Wednesday, June 13, 2018

"Has bitcoin come to the end of its Tether?"

See what she did there?
No? Read on.

From FT Alphaville:
Remember Tether, the eurodollar-lookalike digital currency that many people suspected of playing a major role in propping up the price of bitcoin and other cryptocurrencies?
A new paper from University of Texas finance professor John Griffin -- an academic who is known for uncovering fraud and manipulation in more traditional financial instruments such as the VIX index -- and graduate student Amin Shams provide some strong evidence for such up-propping.

Here's a summary of the report's findings, released Wednesday, (emphasis ours):
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 per cent of hours with such heavy Tether transactions are associated with 50 per cent of the meteoric rise in Bitcoin and 64 per cent of other top cryptocurrencies. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends.

These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices....