New study: This is how Tether influences the Bitcoin price in 2019

  • A new study by Token Analyst confirms that Tether’s new mintage also had an impact on the Bitcoin price in 2019. 
  • If the company prints new USDT in the form of the ERC20 token, then the Bitcoin price rose in 70 percent of all cases. 

Tether (USDT) is one of the most controversial cryptocurrencies on the market. Not only the question whether all USDTs are covered by an equivalent amount of US dollars by the company behind the stable coin has been on the agenda of the crypto community in recent years. Also the question of the influence of new tether minting on the Bitcoin price is a much-discussed issue on which several studies have already been published. For outsiders it is often not comprehensible why Tether prints new USDT. Tether states that new USDT are only minted to fulfill orders from larger customers. But that doesn’t make it any less opaque.

The result of the study will therefore come as no surprise to the crypto community. According to Token Analyst, the study shows how Tether contributed to the Bitcoin rally in 2019. The study shows that on days when USDT ERC 20 is minted, the Bitcoin price rose in 19 out of 27 cases (70 percent). Similarly, the BTC price rose on 12 of 24 days (50 percent) when USDT Omni was minted.

In 2019, a total of $1.5 billion in Tether were minted on both Omni (USDT Omni) and Ethereum (USDT ERC20). Omni is the protocol originally used by Tether to issue Tether, which is based on the Bitcoin network. USDT ERC20 is the USDT issued by Tether, which is based on the Ethereum network.

Sid Shekhar, co-founder of TokenAnalyst, told Bloomberg that the Tether version of Ethereum probably has a higher rate because Ethereum transactions are faster:

I think the discrepancies are appearing recently primarily because Tether on ERC-20 is just much easier than Tether on Omni to use as a means of transferring value quickly,” Sid Shekhar, co-founder of TokenAnalyst, said in an email. “Ethereum is a speedier chain than Bitcoin. As Tether is primarily used as a way to realize gains and get in and out of volatile crypto-asset positions in times of market movement, the speed of transferring into/out of it is critical.

Is the number of minted Tether important?

The analysis company Token Analyst has also investigated the influence of the net inflow and outflow of tether. In the chart below, each green bar represents an inflow. Each blue bar represents an outflow of Tether (USDT) from the market.

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For USDT Omni, there is an inverse relation between the minted amount and the Bitcoin price movement. This means that the more USDT tokens that were minted, the smaller the Bitcoin price decrease was. On the other hand, a correlation of 15.8% between the issue amount and the Bitcoin price movement was found for the USDT ERC 20. This means that the higher the number of minted tokens, the higher the potential increase in the Bitcoin price.

According to Shekhar, the data could make it easier to predict future price movements:

Traders can leverage this knowledge by tracking mints and burns of the ERC-20 Tether token as it’s closely tied to movements in Bitcoin prices.

However, from our point of view it is important to note that correlation studies cannot establish causalities, but are merely interpretative. From a statistical point of view, each event (two possible events) has a 50% chance of occurring. From a mathematical point of view, for example, in medicine a correlation of 50 percent or more is the only way to speak of a correlation.

Study of the University of Sussex confirms Token Analyst

About a week ago, another University of Sussex survey was published showing that both the Tether and Bitfinex markets for BTC were “decoupled” from the broader market on two occasions in the last 12 months. According to the research, fluctuations in Bitfinex markets have correlated with the launch of USDT/USD trading on the platform in November 2018 and the massive issuance of Tether in March 2019.

About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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