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   928

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.

Tether to Issue Commodity Backed Stablecoin, - Dong

Zhao Dong is major investor and shareholder of the Bitfinex
03 September 2019   229

Bitfinex exchange major investor Zhao Dong told Cointelegraph that Tether plans to release a USDT stablecoin option, backed by a basket of commodities such as gold, oil and rubber.

According to an insider, the purpose of issuing such a token is to reduce the risks associated with the need to store large amounts in banks to ensure it. Dong also stressed that the flagship stablecoin USDT is not 100% secured with a fiat dollar:

Tether is fully backed by reserves, out of 4 billion existing USDT about 3.35 billion are now in securities and 650 million are being lent to Bitfinex. Bitfinex has been raising 1 billion with it's LEO token IEO and could easily pay back Tether any time (as a matter of fact it already paid 100 million last month).

Zhao Dong

Shareholder, Bitfinex

Dong is confident that the level of provision with USDT reserves is generally sufficient to consider this stablecoin reliable.

Even if you don't calculate this 650 million as reserves the total amount backed by USD is 83.75% (3,350/4000) and not 72% as fake news are reporting.

Zhao Dong

Shareholder, Bitfinex

 Zhao Dong also remembered Tether’s plans to issue CNHT stablecoin linked to the renminbi and with reserves on offshore accounts.

CNHT will not interfere with PBOC [People’s Bank of China} capital control policy because CNH is different than CNY, as it's already an offshore product. On the contrary CNHT will help China to expand the adoption of CNH for international settlements.

Zhao Dong

Shareholder, Bitfinex

At the end of April, the New York Attorney General's Office charged Bitfinex with the fact that, having suffered a loss of $ 850 million, it withheld this fact, partially using the funds of Tether, the stablecoin issuer affiliated with it, to cover the damage. Later it turned out that these funds were frozen in the bank accounts of the Panamanian processing service Crypto Capital.