# Bitcoin: Old Tether report brings fresh wind in the manipulation scandal
Does Tether have a white vest? A study relieves the publishers of the supposedly US dollar-covered stable coin regarding the allegation of Bitcoin market manipulation. Does the report manage to invalidate the allegations of manipulation?
# The anonymous tether critic
Stable Coin Tether has faced allegations of manipulation of the Bitcoin course since the publication of an anonymous report in January of this year. Under the title "Quantifying the Effect of Tether," the report suspects that the Stable Coin was responsible for nearly half of Bitcoin price gains over the period under review. The report concluded that new units were "printed" depending on the crypto-market situation and that its growth was not the result of "organic" demand.
# Doubts about the coverage of the stable coin
Also, that the stable coin is really 100 percent covered by US dollar deposits, the author doubts. Tether Limited, the publisher of the Stable Coins, is persistently claiming this - but so far does not have watertight evidence. An expert opinion published by the law firm Freeh Sporkin & Sullivan on June 20 confirmed, on the basis of random samples, that the stable coin was covered by the US dollar. However, the report lacks credibility, as attorney Sullivan is also part of the advisory board of one of the two (anonymous) tether banks.
# Persistent suspected manipulation
Above all, the report highlights abnormalities in the relationship between the stable coin and Bitcoin. For example, 48.8 percent of Bitcoin 2017's share price gains came within the first two hours of issuing new USDT tokens on the Bitfinex crypto exchange. In addition, the author described the deposit / withdrawal movements at Bitfinex as "unusual" and in need of further research. The report from the beginning of the year also assumes a price slump of 30 to 80 percent should the rumor of manipulation for the stable coin be confirmed.
Who wrote the report for the private think tank "1000x Group", was not known. However, the group revealed that the author is an ex-Google employee specializing in machine learning and statistics.
# Confirmation from Texas
On June 13, then, John M. Griffin and Amin Shams looked at the relationship between bitcoin price and stable coin issuance in their study "Is Bitcoin Really Un-Tethered?". The two researchers from the University of Texas came to a similar conclusion to the report from the beginning of the year - namely, that there is a striking correlation between the stable coin and Bitcoin:
"From 1 March 2017 to 31 March 2018, the actual Bitcoin price will increase from around $ 1,190 to $ 7,000 - a 488 percent return. By contrast, if you discount the 87 tethered hours, the price series ends at around $ 4,100, an increase of 245 percent. Therefore, the hours with the highest tether flow, which account for less than one percent of the time period, appear to be associated with 50 percent of Bitcoin's buy and hold revenue. "
# The report also featured a possible theme from the tether leadership floor:
[...] if the Tether founders, like most early cryptocurrency buyers and exchanges, hold Bitcoin for the long term, they have a great incentive to generate artificial demand for Bitcoin and other cryptocurrencies by" printing "tether. Much like the inflationary effect of printing extra money, this can push up cryptocurrency prices. Second, the coordinated deployment of tether creates the ability to manipulate cryptocurrencies. When prices fall, the tether creators can turn their tethers into Bitcoin, pushing Bitcoin up.
Then they trade bitcoin back in dollars to replenish tether reserves as the bitcoin price goes up. "
# Much wind for nothing?
Recently, the VWL journal "Economic Letters" has published a report that breaks a lance for the stable coin. The author, Wang Chun Wei, had already published his paper on SSRN in May. After initially receiving little attention there, public interest grew with its inclusion in the October issue of Economic Letters.
In the report "The Impact of Tether Grants on Bitcoin", Wei Bitcoin and Tether are also subjected to a statistical analysis. By using a vector autoregressive model (VAR), Wei comes to the conclusion:
"Our paper does not examine whether or not the newly issued tether tokens are actually US dollar denominations, but we are investigating the impact of these cryptocurrency issues on the future cryptocurrency price. In summary, we do not find any indication that USDT issues will result in a later increase in bitcoin returns. "
At the same time, however, the report notes that editions of the stable coin could increase the trading volume of bitcoin (and tethers) in the short term. Here, the report explicitly agrees with the results of the January anonymous report.
In addition, it is expected that Tether Limited will make the issuance of new tokens dependent on the situation on the Bitcoin market.
# Conclusion: No complete rehabilitation for the stable coin
The study fails to completely eliminate the allegations of tampering (and Bitfinex). The applied VAR model has a thinner data base than the Griffin and Shams analysis. In addition, Griffin and Shams not only knew about Weis's results, they also cited his report as sources. While not all of the 45 references used by Texas researchers are meaningful technical literature. Nevertheless, the sources and data provided by Griffin and Shams provide a more convincing picture than Weis's report. This is not only shorter, but is based on only six sources - one of them is himself.
Also, the argument of the anonymous report with the various statistical methods, some of which are also used in financial forensics, is not taken up by Weis report. Finally, the fact that the results of Griffin and Shams in some places are almost identical to those of the January report argues rather for the manipulation thesis.