Back in 2017, John Griffin, a professor of finance at the University of Texas McCombs School of Business, noticed something strange. Griffin follows a totally different beat from typical business school finance profs who explore, say, how business cycles influence commodity prices or Fed policy sways the term structure of interest rates. The 6-foot-2 former high school football star views himself as a crusader for good, a moral sleuth who, as he tells Fortune, “looks to expose financial evil, to shed light on the world and expose dark things in the markets.” After the Great Financial Crisis, Griffin became a devout Christian. He has since dedicated his distinguished career to righteous forensic digging that’s unearthed abuses ranging from insider trading to mortgage fraud to the doctoring of bond ratings during the financial crisis.
As Griffin and Amin Shams, then a doctoral candidate at McCombs who’s joined Griffin in several gumshoe investigations, screened for misdeeds in 2017, they were fascinated to see that a little-known token that’s supposed to be backed one-for-one to the dollar was getting printed in large quantities. That clue led the pair to another: When new batches appeared, the price of Bitcoin seemed to jump. It looked like someone, or a group, was using that freshly printed “free money” to inflate Bitcoin’s price for their own profit. He and his coauthor Shams sifted through an incredible 200 gigabytes of trading data, equal to the troves that the Smithsonian Institution collects in two years, and followed sales and purchases from 2.5 million separate wallets.
In 2018, they coauthored a groundbreaking study showing that a single, still unidentified, Bitcoin “whale” almost singlehandedly drove the token’s giant run-up in late 2017 and early 2018 by distorting the trading in the token.
Toward the end of 2022, another mystifying trend caught Griffin’s eye. Despite the crypto crash and myriad other negative forces, every time Bitcoin briefly breached the $16,000 floor, it bounced above that level and kept stubbornly trading between $16,000 and $17,000. Almost unbelievably, as the crypto market has continued to unravel into 2023, Bitcoin has gone in the opposite direction, trading up 35% since Jan. 7 to $23,000.
“It’s very suspicious,” Griffin told Fortune. “The same mechanism we saw in 2017 could be at play now in the still unreal Bitcoin market.”
For Griffin, the way normally super-volatile Bitcoin went calm and stable in the stormiest of times for crypto fits a scenario where boosters are uniting to support and juice its price. “If you’re a crypto manipulator, you want to set a floor under the price of your coin,” added Griffin. “In a period of highly negative sentiment, we’ve seen suspiciously solid floors under Bitcoin.”
Though manipulation is unproven, the signs are troubling
It’s important to note that no definitive proof of chicanery has so far emerged. “The space is bigger now so it’s harder to dig the data,” says Griffin. “Sophisticated players may be expert at hiding their identities.” We have seen credible leaks asserting that major market participants call meetings of the sector’s elite when they fear a crypto leader plans to make what they consider a reckless, industry-endangering move. But no evidence has surfaced that the players are gathering to coordinate buying of Bitcoin or other cryptocurrencies. For example it’s well known that earlier this fall Changpeng Zhao (known as CZ), chief of Binance, the world’s largest crypto exchange and other crypto crypto leaders believed that Sam Bankman-Fried’s hedge fund Alameda was attacking Tether, the then-wobbling coin whose reliability is crucial to the industry’s well-being, and reportedly encouraged him to stop. (Tether—symbol USDT—by the way, was also at the center of the 2017-18 manipulation exposed by Griffin and Shams.)
It’s possible that evidence of cozy, clubby practices will come to light in the numerous bankruptcy proceedings, lawsuits, and criminal investigations now pending in the crypto-verse. “Now that SBF is being charged, he’ll turn on the other players and could accuse them of collusion,” predicts Alex de Vries, an economist at the central bank of the Netherlands who runs Digiconomist, a site that tracks Bitcoin’s carbon footprint. The collapse Genesis’s lending business has set Barry Silbert, the head of its parent Digital Currency Group, at the throats of Cameron and Tyler Winklevoss, cofounders of floundering exchange Gemini. The brothers claim that DCG owes the $900 million that Gemini’s depositors loaned to a Genesis program that paid high interest rates and threaten to sue DCG and Silbert, whom they accuse…
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