In a newly available research paper by faculty at University of Texas (Austin), the question as to whether Tether (USDT) has influenced the price of Bitcoin (BTC), has been answered. John M. Griffin, a professor at the University, and Amin Shams, a PhD candidate in Finance at the same institution, co-authored the piece and have ample evidence that there is a pattern of Tether being spent during Bitcoin’s pivotal moments of decline.
The research paper postulates that Tethers are usually created by the parent company Tether Ltd. in large chunks of 200 Million. The coins are then transferred to Bitfinex. What then happens is as soon as the price of Bitcoin drops, Tethers at Bitfinex and other exchanges are used to buy Bitcoin in a coordinated way that drives the price up.
John Griffin is noted in the research paper as observing that:
Tether seems to be used both to stabilize and manipulate Bitcoin prices.
Griffin would also add that:
I’ve looked at a lot of markets. If there’s fraud or manipulation in a market it can leave tracks in the data. The tracks in the data here are very consistent with a manipulation hypothesis.
The paper further outlines several patterns uncovered over a year long period. The flow of Tether was only one way in that when the prices of Bitcoin fell, purchases with Tether tended to increase but not the other way round. This further means that when the prices of Bitcoin rose, there was no reversal of Tether. Griffin would postulate in the paper that Tether was being used to protect the price of Bitcoin during downturns.
The research focused on the time period between March 2017 and March 2018. Griffin highlighted on 87 of the largest purchases of Bitcoin using Tether and observed in some cases, Tether had just been minted three days prior of the purchases and used immediately the price of BTC fell significantly. What then would happen, is an increment in the price of BTC.
The team of Graffin and Shams ran 10,000 simulations to verify that their observations were indeed true before releasing the paper. They would also add that:
[Bitcoin purchases with Tether] strongly increase just below multiples of 500. This pattern is only present in periods following printing of Tether and not observed by other exchanges . If it was random behavior you wouldn’t see it cluster around the thresholds. It indicates it’s a conscious strategy to provide price support.
This research paper and the information it holds, has reignited questions of the link between Tether Inc. and Bitfinex. Both companies are said to share a management team including Van Der Velde, the CEO of Bitfinex.
Tether was earlier on in the year embroiled in investigations as to whether it has the actual cash to back the over 2.5 Billion USDT in circulation. Recent reports also indicate that there was a new batch of $250 Million worth USDT minted on May 18th. The questions keep piling up with respect to Tether (USDT).