The price of Bitcoin dipped further on Wednesday, dropping by about $400 as the cryptocurrency lost 2% of its value. It traded below the $6,400 mark at some point as prices plunged to a 7-month low.
Wednesday’s crash was stoked in part by a new report that claimed bitcoin’s price was manipulated in 2017 to artificially inflate its value.
According to the report published in the New York Times, researchers found that a “concentrated campaign of price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year.”
The duo of University of Texas finance professor John M. Griffin and graduate student Amin Shams, say there is substantial evidence that traders propped up bitcoin prices by using another cryptocurrency called Tether to purchase Bitcoin after market downturns.
“Tether seems to be used both to stabilize and manipulate Bitcoin prices,” the researchers say in the study.
They say they tracked millions of cryptocurrency transactions from 2017 and found that the “patterns cannot be explained by investor demand proxies” and instead seemed to arise through the strategic use of Tether.
On their part, the executives of Bitfinex, (the creators of tether) have issued a denial with the CEO J.L. van der Velde telling Business Insider: “Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.”
If the report proves to be true, then tether’s creators may have pocketed millions by artificially raising bitcoin prices then cashing out at a relatively slower pace through other channels to avoid suspicion.
The researchers say more regulation is needed and conclude by saying: “Our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies. These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free.”
Wednesday’s crash comes on the heels of a similar one earlier in the week, which saw the price of bitcoin fall by nearly $1000 after reports that Coinrail, a South Korean based exchange had been the victim of a hacking attempt.
The latest bitcoin crash has also produced a ripple effect, causing the prices of other cryptocurrencies to slide in tow. Litecoin, for one, plummeted to a new low for 2018 on Wednesday, hitting $97—a dip of nearly 75% off the all-time high of $379 in December.
Some observers say the price of bitcoin still hasn’t found a bottom as the digital currency struggles to cope with waning investor confidence, frequent hacking attempts and news of coming government regulations.