In an unexpected turn of events, a new report by the University of Texas has found that ‘stablecoin’ Tether could be being used to manipulate the price of Bitcoin and thus, change the direction of the markets. This research stems from an extensive study into the freak performance of cryptocurrencies at the end of 2017 and the start of 2018. If the findings are accurate, not only could this explain an awful lot, this could help to shift the way the entire world see’s currencies such as Bitcoin.
Tether is a stable coin that follows the price of the US Dollar, in essence. It is a highly traded coin, sitting at the time of writing with a market capitalisation of $2,527,598,611.00, sitting in 11th place just behind TRON, and now, ahead of NEO. At the time of writing, Tether is valued at $0.01, up 0.29% but generally, as it is a stablecoin these latter figures are irrelevant.
So, according to the study, during periods of large Bitcoin movements, Tether shows patterns of being spent on Bitcoin in large amounts. Therefore, there seems to be a correlation between Bitcoin price movements and Tether spending volumes, on Bitcoin especially.
The study, by John M. Griffin and Amin Shams from the University of Texas Department of Finance, published today, can be found here- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
Within the abstract of the paper, Griffin and Shams state:
“Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.”
In all honesty, this is huge news. Whilst the news is so fresh, it is difficult to actually understand the implications of this, a few scenarios do however spring to mind here.
Most of all, if these Tether movements are correlated with the Bitcoin movements, is it the same people doing it each time? If so, what sort of questions does that raise?
As this is such a new report, things are a bit uncertain at the moment. As this news gets out though, we expect conclusions to become a little clearer. For now, we will monitor this story and bring you the news as it comes.
This could be a very big deal indeed.