Is Bitcoin Really Un-Tethered?

66 Pages Posted: 25 Jun 2018

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

Amin Shams

University of Texas at Austin - Department of Finance

Date Written: June 13, 2018

Abstract

This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom. 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% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies. The flow clusters below round prices, induces asymmetric auto-correlations 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.

Keywords: Blockchain, Cryptocurrencies, Bitcoin Prices, Tether

Suggested Citation

Griffin, John M. and Shams, Amin, Is Bitcoin Really Un-Tethered? (June 13, 2018). 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)

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

McCombs School of Business
Austin, TX 78712
United States

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