June 13 (UPI) -- Another cryptocurrency was used to prop up the value of bitcoin last year at pivotal moments, an analysis Wednesday said.
The 66-page paper by University of Texas finance professor John Griffin and graduate student Amin Shams suggests major cryptocurrency investors used covert investing of another cryptocurrency, called tether, to "stabilize and manipulate bitcoin prices."
The report said prices were suspected of improper influence by activity at Bitfinex, a cryptocurrency exchange. Bitfinex lost relationships with banks but continued to operate after it was subpoenad by the U.S. Commodity Futures Trading Commission. The panel sought proof that Tether was backed by U.S. dollars, as many cryptocurrencies have no governmental backing.
Bitfinex is registered in the Caribbean and has offices in Hong Kong.
Griffin researched the flow of digital transactions at Bitfinex and identified several distinct patterns that indicated prices rose when they declined at other exchanges. Tether, he said, was used to buy purchase the other cryptocurrencies.
"There were obviously tremendous price increases last year, and this paper indicates that manipulation played a large part in those price increases," he said.
The paper said half of bitcoin's increases last year came just after tether flowed to other exchanges, generally when bitcoin values were falling. Eighty-seven major bitcoin purchases accounted for less than 1 percent of the time period examined but resulted in 50 percent of bitcoin's compounded return.
"This behavior never occurs randomly," the report states.
A previous analysis by Griffin also noted potential manipulation of Cboe Global Market's VIX benchmark for bitcoin values in 2017.
"The hype in cryptocurrency isn't just 20-year-olds buying Bitcoin in their garage -- that's part of it -- but there are big players moving the market and having a huge price impact," Griffin told Bloomberg News.
Bitfinex has denied accusations it manipulated prices.
"Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation," CEO J.L. van der Velde said in a statement. "Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex."