Tether has been under the scrutinous microscope of the mainstream financial media for over a year, having been accused of artificially propping up the price of bitcoin. Researchers have accused the Tether team – alongside Bitfinex, which reportedly shares a CEO with the stablecoin – of manipulating the bitcoin price during the 2017 bull run leading up to the 2018 crypto crash.
The latest accusations hurled at Tether are that not only was bitcoin’s year-end 2017 rally manipulated but it could be traced back to a single wallet address on Bitfinex, not a flood of retail investors that is widely believed to have fueled the leading cryptocurrency’s gains. That was enough to get the goat of pretty much the entire crypto market. Now Tether has come out swinging at its accusers, claiming they don’t understand crypto market dynamics:
“Tether and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing. All Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets.”
Tether’s ire is aimed at two professors – John Griffin from the University of Texas and Amin Shams from Ohio State University. Griffin and Shams – both of whom recently updated their original hit piece. While their first paper surfaced on the heels of bitcoin’s ascent to nearly $20,000, the BTC price has most recently been slashed to about the $9,000 level. Tether describes the report, which was spotlighted by Bloomberg, as nothing more than “a watered-down and embarrassing walk-back of its predecessor.”
Tether is a wildly popular stablecoin that is relied upon by institutional investors to trade cryptocurrencies. In recent months, USDT trading volume eclipsed that of leading cryptocurrency bitcoin as the most heavily coin traded based on daily and monthly data, Forbes reports.
It’s much easier and faster to use Tether as an on-ramp onto cryptocurrency exchanges vs. the U.S. dollar, the latter of which requires more regulatory hoops to jump through. Given its 1:1 ratio with the USD, holding USDT is basically the same as holding the equivalent in dollars.
The crypto community has been quick to come to Tether’s defense. Take Mati Greenspan, eToro senior analyst and the de facto voice of reason for crypto Twitter. He calls out the researchers for hypocrisy, suggesting that what Tether may or may not have done is no different than what financial institutions have been shamelessly doing for decades.
Source: Mati Greenspan on Twitter
Economist and trader Alex Kruger launched a Twitter poll asking the crypto community, “What would happen to BTC if Tether goes under?” Out of nearly 3,700 votes, more than one-third, or 38%, of responses believe bitcoin would suffer a “temporary 10%-40% crash.” About one-quarter of those polled believe the BTC price “would pump.”
Despite the controversy surrounding Tether, the stablecoin has not lost parity with the U.S. dollar and remains the No. 5 cryptocurrency based on market cap.