Few articles in recent memory have generated as much “heat” as Bloomberg’s repeat publishing of an academic paper entitled, “Is Bitcoin Really Un-Tethered?” The paper was a “re-bake” of a June, 2018, work product by John Griffin, a University of Texas Professor, and Amin Shams from Ohio State University. The duo from academia posit now that one large Whale used Tether and the Bitfinex exchange to manipulate Bitcoin prices in 2017, resulting in a major bubble that eventually collapsed.
The industry response was immediate, an emotional display of anger and disbelief that a seemingly de-bunked paper from a prior year would once again surface and attempt to discredit the entire crypto industry by implying that global trading activity could be so easily duped, fabricated, and manipulated by a single large player.
A few days have now passed, and reporters have now approached crypto insiders to solicit calmer reactions to this inflammatory piece of academic number crunching. After sober thought, the consensus of analysts remains dismissive. Yes, Bitcoin is not immune to price manipulation tactics, not is any financial market on the planet, but analysts remain unconvinced, and for those that were there, they contend the theory is, in a word, “preposterous”.
The researchers believe that Tether and Bitfinex were responsible for more than 50% of the Bitcoin price rise in 2017. Here are a few of their statements from their paper, as reported by Cointelegraph:
When quizzed by reporters about who the “Whale” might be, Griffin failed to clear the “hurdle”: “We don’t know the country of origin, just that it’s a large percentage of the volume on Bitfinex.” With a response like that one, it is not surprising that the comeback has been that, “Correlation does not prove causation.” Griffin and Shams are also consumed with the separate controversy regarding whether Tether tokens were fully backed by USD cash reserves, as if it gave credence to their work. The “1-for1” backing would not influence market behavior, a specious argument that casts doubt on the duo.
For those analysts and industry participants that actually experienced 2017 moment to moment, their opinions describe the findings of Griffin and Shams as incredulous. Any one that was there knows there was a multitude of moving parts that were adding to the chaos on a daily basis. Just a few of them were:
Analysts were also quick to point out that the professors did not understand how money moves about when pooled. Jeremy Allaire CEO of Circle, explained: “Exchanges use omni-bus wallets that pool all customer balances and transactions on and off the exchange. So an analysis that shows that ‘a single wallet’ was involved in flows from Bitfinex to other exchanges is meaningless. All it shows is that traders were trading.”
Mati Greenspan, eToro’s senior analyst, scoffed: “This isn’t something that could have possibly been caused by one whale. Diligent readers will no doubt realize that this report is actually just a repost of an already debunked research paper, albeit with added details and peer review. The simple matter is though that there’s no amount of peer review that will make us forget what we’ve clearly witnessed.”
Cointelegraph also spoke with folks over at Whale Alert, an industry watchdog that diligently tracks all Bitcoin, as well as a few altcoin, large transactions from large balance accounts. Their response: “2017 was a crazy time and in our opinion it would be unlikely that one single entity was responsible for the price surges/drops, but in the near future we will have more historical transfer data that can possibly give a more clear answer on the matter.”
Stuart Hoegner, general counsel for Bitfinex, vehemently disavowed the duo’s findings: “It’s important for the public to understand that the paper was likely authored for the very purpose of launching a parasitic lawsuit. In any event, this is a transparent attempt to use the semblance of academia for a mercenary money grab. 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.”
Lastly, when Coin telegraph spoke with Juan Villaverde and Martin Weiss of Weiss Ratings agency, their one-word rebuke was “preposterous”, but they also offered a balanced take on the situation, after a review of the new research material: “The correlation the authors find is there. But correlation does not mean causation, and we would caution against drawing too many conclusions from such a one-dimensional look at crypto markets in the 2017 period.”