Forensic Researchers Claim a Single Whale Caused the 2017 Bitcoin (BTC) Spike

John Griffin and Amin Shams, two well-known forensic researchers, have built on their previous research which accused Tether (USDT) of single-handedly causing the 2017 bitcoin rally. According to research shared with Bloomberg, the two have found that when BTC decreased in a certain increment on Bitfinex, one single whale exerted enough orderbook pressure to flip the momentum, single handedly leading the entire market to believe there was strong, dispersed demand, November 4, 2019.

Examining the Claims

John Griffin and Amin Shams are the forensic researchers that alerted the market of potential manipulation in the volatility index (VIX), so their words aren’t to be taken all that lightly.

The two rose to crypto fame with their research paper titled “Is Bitcoin Really Un-Tethered”. While this paper highlighted the strong correlation between BTC pumps and Tether issuance, their new research claims all of the pump came from a single entity operating on Bitfinex.

Stuart Hoegner, general counsel at Tether, vehemently denies the credibility of the research conducted by the duo. His claims revolve around a lack of data points, but he went on to accuse Griffin and Shams of propelling a “parasitic lawsuit“.

As of now, there is no accurate way of ascertaining what is what, as the paper will only be published in the next edition of the Journal of Finance.

Validity of the Thesis

From a data validity angle, as mentioned earlier, it is impossible to draw a conclusion without going through their analysis and captured data first. But from a logical perspective, there is a lot of room for criticism.

Between 2010 and 2014, the U.S. stock market was soaring, and M0 money supply, which is currency in circulation and bank deposits with the Federal Reserve, was also on a massive expansion i.e. quantitative easing. Does the existence of this correlation insinuate that the Federal Reserve created the stock bubble?

The answer is yes and no. The expansion resulted in an increase in asset prices, but the demand for cheap money was effortlessly soaked up by private sector demand.

Tether may have been a big reason for the spike simply because it was an easy on-ramp to liquid, digital dollars. The mere existence of a correlation does not imply causation. Previous research by Griffin and Shams is not enough to build a strong case; the new research just might be more convincing.