Following allegations that the Tether stablecoin was responsible for the variations in the value of the Bitcoin last year, a professor in the University of Queensland has moved to debunk those theory.
Dr. Wang Chun, Ph.D., Finance in his report, explained the integration of his model called the Vector Autoregression (VAR), to disprove the allegations leveled against Tether as being the major catalyst to Bitcoin’s unusual surge last year towards the $20,000 mark.
The VAR which studies relationships between variables over a particular given period was fed diverse data containing Tether grants, daily Bitcoin trading volume, daily Tether trading volume, and Bitcoin returns. After the ensuing analysis, and comparison, Chun claimed to have discovered four significant conclusions:
No empirical evidence could related Bitcoin uptrend with the Tether grants.
Increased Tether grants led to rising in Tether and Bitcoin trading. However, the increase in trading volume didn’t increase Bitcoin returns.
Tether grants are issued in small chunks than at one go. It may also suggest demand for Tether coins are clumped and exhibit time clustering.
Evidence shows Tether trading increases every time before Bitcoin fall. It means investors shift from volatile cryptocurrencies to ‘stable coins’ in times of excessive market volatility.
Tether Should Not be Held Accountable
Touching on the subpoena issued to Tether Limited recently by the US Commodity Futures Trading Commission (UCFTC), along with a report that claimed the Tether issued the USDT to facilitate the surge of the Bitcoin, Dr. Chun noted that the VR model did not take those developments into consideration, before its construction.
He reiterated that the paper did not study the veracity of the claim that the USDT coins were indeed backed by the US dollars; instead, the model only examined the effect of the issuance of the digital currency on resultant cryptocurrency price.
In his report, Chun says the study fails to find any sort of evidence that implied that issuances of the USDT caused the increase in Bitcoin returns in whatsoever way. Although, the VAR model did discover that issuances of the Tether stablecoin caused an increase in the trading volume of Bitcoin in some occasions, but only for a short period.
It was however clear from the study that people saw the Tether stable coin as an insurance against the inconsistency of the crypto market. The study points out that traders did leave bitcoin and altcoin positions at unfavorable conditions and fall in value as the Tether stable coin became a safer shield against the volatility of the bitcoin.