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BitcoinBusiness & Finance

Joseph Lubin Defends Tether Against Alleged Bitcoin Price Manipulation

Tether (USDT) has certainly seen better times. The controversial “stablecoin” has been a subject to price manipulation claims from other cryptocurrencies, most notably Bitcoin. It has also been alleged to colluding with parent exchange, Bitfinex, where it was observed to be traded distinctly more than any other exchange.

Tether is a “stablecoin” pegged to the value of the U.S. dollar. Tether tokens are meant to be a way for investors or vendors to get out of bitcoin by exchanging it for tether. The price of tether has stayed at or right near $1 for its lifetime. It certainly does not merit all the scandals it has become involved in.

Joseph Lubin to the rescue

However, amid this backlash, it sees light via one very reputable source. In a recent interview with Yahoo Finance, one of the most respected voices in the crypto world, Joseph Lubin, offered support to the USDT against the alleged price manipulation claims against it. It certainly comes as good news to Tether and its marketers, that the co-founder of Ethereum has backed the most controversial crypto presently.

Lubin said during the interview on Tuesday:

Tether is an interesting project. Based on our analysis, which involves just talking to a bunch of people in the space, we do believe that tethers are backed 1-to-1 by U.S. dollars in bank accounts. With respect to market manipulations, I’m not sure that market manipulations are related to Tether directly, if they do exist.

This comes after claims from several sources that Tether is used to manipulate Bitcoin prices, as reported, the idea was first presented by University of Texas professors, Dr. Griffin and Dr. Amin Shams in a 66-page report titled, “Is Bitcoin Really Un-Tethered?”

Their argument was based on the correlations between Bitcoin price movements and Tether issuance — along with Bitfinex, with whom it is closely related, operating a financial reserve and using unbacked tokens to inflate BTC prices. Tether itself marched well last year, when Bitcoin hit a record high.

Tether’s market cap has struck in 2018. | Source: CoinMarketCap

Lubin believes that USDR is backed by physical dollars at a 1-to-1 ratio and that if there is any manipulation in the cryptocurrency market, it stems from the fact that trading platforms are relatively unregulated. Something the CFTC and SEC should come together to discuss.

Ideally we’ll get a little better regulation of those centralized exchanges, at least, and we’ll see less sloshing around in price.

Lubin, who now runs ConsenSys, which is an Ethereum development studio, remains confident about Tether’s role to the cryptocurrency market, as accusations continue to swirl around Tether, which claims that all of its assets are backed by the US dollars held in bank accounts, but would not publicly identify its banks.

Bad 2018 for Tether

In December 2017, the CFTC subpoenaed Tether and Bitfinex, a huge bitcoin exchange that began offering tether in 2015 for claims of inside trading, which potentially manipulated the price of Bitcoin. The two companies also share a CEO and higher management.

In May, the U.S. Department of Justice, working with the CFTC, launched a criminal investigation into manipulation of bitcoin prices. And in June, University of Texas’ research paper concluded that the run-up in price of bitcoin at the end of 2017 was mostly due to manipulation of tether.

To make things statistically worse, it came as insult to injury that around half a billion Tethers were printed in August only, without making a significant impact and fluctuation into Bitcoin’s prices. This indicated that the market had matured to a great extent, or either there is an overwhelming number of sellers — as the same amount of Tether last year could have caused up to a $1,000 movement in BTC price.

Also in August, the Wall Street Journal highlighted the “Opaque ways in which tethers are created” which further tightened breathing space for Tether.

Tether has yet to release an independent audit refuting this claim, but the firm did hire a U.S. law firm founded by a former FBI director to investigate its finances. The firm’s report found that, as of June 1, Tether was holding more than enough USD to cover its outstanding tokens.

In the report, FSS said they were:

Confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.

Lubin is yet to comment on both the University of Texas professors’ and FSS’ investigations and is being sought after by BlockPublisher at press time.

Razi Khan

Researcher, Electrical Engineer and a teacher, Razi is one who takes great intrigue in the prospects of blockchain and cryptocurrencies (BTC in particular) while contributing a critical approach over the subject regularly. Contact the editor at editor.news@blockpublisher.com

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