New Study Claims Tether (USDT) Did Not Impact Bitcoin (BTC) Prices Significantly
A new study by Australia's University of Queensland business school claims that the highly controversial stablecoin, Tether (USDT), did not materially impact the price of Bitcoin (BTC).
A new study by Australia’s University of Queensland business school claims that the highly controversial stablecoin, Tether (USDT), did not materially impact the price of Bitcoin (BTC).
During the rapid rise of Bitcoin, many accused the issuer of Tether to have issued millions of dollars worth of coins to inflate the price of Bitcoin. Further, Tether’s independent auditor stopped serving the company, leading to further allegations about the integrity of the stablecoin.
Tether issuance not meaningful to Bitcoin price
Recent research conducted by Dr. Wang Chun Wei, a lecturer at Australia’s University of Queensland business school revealed that, contrary to popular belief, the issuance of Tether doesn’t have much significance to the price of the leading cryptocurrency.
Wei’s findings have been accepted for the October 2018 issue of Economics Letters. The academic paper is titled “The Impact of Tether Grants on Bitcoin.”
In the research paper, Wei stated that the issuance of the USDT token was partially timed to coincide with a drop in Bitcoin price so it the USDT/BTC trading volume can be increased.
However, the issuance of the token doesn’t have many effects on the rise of Bitcoin price, thus the issuance cannot be considered as an effective tool for moving the price of the leading cryptocurrency.
Research conducted earlier this year by the University of Texas at Austin claimed that the token was used to unduly influence bitcoin’s 2017 ascent.
The study by Professor John Griffin and Ph.D. candidate Amin Shams claimed that USDT which is a stablecoin backed by the U.S Dollars was used to jack up the price of Bitcoin on the Bitfinex cryptocurrency exchange last year.
This revelation has led to an increased controversy for Tether which has yet to publish its audit.
There are rumors that the company behind the stablecoin doesn’t have enough U.S Dollars in the bank to account for every USDT token issued.
The research by Wei was focused on the trading volume of USDT and how the volume changes. Regarding the controversies, Wei stated that the issue is for regulators and auditors to determine.
The paper focused on the possibility of Tether being used to manipulate the price of Bitcoin. Wei stated that the issuance of the token takes place in groups, with the parent company breaking the issuance into smaller blocks and issuing them within days of each other.
Regarding the issue of Tether coins not fully backed, Wei responded by stating that:
If tether tokens were not fully backed, then for the company to issue new tokens would be equivalent of printing money. If this was true, tether grants/issuances would be equivalent to ‘monetary easing’ in the cryptocurrency markets.
Tether issuance doesn’t lead to a pump
Wei added that his team tried to research how increasing the USDT in circulation inflates the price of Bitcoin. The team found out that BTC/USDT trading pairs were the major trading pair on crypto exchanges.
The paper noted that there were increases in Bitcoin trading following the issuance of new USDT tokens, though that observation doesn’t necessarily prove anything.
Wei, however, pointed out that even though trading volume is linked with price, it cannot be used to predict the price of a cryptocurrency since the effect is random. Past trading volumes have no impact on the future prices of cryptocurrencies.
Wei’s research team concluded that the past Tether issuance has nothing to do with rises in Bitcoin price.
The team revealed that rises in Bitcoin price are an indication of market efficiency, rather than Tether issuance.