Wang Chun Wei, an academic researcher at the University of Queensland Business School has come out with findings to counteract people’s view on Bitcoin and tether. Generally, people believe that issuing tether (USDT) helps in manipulating crypto markets by increasing the bitcoin price. But the research has proven this general assumption to be false.
2017 Bitcoin Price and Tether
The report has as its title “The Impact of Tether Grants on Bitcoin” and its major focus is to assess the purported relationship between the price of Bitcoin and tether issuance. The academic wanted to ascertain if in the real sense prices of Bitcoin increase as the amount of tether issued into the market also increases. The finding though established a significant relationship between the duos dismisses the price movement theory.
A report had earlier claimed that some University of Texas researchers alleged that certain market manipulators made use of Tether’s USDT to influence Bitcoin price. The report quoted the researchers as saying that market manipulators used tokens from USDT to inflate prices during the extended bull run of 2017.
The researchers’ report was contained in a 66-page document and the researchers, namely Amin Shams and John Griffin said in it that whenever there was a market downturn, the saving grace of Bitcoin has always been a tether.
But latest study which utilizes VAR has now shown that the above position is actually incorrect. If anything, the study unequivocally asserted that there are no tangible facts to submit that USDT offers some financial cushion to Bitcoin at it price rally in 2017. The report further stated that
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.
Tether Issuance Raised Trading Volume
However, despite showing that USDT issuance does not really influence Bitcoin price, the report admits that it does contribute to Bitcoin’s volume of trade. In the said report, it was clearly shown that both Bitcoin and tether experienced the volume of trade increase.
But regardless of the increase in the volume of trade, researchers were quick to state that such an increase has no direct impact on the increase in Bitcoin price. They also said that an increase in trading volume is only for a while as the volume soon reverted to its original level.
The implication of this report is that when tether releases new tokens, many investors increase their purchase of bitcoin and other cryptos with it. However, such buying does not translate to a significant increase in the price of the crypto.