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A new study has quashed long-held sentiments that Tether (USDT) grants had a significant impact on Bitcoin (BTC) price. Findings by Dr. Wang Chun Wei have since opened the door for more reviews following the report’s acceptance into Economic Letters.

Tether’s U.S. Dollar Reserves Questioned

Tether has in the recent past prided itself as the most stable coin with a steady price of at or near $1 USD. Developers behind the coin have held the assertion in part because the U.S. dollar in reserve backs the coin. However, the company has never substantiated the claims through an audit of the currency reserves.

Backers of the dollar backed cryptocurrency periodically issue large lots known as grants. According to Wei, the grants occur in batches, intentionally broken into smaller blocks. The breaking down of the blocks allows for the issuance of the grants for days.

If the tokens were not in any way backed by the dollar, then the issuance of new tokens would amount to the printing of money. However, that does not appear to be the case now. The issuance of tokens could thus amount to monetary easing in the crypto market.

The findings by the Wei, a lecturer at the University of Queensland’s Business School, should pile pressure on backers to validate their claims.

“Our findings show that tether grants were potentially timed to follow bitcoin downturns and subsequent bitcoin/tether trading volumes increased… However, the impact of Tether grants on Bitcoin returns were not statistically significant, and therefore tether issuances cannot be an effective tool for moving Bitcoin prices,” Wei noted in a research paper.

Tether-Bitcoin Correlation

Wei bases his argument on the volume of USDT in the market as well as its periodic changes. His primary objective with the study was to try and find out whether the issuance of USDT could affect the price of BTC. However, the findings continue to arouse questions as to the actual amount backing USDT.

The study followed similar concerns raised early in the year by an anonymous author. The author in his research note sought to find out whether USDT issuance had any impact on BTC price. The author also sought to uncover whether Bitcoin growth had any impact on Tether growth.

Concerns over the correlation between the two cryptocurrencies stemmed from overwhelming presences of BTC/USDT trading pairs. Increased trading activity of the pair helped push the market value of USDT to over $2 billion Tether.

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