Opinions

What is Up With Tether?

Tether printing failing to pump up BTC and the cryptomarket

Pumping the cryptocurrency market is proving to be a difficult task for digital asset exchanges. At least that appears to be the case when we look at Tether, one of the most traded digital assets and one that has also been tipped to manipulate the price of Bitcoin.

The asset marched well at the end of last year, when Bitcoin hit an all time high. It was from a University of Texas’ professor’s research that showed how Tether seemed to stabilize and manipulate bitcoin prices.

Finance professor John Griffin and co-author of research, Amin Shams wrote:

Tether seems to be used both to stabilize and manipulate Bitcoin prices

$500 million in August

Over $500 million in stablecoin Tether (USDT) has been “printed” throughout August without a significant increase in Bitcoin’s price, infact, the largest cryptocurrency has fallen 15%. The once largely sought after high price movement of BTC has faded away of late, with the pioneer cryptocurrency moving downwards and taking every other digital token with it.

Last year, however, the same amount of money could have caused up to $1,000 in BTC price fluctuations, indicating that either the market has matured to a great extent or that there is an overwhelming number of sellers.

Collusion between Tether and Bitfinex?

Bitfinex, also termed as the parent exchange of Tether, shares the same management team as the latter and both have managed to pretty much dodge all questions from the crypto world since last year, when Bitfinex lost banking relationships but yet continued to operate. The U.S. Commodity Futures Trading Commission (CFTC) subpoenaed both firms in December, seeking proof that Tether is backed by a reserve of U.S. dollars, as it claims. Up till now, Tether and Bitfinex haven’t been accused of wrongdoing.

Bitfinex Chief Executive Officer JL van der Velde said in an emailed statement:

Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation, Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.

To date, a whopping $2.8 billion Tether have been issued, according to the company’s website. The digital currency generally trades for around $1 because each coin is supposed to be backed by $1 of fiat money in a bank.

What analysis report tells

The currency, which started back in 2015, has been claimed to be a stable alternative to Bitcoin’s volatility, acting as a safe haven for crypto investors. But Tether has also been preached as a way to move the ‘price at will’ of smaller digital tokens and coins. Last year, Tether was linked to Bitcoin, Ether and Litecoin about 85% of the time. When prices crashed early this year, that correlation fell by an average 93%.

Source: Chainalysis

Tether has issued $515 million worth of new tokens this month. All of those were sent to Bitfinex. After issuance, all Tether pass through the Bitfinex trading platform, Tether’s only direct client. From there, about 80% of it is then moved to six other exchanges: Bittrex, Poloniex, Huboi, OKEx, Binance and Kraken.

Source: Chainalysis

Yet, even more than half a billion in new Tether has been unable to affect to affect the price of BTC and other small cryptocurrencies, with the former having dumped up to 37% from July 30th to August 21st.

Will we ever find out the reality?

There are three plausible situations for that to happen. One, a serious, competent, trustworthy, professional audit firm performs an audit on Bitfinex and Tether management. Two, a legal or regulatory investigation force tells Tether to open up their books. Three, a whistleblower tells us everything there is to know.

For now, their users won’t care, as long as one Tether buys you exactly as much bitcoin as one dollar on every crypto exchange that supports them.

Razi Khan

Researcher, Electrical Engineer and a teacher, Razi is one who takes great intrigue in the prospects of blockchain and cryptocurrencies (BTC in particular) while contributing a critical approach over the subject regularly. Contact the editor at editor.news@blockpublisher.com

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