- A new study by the University of Queensland finds that Tether does not affect the value of Bitcoin.
- It does, however, affect the trade volume of Bitcoin.
- Investors flock to Tether and other stablecurrencies when cryptocurrencies do badly.
One of the biggest controversies in the cryptocurrency community is the role of Tether in the price of Bitcoin. For years, it has been speculated that Tether was only created to act as a tool with which to manipulate the value of Bitcoin. Supposed correlations between the issuance of new batches of Tether and fluctuations in the value of Bitcoin further fueled these speculations.
However, according to a study carried out by Wang Chun Wei of the University of Queensland Business School, Tether does not actually have any impact on Bitcoin price.
What is Tether?
Tether is a stablecoin which is issued by Tether limited which claims to be backed up by fiat currency, the U.S dollar to be precise, though concerns have been raised that no independent auditors have been able to confirm a 1:1 ratio of dollar reserves to tokens, but rather have been forced to rely on reports by the Tether team.
Claims that Tether was being used to manipulate the value of Bitcoin started in early 2018 with a study carried out by John M. Griffin and Amin Shams who claimed that increase in the trading of Tether, particularly on Bitfinex resulted in a remarkable increase in the value of Bitcoin at the end of 2017.
Another report made by Bloomberg found that the price of Tether was being manipulated on Kraken and that there were several irregularities in orders going out which implied that an automated system was involved in the trading.
On Tether’s part, the management has denied any wrongdoing. The CEO of Tether and Bitfinex, JL van der Velde said:
“Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuance cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex.”
Despite all the drama and speculation, it now seems that Tether is not a manipulation tool after all.
In the study, a VAR model was created to illustrate both Tether and Bitcoin trades to show their influence, or lack thereof, on each other.
The study gathered that Tether trading does not impact the value of Bitcoin but does impact the traded volume.
When Bitcoin sees a decline in value, investors tend to quickly purchase Tether and other stablecoins. This is because, after a slump in the value of a cryptocurrency, investors crave the security of a currency that is backed up with fiat currency.