Does Tether affect Bitcoin's price? - academic study

21 Sep, 2018
by Paula D. Baciu
Does Tether affect Bitcoin's price? - academic study

A study on USD tether was published one month ago to support that the stablecoin was used to manipulate the price of Bitcoin and other cryptocurrencies. However, a brand new academic review disapproves of these claims with new evidence.

Many observed that Bitcoin’s price was somehow related to Tether’s trading volume and concluded that the latter consequently inflates Bitcoin’s price. A paper published in January 2018 endorsed this view and suggested that the company was printing money from thin air to pump Bitcoin.

Read more: Tether no longer able to pump crypto prices in major dump season like now

UQ Business School Lecturer in Finance, Wang Chun Wei, found out that the two are actually not related. The only link between the two is that Tether’s volume increases when Bitcoin’s price goes down — but that’s nothing new yet.

On the other hand, it seems that Tether issuances are followed by increased overall trading volumes the next day.

However, the author could not confirm that USDT is fully-backed by a real reserve account, as the official website claims. “Our paper does not focus on whether Tether coins are in fact backed by USD or indeed ‘created out of thin air’. This is for regulators and auditors to determine. Instead, we focus on the impact of Tether grants (or issuances) on Bitcoin

valuation, Given Tether’s poor liquidity back into fiat currencies, we hypothesize an increase in Tether leads to aggregate positive flows into Bitcoin,” stated the paper.

Their conclusions:

Tether grants could not be tied to the rising price of Bitcoin, based on the evidence they gathered;

However, these grants can and do cause increases in trading volume, briefly, in USDT and several other cryptocurrencies;

When Bitcoin’s price drops lead to Tether issuances, just as Griffen and Shams concluded a few weeks ago.

Read more: Ethereum co-founder doubts Tether manipulation

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