According to a new academic study conducted by researcher Wang Chun Wei of the University of Queensland Business School, most widely used stablecoin has a negligible effect on Bitcoin. Earlier it was believed that the issuance of the tether (USDT) is used to manipulate the cryptocurrency market by boosting the price of Bitcoin.
Correlation between Tether’s USDT Token and Bitcoin price rally of 2017
In July, researchers from the University of Texas claimed that Tether’s USDT token was used by market manipulators to artificially inflate the price of Bitcoin during the bull run of 2017. In the report, professor John Griffin and Amin Shams wrote that during the market downturn Tether has been used to provide support for Bitcoins. But the new study debunks these claims stating that there is no correlation between Tether USDT token and Bitcoin price rally of 2017. The report titled “The Impact of Tether Grants on Bitcoin” examines Tether Bitcoin price manipulation theory with the help of Value at Risk (VAR) model to establish the positive correlation between Tether’s USDT token and trading volume of Bitcoin. The study proved that there is no significant movement in the price of Bitcoin because of the Tether’s USDT token.
Correlation between Tether USDT Token and increased trading volume of cryptocurrencies
The researchers have found the evidence of positive correlation between the issuance of Tether’s USDT tokens and increased trading volume of cryptocurrencies on the following day. After the tether grant, there was an increase in the trading volumes of Bitcoin as well as Tether. However, the researchers cleared that increase in trading volumes did not lead to the increase in the price of Bitcoin. According to the researchers, the size of Tether grant was not enough to create a significant impact on the price of Bitcoin. The effect on trading volume was temporary and within a few days, trading volumes of Bitcoin reached to the normal. Which means after the issuance of Tether USDT tokens, crypto investors were using Tether tokens to buy Bitcoin and other cryptocurrencies.
The study also found that after the issuance of Tether token, during the Bitcoin downturns investors started to keep their holdings in stablecoins which leads to the increased trading volume of USDT. To minimize the price impact on cryptocurrencies, Tether broke large grants into smaller blocks for issuance over several days.