Contrary to the widely held belief that Tether (USDT) has been used to manipulate the coin market in the past, a new report is saying otherwise. The study which was led by Queensland University’s business school researcher Wang Chung Wei shows that Tether has little effect on the price of Bitcoin.
The document that was titled, “The Impact of Tether Grants On Bitcoin” made use of the Value at Risk (VAR) in concluding that there is no significant price movement resulting from the issuance of Tether and therefore it would be safe to posit that there has been no manipulative tendencies associated with Bitcoin with respect to the issuance of Tether.
The report contradicts an earlier on released by researchers from the University of Texas that claimed that the massive bull-run of Bitcoin in 2017 can be linked to the stable coin Tether. That report said that the release of Tether coincided with the times Bitcoin prices spiked considerably.
That report by professor John Griffin and Amin Shams re-echoed the belief in some quarters that the coin market is manipulated. That belief is instrumental to the reluctance of the Security and Exchange Commission to approve the bitcoin ETFs even though a number of firms have applied for them.
The Wang Chung Wei report said in part,
“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.”
One of the findings of the study is that there is a surge in the volume of digital currencies traded the day after Tether was released marking increased trading activities. However, this does not necessarily imply a surge in the price of Bitcoin since there are times prices increase without increase in volume. It also said that even when there is increased volume traded, the effect is not long term as volume generally returns to normal after a few days.
The basic take away from the study seems an implication that when new tokens are issued for the stable coin, traders usually use them to purchase cryptocurrencies but since the volume is negligible compared to the total coin market, the effect is insignificant.
There are indications that when price of Bitcoin drops that the volume of the USDT sometimes increasing as many traders move to the stable coin to cushion the effect of the falling prices just as the strength of BTC has been known to be inverse to the strength of the USD.