In Wednesday's Daily Market Commentary webinar I was asked a few questions about bitcoin and its continued decline. In 2017, this topic would come up much more frequently as bitcoin’s value rose nearly 2,000% to its peak in December. However, from its absolute high in 2017 to today’s low, bitcoin is down approximately 70%.

Some cryptocurrency enthusiasts will take issue with comparing the rally last year with an asset bubble, but it certainly had all the right characteristics to be defined that way. One of the most important problems that create an asset bubble is called “asymmetric information flow,” which happens when one side of a trade has more information than the other side. New analysis indicates that this is one of the most important factors that drove bitcoin’s rally last year.

For example, the flow of information about Mortgage Backed Securities (MBS) and Credit Default Swaps (CDS) was much more available and more accurate to the banks issuing those exotic instruments than the buyers and investors who bought them.

There is mounting evidence that the market for bitcoin had an extremely asymmetric information flow and was likely manipulated into the rally last year. In a paper released on Wednesday, University of Texas Finance professor John M. Griffin and his co-writer Amin Shams convincingly show that another cryptocurrency called “tether” was used to manipulate bitcoin to higher and higher prices.

Tether, a purportedly dollar-pegged cryptocurrency, was apparently used to obscure bitcoin purchases in ways that would push prices higher when there were no other market catalysts that could explain the cryptocurrency’s rally. Essentially, the lack of transparency allowed bad actors in the market to create information (tether-funded bitcoin purchases) that they had access to, but the broader spectrum of investors did not.

Investors have attempted (and sometimes successfully implemented) the same strategy in regulated financial markets. The “pump and dump” scheme in penny stocks or efforts to “corner” a futures market are similar to what was done to bitcoin through tether. In U.S. and European financial markets, attempts to influence prices like this are considered “market manipulation” and can be criminally prosecuted.

The bottom line is that if Professor Griffin is correct, then the underlying manipulation in bitcoin's price may have been removed and the asset is going to fall back to its "natural" value. Whatever its real worth, apparently $20,000 wasn't the right number.