Tether Manipulation Pushed Up Bitcoin’s Price, Researchers Find

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The U.S. Dollar pegged tether has been utilized to support bitcoin’s price during market downturns, a brand new study published by the University of Texas at Austin professors. John Griffin and Amin Shams, of the University of Texas at Austin’s Department of Finance, published a study Wednesday linking the stablecoin with bitcoin’s prices throughout the 2017 price increases. The published study states that the investigators used algorithms to analyze block-chain data, we found that purchases with tether are timed following market downturns and lead to considerable increases in bitcoin prices. This generated a clear connection between the printing of new tether tokens and Bitcoin cost increases following bear runs, the study claims, stating: by comparing the blockchains of bitcoin and tether, we’re Able to establish that entities related to the Bitfinex exchange use tether to buy bitcoin when prices are falling.

Such cost supporting activities are successful, as Bitcoin prices increase following the periods of intervention. These effects are present just after negative returns and periods following the printing of tether. Nevertheless, the two notably discovered that it doesn’t take a large amount of tether to prop bitcoin’s price – even less than 1 percent of extreme exchange of tether for bitcoin has significant aggregate price effects, the study said. The algorithms the two developed were able to cluster groups of associated bitcoin purses, in accordance with the study. This allowed the investigators to map how tether was dispersed, and how it affected bitokoyn prices.

The study explains that tether is created, moved to Bitfinex, and after that Slowly moved to other crypto exchanges, largely Poloniex and Bittrex.”. It continued on to note that usually, the token isn’t redeemed by the issuer, and the major exchange where tether can be exchanged for USD, Kraken, accounts for just a small part of the transactions.”. The study focuses mainly on the supply based explanation for the link, but the researchers also note that the demand for bitcoins may create a comparable demand for tether, especially by investors who can’t move substantial sums of cash into cryptocurrency directly. Bitcoins image via Shutterstock. A leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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