Tether's Impact on Bitcoin Price Not 'Statistically Significant,' Study Finds

The issuance of tether, the controversial cryptocurrency tied to the U.S. dollar's value, has had no meaningful impact on the price of bitcoin, an academic study has found.

The findings by Dr. Wang Chun Wei, a lecturer at the business school of Australia's University of Queensland, contradict widespread and long-running speculation that Tether, the company behind the stable cryptocurrency, has been issuing USDT to pump up the price of bitcoin.

"Our findings show that tether grants were potentially timed to follow bitcoin downturns and subsequent bitcoin/tether trading volumes increased ... However, the impact of tether grants on bitcoin returns were not statistically significant, and therefore tether issuances cannot be an effective tool for moving bitcoin prices."

"The highly correlated growth between tether issuance and bitcoin price raises several interesting questions: Is bitcoin growth driving Tether? Is tether issuance driving bitcoin? If one were to assume the worst case scenario, that bitcoin's price has been artificially pumped up by tether issuance, one would expect the market price of bitcoin to be closer to $2,000 based on the trendline before April 2017 and the marked growth in tether issuance."

"My paper tries to test this theory out empirically. Is it true that tether grants pushed up bitcoin prices?".

Wei broke it down in layman's terms: "We have a null model that tries to explain bitcoin returns using past bitcoin returns. We have a full model that tries to explain bitcoin returns using past bitcoin returns and past tether grants."

"We then show the full model isn't actually any better than the null model. Hence, past tether grants must have no impact on bitcoin returns."

"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," Wei writes in the paper.

"The grants come roughly at $100-250 million blocks. The daily trading volume of bitcoin is roughly $5-10 billion USD. At its peak, it was roughly $20 billion," he told CoinDesk.

"So the impact of tether is small. Claims saying that it is tether that props up bitcoin are definitely not true."