The crypto community has clashed over a report that reinforces the suggestion that Bitcoin’s 2017 price explosion was due to the manipulation, specifically the mass printing of USDT tokens. The report, which made headlines when it was released in 2018, has now been updated to reflect the authors’ beliefs that a single entity was in fact responsible for the run to $20,000 in 2017, but not everyone is buying the theory.
Did One Whale Cause the 2017 Pump?
John M. Griffin and Amin Shams of the universities of Texas and Ohio respectively caused a huge stir in June last year when they published a paper that suggested that Bitfinex and Tether conspired to shoot up the price of Bitcoin in 2017 by printing billions of dollars’ worth of unbacked tokens with which to buy Bitcoin on Bitfinex. This notion was grasped by the mainstream media and the likes of Nouriel Roubini who decried Bitcoin for its manipulation, while the community argued about its merits. Griffin and Shams doubled down on their argument this week in an updated version of their paper, in which they suggested that “instead of thousands of investors moving the price of Bitcoin, it’s just one large one”, although they choose not to state which account is responsible for this, adding that they came to the conclusion following patterns in the price versus USDT printing:
This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges. Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.
Not Everyone is Sold
Some in the space agree with the sentiment behind the paper, with manipulation theorist Super Crypto telling BitStarz News exclusively that the updated report merely emphasizes that manipulation has been at the heart of Bitcoin since early 2017:
It’s important to understand that it (the 2017 pump) was a planned and coordinated act, but the specifics are not really important in my world. We need to accept the fact that the 2017 pump was not organic – it was part of the plan to eventually dump it to punish and discourage the retail investors, and that is exactly what has happened.
Criticism of this viewpoint was swift, with writer Larry Cermak claiming that Tether has been treated as a “clear scapegoat” and Bitcoin maximalist Anthony Pompliano offering a simple critique:
I have now read the entire updated paper by Griffin and Shams and I have to say that it’s still riddled with errors and fundamental misunderstandings about how the stablecoin deposits and redemptions work. There is still no proof that there was market manipulation.
— Larry Cermak (@lawmaster) November 4, 2019
Narrator: This is false. https://t.co/BzSKomWMe0
— Pomp 🌪 (@APompliano) November 4, 2019
Super Crypto offers a simple riposte to those who claim everything is above board:
The crypto community is in denial and will remain so for a long time. They continue to believe that the 2017 pump was natural and that the dump after that was a standard 85% correction, but both were not.
There will always be those on both sides of the fence with the manipulation theory, and it seems that time might not be able to settle the debate if the community is still hammering it out two years after the event.