Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Professor John Griffin: Yes, Tethers Flowed into Bitcoin at Key Moments

Cryptocurrency Jun 13, 2018 09:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Professor John Griffin: Yes, Tethers Flowed into Bitcoin at Key Moments
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

Economics professor John Griffin recently published a paper based on data that reveal market manipulation through Tether (USDT) tokens on the Bitfinex exchange. The paper reveals a trend that was only a social media meme, and was accepted with skepticism. But trading data reveal a pattern of behavior, especially strong after March 2017, when Bitcoin prices started to take off, to reach a peak near $20,000 in December.

“The hype in cryptocurrency isn’t just 20-year-olds buying Bitcoin in their garage -- that’s part of it - but there are big players moving the market and having a huge price impact,” Griffin said for Bloomberg.

The paper, co-authored with Amin Shams, looks at patterns where new Tethers are issued while Bitcoin slides, and then sent to Bitfinex to prop up the price and create hype for buyers. Griffin believes Tethers have a double effect - avoiding panic and stabilizing Bitcoin when interest flags, thus supporting the trend; but also the possibility for outright manipulation and orders that bait traders to make risky decisions.

“Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies,” argues the paper.

Bitcoin trading is fully unregulated, and the market behavior of bots, whales, or other entities is easier to notice and discern. Usually, Bitcoin’s rise happened within hours, if not minutes, creating additional hype and buying from a wider circle of investors.

Griffin notes the increased public interest into Bitcoin. But he also presents the hypothesis that Tethers do not reflect real market demand. In contrast, they are “pushed” onto the market to create artificial demand.

“Similar to the inflationary effect of printing additional money, this can push cryptocurrency prices up,” explains the paper.

The hypotheses also suggest that Tethers may be issues as a form of fractional reserve banking activity, an injection of liquidity that is only later backed by gains. This means that Tethers are printed in order to bait real dollar investors to buy up Bitcoin for cash. If Bitfinex and Tether, which share a management team, sell Bitcoin to cash buyers, they could build a real backing for Tethers, in part or in whole. But the effect would be an artificial exuberance and extra liquidity where investors would be far more cautious without the incentive.

The in-depth discussion and evidence of the effect of Tethers comes at a moment when an investigation was launched against four exchanges on possible Bitcoin price manipulation.

The Tether digital assets have increased to about 2.5 billion tokens after one last printing a few weeks ago. Since then, a new asset, True USD (TUSD) entered the scene, this time supposedly not pushing assets, but waiting for real dollar buying. Tether trading also moved from Bitcoin and into altcoins, with Binance opening up pairs against USDT almost every day. Thus, the increased liquidity may lead to a similar growth in the price of some smaller digital assets.

After Tethers moved out of Bitcoin in the past months, the asset slid, with the latest shakedown taking BTC prices to $6,514.46. The share of Tether trading has increased to record levels, with more than 18% of crypto trades achieved against the fixed price token. This outstrips any activity with exchange coins, and other fixed-price assets. As investor enthusiasm wanes, and new inflows of cash may be slower, the crypto market is notably relying on Tethers to keep the trades flowing.

This article appeared first on Cryptovest
Professor John Griffin: Yes, Tethers Flowed into Bitcoin at Key Moments

Related Articles

Kraken's incoming CEO: No plans to register with SEC
Kraken's incoming CEO: No plans to register with SEC By Cointelegraph - Sep 26, 2022

The newly appointed CEO of crypto exchange Kraken has stated that he has no plans to register the company with the Securities and Exchange Commission (SEC) or delist any tokens...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email