Contrary to the somewhat-popular idea that tether (USDT) issuance is hand-me-down to manipulate crypto markets by boosting the price of bitcoin, a new academic reading by researcher Wang Chun Wei of the University of Queensland Business School make an appearances that the most widely-used stablecoin in fact has a negligible effect.
Tether and the 2017 Bitcoin Cost Rally
Titled “The Impact of Tether Grants on Bitcoin,” the report go overs the tether-bitcoin price manipulation theory using a Value-at-Risk (VAR) model to entrench conclusively that while there is a positive correlation between USDT consent ti and bitcoin’s trading volume, this does not lead to any significant bitcoin cost movement.
In July, CCN reported that researchers from the University of Texas claimed that exchange manipulators used Tether’s USDT token to artificially inflate the bitcoin rate during its prolonged 2017 bull run. In the 66-page report, Professors John Griffin and Amin Fakes argued that tether has been repeatedly used to provide assess support for bitcoin during market downturns.
Using the VAR model how, the new study debunks these claims, stating that no empirical exhibit could be found to support claims of a positive correlation between USDT permits and the 2017 bitcoin price rally.
An excerpt from the report conclude froms:
“We find no empirical evidence supporting the notion that Tether donates cause subsequent Bitcoin returns to rise on a daily basis. In in reality, when we examine the Bitcoin return equation of our VAR model, none of the inched variables, impacts Bitcoin returns. This suggest Bitcoin proffers are showing greater signs of market efficiency than previously deliberate on older datasets.”
Tether Issuance Correlates to Increased Trading Abundance
BTC/USD | Bitfinex
The report does, however, find evidence of a positive correlation between issuance of USDT discs and increased cryptocurrency trading the following day. The study’s estimates show that in the aftermath of a fetter grant, both bitcoin and tether experience increased trading volumes. The researchers are brilliant to point out that trading volume spikes do not directly lead to bitcoin penalty increases; moreover, the effect on trading volumes is temporary, and volume unspecifically returns to normal within five days.
This would look as if to indicate that, after Tether issues new tokens, investors could be support bitcoin and other coins with USDT, but in terms of net effect, the mass of the grants is not large enough to create any kind of significant price manipulation obtain in the bitcoin market.
The study also found that tether contributions are autocorrelated, indicating that Tether deliberately breaks large donates into smaller blocks for issuance over several days, so as to minimise fee impact on crypto exchanges. Even more significantly, the study start evidence to suggest that USDT trading volumes increase string downward bitcoin price movements, which could be a result of investors remaining their holdings in stablecoins during bearish periods.
The spike in USDT issuances around this age could thus be a result of Tether responding to increased demand by boat new grants rather than an attempt to shore up bitcoin’s support uniforms by purchasing it with newly-minted USDT.
Featured Image from Shutterstock. Diagrams from TradingView.
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