Two academics contend 2017 Bitcoin bubble due to Whale’s manipulation

Two academics contend 2017 Bitcoin bubble due to Whale’s manipulation

Every now and then, a juicy article appears in the press that commands re-writes across the entire news spectrum. In other words, no matter where you go, you cannot avoid reading the same storyline, over and over again. Bloomberg created one of these “honey pots” on Monday, and before you could say, “What the…,” a thousand bees had already swarmed over the sweet attraction. It seems two fellows from academia updated a previous paper that hypothesizes that the 2017 Bitcoin bubble was due to one Whale.

John Griffin from University of Texas Professor and Amin Shams from Ohio State University co-authored the paper, which concluded: “Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one. This pattern is only present in periods following the printing of Tether, driven by a single large account holder, and not observed by other exchanges.” Tether was the largest stablecoin at the time and was frequently used by traders as a substitute for the USD, before and after entering and closing other crypto positions.

Griffin and Shams added:

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.

Bitcoin is obviously the “newest kid on the block” to engage entrenched traditionalists, when it comes to qualifying as an acceptable investment worthy of their favor. As such, one might expect a bit of negativity here and there, but it appears that the financial press has a love affair with dumping on all things crypto. Academic papers have a way of finding strange correlations in unrelated data and then devising an entire treatise that brings logic to bear on its argument. Industry pundits decried the effort as delusional, an attempt to validate a conclusion by selectively finding data that supports the hypothesis.

If the article had stopped with the source, which was Bloomberg, then it would not have created such a firestorm, but every financial news outlet from the Wall Street Journal to CNBC to the MIT Technology Review picked up the story and then propagated it across the Internet. Bloomberg positioned it as a “striking new claim” in its article entitled: “Lone Bitcoin Whale Likely Fueled 2017 Price Surge, Study Says”. Branded immediately as “clickbait” by crypto industry observers, the article was soon given credibility, when The Block elected to accept the findings as “reasonable”.

Industry pushback was immediate. Tether General Counsel, Stuart Hoegner, told Bloomberg: “The paper lacked academic rigor,” and: “The research is foundationally flawed because it relies on insufficient data.” Su Zhu, CEO of Three Arrow Capital, tweeted back at The Block:

This article is clickbait so dumb that it’s a crime to give attention to it. [The two authors of the paper] started at a conclusion and then tried to find data to fit it.

Mati Greenspan, senior market analyst for eToro and a well respected voice of reason in crypto circles, explained in his daily market update:

There is no methodology on the planet that will convince me that this narrative is accurate. Millions of verified retail accounts were opened here at eToro in order to trade crypto and it was the same throughout all exchanges. It wasn’t anything that could have possibly have been caused by any single whale.

Gabor Gurbucs over at VanEck was also in agreement with Greenspan’s experience and sentiments. As reported by DeCrypt, he suggested that:

The conjunction of any pattern between Tether and Bitcoin was simply an effect of increased demand within periods of growth.

Ari Paul, CIO of BlockTower Capital, also noted that the updated report had switched from just Tether to a single Whale, which he categorized as misleading:

Attributing a mass Tether printing to a “lone whale” was an elementary misunderstanding of how financial assets work. It’s like saying that GLD (gold ETF) is traded mostly by 1 person because it has a single custodian and a single entity handling creations and redemptions.

Bitcoin has struggled for over a decade to establish its current “beachhead” on the investment battlefield and has recently achieved a degree of respectability, as well, from institutional investors and traditional investment managers. The hue and cry of price manipulation will only be silenced when the network of crypto exchanges across the globe agrees to submit to regulatory oversight and monitors for potential “bad actors”.

A reporter at, however, summed up best why industry leaders reacted so angrily:

The media has often pushed the narrative that the entire cryptocurrency space is based on fabricated growth and manipulation. In doing so, they discredit the industry as the whole, likely out of fear or resentment. Cryptocurrency-related media should be smart enough to stay away from such clickbait stories.

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