Tether to Force BTC Price Jump, Research Says

New research is called 'Is Bitcoin Really Un-Tethered?' and is conducted by John Griffin, professor of finance at the University of Texas, and Amin Shams
14 June 2018   321

The authors of the new study argue that the bitcoin rate was manipulated by the issuer of Tether. 

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.

'Is Bitcoin Really Un-Tethered?' Research

Researchers John Griffin, who is a professor of finance at the University of Texas, and Amin Shams analyzed data from the CoinAPI, Coinmarketcap.com, Blockchain.info, Omniexplorer.info and CoinDesk portals, using algorithmic analysis techniques to establish the relationship between transaction flows and cryptocurrency prices.

From March 1, 2017 to March 31, 2018, the actual Bitcoin price rises from around $1190 to $7000 for a 488% return. In contrast, the price series without the 87 Tether-related hours ends at around $4100, a 245% rise. Hence, the hours with the strongest lagged Tether flow, which account for less than 1% of the time-series, seem associated with 50% of the Bitcoin buy-and-hold return over the period.

'Is Bitcoin Really Un-Tethered?' Research

The study also says that Tether's influence is not limited to the bitcoin market alone.

The percentage of the buy-and-hold return that are attributable to the Tether-related hours range from 42% for Dash to 82% for Zcash. Ethereum, for example, experienced near 2400% return during this period, while it would alternatively experience around 900% return if the Tether-related hours were excluded. Across the six other crypto currencies, returns are 64% smaller on average when removing the 87 Tether-related flow hours.

'Is Bitcoin Really Un-Tethered?' Research

Analysts do not pretend to the accuracy of calculations, but argue that in the periods after the release of Tether or moving them beyond the Bitfinex exchange, certain regularities are traced. 

The suspicions that Bitfinex and Tether can influence the price of bitcoin have long existed in the community. In January, it became known that the Commodity Futures Trading Commission (CFTC) was conducting its own investigation in a case involving two companies. After the appearance of this news, Tether hadn't print its tokens for several months, but in March it issued 300 million USDT, and in May - 250 million more. Recently, the CFTC refused to answer questions about the progress of the investigation.

Tether has long promised to provide audit of USDT, however it has not done so yet, forcing market participants to guess how much the growth of the bitcoin price was provided by printing of unsecured tokens if such an activity generally took place.

Third-Party Audit Finally conducted by Tether

All the allegations stating claiming that Tether has “unencumbered assets exceed the balance of fully-backed USD Tethers” are cleared by the report
21 June 2018   216

After recently conducting an audit, Tether declared, that a law firm had confirmed that, as of 1st June, the company has more than bountiful amount of USD for the circulating USDT tokens. Tether was supported by the services of Washington-based law company Freeh Sporkin & Sullivan LLP (FSS) to revise bank account documents and to randomly inspect circulating Tethers and corresponding USD reserves.

Tether on their Twitter
Tether on their Twitter

As for  the firm’s credit, it was founded by 3 former federal judges. Earlier this year Tether involved Freeh, Sporkin & Sullivan LLP to survey bank account documentation and to perform an inspection of the numbers of Tethers in circulation & the corresponding currency reserves.

The law company also declared Tether’s compliance to AML standards, paperwork towards to personnel and corporate structure, and historical records about the amount of issued and outstanding Tethers, along with a variety of other documents. Tether’s problem began as the company parted its ways with its previous auditing partner Friedman LLP in late January. Even after facing a massive backlash the firm did not hire any third-party to go through its books. Because of the firm’s ties with the crypto exchange Bitfinex, it faced many allegations for the Bitcoin price manipulation. 

On June 13th, two researchers at the University of Texas at Austin issued a report called “Is Bitcoin Really Un-Tethered?” in that they stated to have found fresh evidence of Tether’s market manipulation tactics of Bitcoin and other major altcoins by flooding the market with USDT. Tether in their recent transparency update, admitted the scrutiny and affirmed that “much of the speculation and negative reporting” was due to “misunderstandings” of the firm’s business model.