New Tethers Worth $1 Million Cause Bitcoin’s Recent Price Leap

By Sumedha Bose

BTC Wires: According to research from the University of Texas, one of the most popular altcoins, Tether, displays a routine of being used to purchase Bitcoin at crucial times. This had helped drive Bitcoin to a record peak back in December.

The entire crypto-industry has had queries regarding Tether and Bitfinex, especially since the latter lost banking partnerships, yet continued operations. The US Commodity Futures Trading Commission had called both organisations to court back in December, seeking proofs of Tether’s claims of being backed by USD. However, they are yet to be accused.

“Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation,” stated Bitfinex CEO JL van der Velde said in an email.

The paper from University of Texas, titled “Is Bitcoin Really Un-Tethered?”, aimed to look at how the 2.5 million units of Tether in the market currently have flowed, and how legitimate their $1 exchange claim is. The currency is pitched to prospective investors as an alternative with a lot of stability as compared to the abnormal volatility of BTC.

In the paper, researchers have also recorded Bitcoin’s unprecedented peaking to about $20,000 in December 2017, just prior to when it started crashing down. Even last Wednesday, the prices of BTC fell around 1.4%, and currently stands at about only $6,442.

The research managed to bring forward a pattern in the BTC price sways and supports. The parent company Tether Ltd. is what creates the Tether coins, over in a large volume at once, like 200 million units. After that, almost all the tokens are shifted to Bitfinex. Once Bitcoin prices start falling soon after this issuing, a number of exchanges including Bitfinex use Tether to purchase BTC “in a coordinated way that drives the price.”

“I’ve looked at a lot of markets,” said John Griffin, one of the authors of the paper. “If there’s fraud or manipulation in a market it can leave tracks in the data. The tracks in the data here are very consistent with a manipulation hypothesis.”

The paper explains a number of such patterns that have been discovered, such as the how the BTC flows aren’t symmetric. When BTC prices were falling, it’s purchase using Tether tended to show an increment. However, when BTC peaked, Griffin explain that the reverse didn’t quite happen. He said that that was “suggestive of Tether being used to protect Bitcoin prices during downturns”.