Tether Has No Significant Impact on Bitcoin Price, New Study Suggests

USDT grants cause a brief increase in crypto trading volumes, but no substantial effect on BTC price movements, researchers note.

Tether (USDT) has no “statistically significant” impact on the Bitcoin (BTC) price movement, according to a new academic study examining the suspected correlation between the USD-pegged stablecoin and the original cryptocurrency.

The report, titled “The Impact of Tether Grants on Bitcoin” and published last week, was conducted by researcher Wang Chun Wei of the University of Queensland Business School. Using Value-at-Risk (VAR) analysis, Wang concluded that despite the existence of a “positive relationship” between new Tether grants and “increased crypto-trading the following day,” the effect on trading volumes is temporary, and volume generally returns to normal within five days, without causing any substantial BTC price swings.

“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,” the paper reads.

The study also found that USDT grants have a high rate of autocorrelation, indicating that Tether deliberately breaks large grants into smaller blocks for issuance over several days in order to minimize their potential effect on crypto exchanges. In addition, the research presents evidence suggesting that USDT trading volumes increase following a BTC price drop, which could be a result of investors resorting to stablecoins amid bearish market sentiment.

Late last year, the US Commodities Futures Trading Commission (CFTC) subpoenaed Tether, seeking proof that the coin is backed by a sufficient reserve of US dollars. While the stablecoin and its developers were not accused of wrongdoing, the controversy persisted. A June paper published by researchers at the University of Texas claimed that the Bitcoin spike to nearly $20,000 in December 2017 was the result of price manipulation orchestrated by Tether.

With another major influx of new tokens issued in August, USDT was expected to cause cryptocurrency price swings. However, according to a recent report by blockchain research firm Chainalysis, the stablecoin is no longer able to have a major impact on the wider crypto market.