Academics at crypto analytics firm Longhash has stated that they have created a metric called “Tether Purchasing Power,” which provides in-depth details into the query of whether stablecoin Tether (USDT) was used to rig cryptocurrency markets.
As per Longhash, the metric calculates the quantum of BTC that could be purchased with the total Tether supply at any point in time. Therefore, a higher ratio indicates a possibility of market manipulation by Tether.
The researchers provide data that indicate an increase in Tether Purchasing Power during 2017 bull run, but then began to drop by the end of the year. Bitcoin, at that time, was trading near all-time high.
Data provided by Longhash indicates that Tether was in a position to rig the markets when BTC price was downhill, as it rallied considerably when the market was under bear grip, hitting a peak by the end of 2018. The academics further stated that:
“This suggests that even if Tether were indeed manipulating the market, its ability to do so actually is strongest when the Bitcoin price falls. This contradicts the claim that Tether issuance drove the 2017 bull market. The supply of Tether actually failed to keep up during the height of the bull market.”
The latest research paper headlined “Is Bitcoin Really Un-Tethered?” pointed out that a single trader or entity allegedly caused Bitcoin’s historic surge in the final leg of 2017. As per the paper, the Tether stablecoin and its creator Bitfinex played a crucial role in the rally.
Bitfinex rejected allegations, calling the document “a transparent attempt to use the semblance of academia for a mercenary money grab.” Several analysts acknowledge and brush away the single whale theory, stating that while the cryptocurrency market can be rigged, it is beyond logic to claim that a single individual drove the prices so steeply in short-span of time.
Juan Villaverde and Martin Weiss of Weiss Ratings agency referred it as “preposterous,” adding:
“There is abundant anecdotal evidence that throws great doubt on the one-large-player theory. For example, exchanges were swamped and not able to onboard new customers. Google searches for “Bitcoin” and “cryptocurrency” were off the charts. New crypto businesses and ICOs were popping up every day. All of this — and more — suggests that the crypto surge of 2017 was very much a mass phenomenon, with heavy public participation.”