Tether, Inc. Responds to Recent Griffin and Shams Paper
Tether, Inc. responded to the second installment of the Griffin and Shams academic research, suggesting active market manipulation during the bull run in 2017.
Tether, Inc. posted a response to the new Griffin and Shams paper on Bitcoin (BTC) trading activity in 2017. The paper, which suggested that a single “lone whale” caused the price climb, is faulty and based on incomplete data, stated Tether, the issuer of USDT.
Tether stated that it has “never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing. All Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets.” Tether, Inc. claimed the paper was based on incomplete data, and that the USDT issuances in 2017 reflected organic demand in BTC.
Once again, USDT is not fully backed by fiat, but by “reserves” which most probably include a loan to the Bitfinex exchange, with a size of $900 million. At this point, it is unknown what percentage of USDT is covered by fiat, but the last known ratio is 74%.
The claim by Griffin and Shams repeats former observations that Tether minting wallet activity preceded BTC price rallies. Supporters of Tether claimed it was one of the chief on-ramps for buying BTC in 2017.
However, actually using USDT was not as popular, despite the minting. New accounts to acquire BTC were noted mostly on Coinbase, as well as other fiat on-ramps, while Tether was not actually popular with retail investors.
The “lone whale” narrative has been repeated by skeptical Twitter accounts, who suggested it was not a whale but a bot that set the pace for BTC price action, and achieved $1,000 dollar days.
Tether skepticism still prevails, though this time, it is harder to correlate USDT movements. The coin is now more distributed across several blockchains and exchanges.
Currently, the supply of USDT remains unchanged, but the flows of ETH-based USDT have become more active. During BTC rallies or sell-offs, the share of USDT trading grows to above 76%, showing that the stablecoin is still the leading source of price discovery for BTC.