According to a new study, tether issuance doesn't affect bitcoin's price.
Come again?
For months now, everyone and their dog has been convinced that tether and Bitfinex pulled over a giant scam on the entire investing community back in 2017.
The claim was that tether was issued very strategically and used to support bitcoin prices any time they started to crash back in 2017.
This resulted in the massive rally we saw end of 2017 where bitcoin reached nearly $20k.
Once this information started to circulate, news outlets and even some regulators starting crying "foul!".
Saying that bitcoin was manipulated and the prices were fake...
Fast forward to today and that might not exactly be the case.
A new academic study by researcher Wang Chun Wei of the University of Queensland Business School was able to show that the tether issuance had a negligible effect on bitcoin prices.
The report can be seen here:
https://www.sciencedirect.com/science/article/pii/S0165176518302556
The report uses a Value-at-Risk (VAR) model in order to show that there is not actually any significant price movement directly related to tether issuance.
The big take away from the report:
“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 suggest Bitcoin returns are showing greater signs of market efficiency than previously studied on older datasets.”
(Source: https://www.ccn.com/tether-no-real-impact-on-bitcoin-price-university-researcher/)
Though, there is a correlation to trading volumes.
IE, trading volumes tend to be elevated for the 5 days following tether issuances.
(Source: https://www.ccn.com/tether-no-real-impact-on-bitcoin-price-university-researcher/)
No evidence of any correlation to bitcoin prices?
Given that finding one might think bitcoin prices would rally $2,000 on the findings considering the original report that implicated tether and Bitfinex crashed prices by $2,000.
But alas, that is not how the crypto markets work.
Fear sells!
The most likely reason for the increase in tethers as prices were falling was due to people selling out of bitcoin and opting in to a stable coin like tether in order to preserve profits.
Which is exactly what you would expect people to do.
The next time someone tells you that bitcoin is all a scam and that tether is artificially supporting prices, point em to this report.
Stay informed my friends.
Image Source:
