly admit they do not have accurate data on the crucial timing of transactions or the flow of capital across different exchanges. This critical lack of information means they are unable to establish a valid sequence of events through which the alleged manipulation could have happened,” in what amounts to a classic case fo cherry-picking evidence, the companies noted.
The exchange also contends supposed irregular patterns cataloged by the two men were wholly in the realm of natural supply and trading demand of tethers (USDT), the world’s most popular stablecoin, and that USDT were not unbacked by dollars. “Importantly, the authors do not possess or reference any data disputing that Tether has sufficient reserves to back up Tether token issuances in circulation,” Bitfinex stressed.
The companies also claimed researchers were simply out of their depth, giving-in to “false bravado” while demonstrating “a fundamental lack of understanding of the cryptocurrency marketplace and the demand that drives Tether token purchases.” Bitfinex also noted the stern reaction from many ecosystem experts to the paper’s conclusions, which the companies further characterized as “simplistic” and “facile” when reducing the 2017 bubble to a single trader. “It is reckless – and utterly false – to assert that Tether tokens are issued in order to enable illicit activity. Tether token issuances have quadrupled since December 2017. This growth is not a product of manipulation; it is a result of Tether’s efficiency, acceptance and widescale utility within the cryptocurrency ecosystem,” Bitfinex and Tether demanded.
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