Although cryptocurrency prices have correlated with issuances of the stablecoin Tether (USDT) in the past, an issuance of over $500 million worth of USDT in August failed to significantly influence the crypto markets.
According to an article published by Bloomberg on August 24, the link between Tether issuance, which has “allegedly been used to manipulate the price of Bitcoin,” and cryptocurrency prices is all but gone.
Although a correlation between Tether issuance and a rise in crypto prices was observed throughout 2017 and the early part of 2018, crypto prices were largely sideways or negative in August, despite the issuance of half a billion dollars worth of USDT, a “move that in the past would have often coincided with a rally in Bitcoin.” Bitcoin is down 19 percent for the month.
Bloomberg published an article in a June reporting on a University of Texas professor whose research shows that “Tether seems to be used both to stabilize and manipulate Bitcoin prices.” Finance professor John Griffin and co-author Amin Shams released a paper in June 2018 that claimed that Bitcoin reached its all-time high of $20,000 due to price manipulation involving both Tether and Bitfinex, which is reportedly “the only direct client” of Tether.
Tether generally trades for about $1 and is allegedly backed one-to-one with fiat dollars locked away in bank accounts.
A research paper by Griffin and Shams analyzed 87 of the largest purchases of Tether with BTC from March 2017 to March 2018, finding that although these purchases accounted for “less than 1 percent of the time period examined, they amounted to about 50 percent of Bitcoin’s compounded return over that year.”
The Bloomberg article also cited a recent research paper by Chainalysis, which highlighted that Tether issuance had a strong correlation to the major cryptos, including Bitcoin, Ethereum, and Litecoin, but also increasingly impacted the prices of smaller coins such as EOS and NEO, especially in the period between January and June 2018.
Tether issued $515 million new tokens in August, bringing the total of USDT issued to $2.8 billion according to data obtained from Omniexplorer. However, despite issuing almost 20 percent of the entire supply of USDT in August alone, the issuance had little effect on any major cryptos and has also left smaller cryptocurrencies completely unaffected. The prices of EOS and NEO dropped 37 and 44 percent in August respectively.