How did Bitfinex and Tether manipulate cryptocurrency market?


Bitfinex, the world's fifth largest cryptocurrency exchange on daily trading volume, became hand in hand with Tether, an ambitious Stablecoin, to rule the virtual world

Bitfinex, the world's fifth largest cryptocurrency exchange based on daily volume transaction, is considering to move its headquarter from Hong Kong to Switzerland. Bitfinex intends to move to Zug, also known as the Crypto Valley, thanks to its friendly policies and tax haven for both investors and fintech companies. Bitfinex's decision came just after Binance – the largest exchange (in term of volume) - officially had moved to Malta – a.k.a the blockchain island.

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On January 31, 2018, Bitfinex and Tether received a subpoena from CFTC (Commodity Futures Trading Commission) due to their "suspicious" behavior.

Tether has issued the USDT tokens and each token is backed by $1 in Tether's reserve account. However, the investors suspected that this one dollar in reserve is not enough to cover the tokens issued. Bitfinex was also under criticism because these two companies have the same chief executive officer, J. L. van der Velde.

One of the main reasons for the rumors about two companies was that in the late January, Tether dissolved the partnership with Friedman LLP, an accounting and financial consulting firm, although the data data provided by Friedman matched with Tether’s financial statements, it had not been officially audited. Coincidentally, Friedman removed Bitfinex from the audit list at the end of January.

What is Tether?

As mentioned above, USDT is a token backed by U.S. dollar at 1:1 ratio, USDT holders can use the tokens for trading or purchasing (for businesses that accept Tether). It can also be used as a kind of 'currency' on the exchange. According to the legal section presented in the Terms of Service, Tether will only provide USDT to identified customers and only accept cash redemption. Precisely, a customer who deposits money into Tether’s bank account will receive the equivalent number of USDT tokens. In addition, customers can exchange USDT for cash at Tether Company.

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However, this is only the working theory of Tether, so far the company has never conducted an official audit to ensure that the figures in the financial statements are accurate. Many accounts on Reddit and Twitter wonder  how a company like Tether which is not on good terms with banks would be able to keep hundreds of millions of dollars in deposits.

How did Tether and Bitfinex manipulate Bitcoin?

In early August 2017, when Bitcoin (BTC) was about $3,000 - the hard fork Bitcoin Cash (BCH) was officially launched. Investors were worried about the possibility that Bitcoin Cash would put more pressure on Bitcoin price.

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Bitfinex announced to list Bitcoin Cash and would distribute the BCH to traders who were at the short position. At the same time, a person (or a group of people) nicknamed 'Spoofy' (a scam) took advantage of this event to control Bitcoin price. Spoofy placed orders to sell 2,000 Bitcoins and prompted many other traders to sell off their BTC, and when the Bitcoin price reached Spoofy’s desired level, (s)he or they cancelled the sale order immediately and received both BTC and BCH. A Twitter user BitCrypto'ed said that Spoofy used USDT as a collateral to trade Bitcoin on margin. In addition, BitCrypto'ed claimed that Spoofy was actually Bitfinex and Tether that had hatched this plot to issue new tokens as a collateral asset in order to 'borrow' Bitcoins, then traded them back and forth on Bitfinex to create fake transaction volume.

On March 21st, 2018, Tether Company issued a new batch of USDT worth more than $300 million and total outstanding token worth over $2.2 billion. Again, the rumors were proved to be true because at the same time Bitcoin price increased 6%, from $8,600 to $8,899.

Is it true that Tether and Bitfinex are taking control of cryptocurrency market?


Whether these two companies are manipulating the market or not, investors must remain skeptical and do their own research.

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In fact, USDT is one of the most stable tokens among all the altcoins in the market and Bitfinex is the 5th biggest exchange platform in the world, but their financial condition still remains mystery. Also, according to figures from Twitter account Bitfinex'ed, Tether and Bitfinex account for more than 70% of Bitcoins being exchanged in the market; what would happen if two companies crashed?

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Referrence: CoinMarketCap, Cointelegraph,, Reddit