Is Bitcoin Really Un-Tethered?

119 Pages Posted: 25 Jun 2018 Last revised: 5 Nov 2019

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

Amin Shams

Ohio State University, Fisher College of Business

Date Written: October 28, 2019

Abstract

This paper investigates whether Tether, a digital currency pegged to the U.S. dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.

Keywords: Blockchain, Cryptocurrencies, Bitcoin, Tether

JEL Classification: G14, G23, G29

Suggested Citation

Griffin, John M. and Shams, Amin, Is Bitcoin Really Un-Tethered? (October 28, 2019). Available at SSRN: https://ssrn.com/abstract=3195066 or http://dx.doi.org/10.2139/ssrn.3195066

John M. Griffin

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Amin Shams (Contact Author)

Ohio State University, Fisher College of Business ( email )

2100 Neil Ave
Columbus, OH 43210
United States

HOME PAGE: http://Aminshams.com

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