Evidence That Tether Is Manipulating Bitcoin Is Nonexistent

Published 5 years ago on September 24, 2018

Evidence That Tether Is Manipulating Bitcoin Is Nonexistent

It’s become a bit of a hot topic within the crypto-debate. Research carried out during the middle of 2018 suggested that movements of Tether (USDT) could have been disturbing Bitcoin and thus, could have been manipulating the price of Bitcoin. This came as research found a correlation between significant changes in the price of Bitcoin and significant movements of USDT tokens. What is Tether?As a quick reminder, according to the Tether website:

“Tether Platform currencies are 100% backed by actual fiat currency assets in our reserve account. Tethers are redeemable and exchangeable pursuant to Tether Limited’s terms of service. The conversion rate is 1 tether USD₮ equals 1 USD. The Tether Platform is fully reserved when the sum of all tethers in circulation is less than or equal to the balance of fiat currency held in our reserve. By leveraging Blockchain technology, Tether allows you to store, send and receive digital tokens pegged to dollars, euros, and yen person-to-person, globally, instantly, and securely for a fraction of the cost of any alternative.”

The studySince these initial findings, many people have argued against this, stating that USDT does not have the capacity to manipulate the markets or alter the price of Bitcoin and that overall, the news was FUD. It now seems that this may actually be the case, according to a new report titled The Impact of Tether Grants on Bitcoin.The paper has been published by Wang Chun Wei from the University of Queensland Business School. The paper finds simply that there is no statistically significant correlation between the price of Bitcoin and USDT movements. The paper is as a result of a Value-at-Risk type study, that found there to be a positive relationship between Tether Grants and Bitcoin, however the relationship was very limited and did not have a significant effect. According to Cryptovest, the paper states:

“We find no empirical evidence supporting the notion that Tether grants cause subsequent Bitcoin returns to rise on a daily basis. In fact, when we examine the Bitcoin return equation of our VAR model, none of the lagged variables impacts Bitcoin returns. This suggests Bitcoin returns are showing greater signs of market efficiency than previously studied on older datasets.”

This in short means that yes, USDT is having an effect on Bitcoin, but the effect is so short and so temporary that it can’t be seen as a form of manipulation. By having no statistically significant effect, it can be concluded that within this study, there is no evidence to prove that USDT is impacting the value of Bitcoin. References Cryptovest About Tether Investment Disclaimer

Robert Johnson

Robert first came across Bitcoin in 2016 during a meetup in Belgium, and has been hooked ever since. With a background in Economics, you can find Robert frequently looking at the Twitter feed of the SEC for any regulatory updates relating to Bitcoin and Crypto in general.