Over the past few months, the movement of Tether tokens (USDT) has been accused of being able to manipulate the price of Bitcoin. It’s a complicated concept, but many believe that using Tether to back FIAT currencies is having an impact on the price of Bitcoin. This is alleged to be happening in waves, as those that maintain Tether produce new tokens in order to keep up with the flow of it’s FIAT connections.
This idea materialised a couple of months ago, when a research paper from the University of Texas was published which refers to the timings of Tether movements and changes in the price of Bitcoin. The research team at the University found a positive correlation between Tether movements and big price swings, stating that:
“Purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices.”
This paper was met with cynicism and some outrage, since then though, the debate has continued on.
The word manipulation does bring negative connotations, therefore it’s wise to point out that this sort of manipulation might not be malicious as such, instead, it simply just refers to Bitcoin responding to Tether, more than an attack on Bitcoin, by shifting Tether around.
However, many believe that Tether is not actually changing the price of Bitcoin. Ethereum Co-founder Joseph Lubin is the next expert to speak out against this, staying that the theory surrounding Tether’s manipulation of Bitcoin isn’t 100% conclusive.
According to Cointelegraph, Lubin has said:
“Based on our analysis, which involves just talking to a bunch of people in the space, we do believe that [USDT] are backed 1:1 by U.S. dollars in bank accounts although it is still not 100 percent solid in terms of a story, from my perspective. With respect to market manipulations, I’m not sure that market manipulations are related to Tether directly, if they do exist. It has been an unregulated market set of exchanges that enable big players to do what they want to do […] Ideally we’ll get a little better regulation of those centralized exchanges at least.”
Simply put, there’s no real evidence to prove that Tether movements are impacting the price of Bitcoin. Of course, the University of Texas’ findings do hold some bearing, although Lubin believes that this is imply just a theory, until it is made 100% clear that Tether is impacting Bitcoin, we can’t sit back and assume that Tether is the sole reason for Bitcoin’s volatility.