Tether is a crypto token, or coin, that’s supposed to be pegged to the dollar and backed by real dollar reserves in a bank account somewhere. Tether’s coins are often used for dollars on cryptocurrency exchanges because of the reserve claim. Traders use Tether’s coins to cash in and out of bitcoin quickly, avoiding the lengthy process of converting the sums in and out of fiat currency. However, Tether hasn’t provided audits to prove its reserves exist.
The uncertainty surrounding Tether has made crypto investors uneasy, an unease that became alarm when Bloomberg reported that Tether was subpoenaed by the US commodities trading regulator in December. Bitcoin’s price has fallen about 25% since that news broke.
Crypto market investors think the report’s analysis is credible. “It’s a great report—awesome data analysis,” says Alex Sunnarborg, who runs a crypto hedge fund called Tetras Capital. ” I think it shows that a huge piece of bitcoin’s price movement has directly followed Tether issuances very well.”
The price of bitcoin stood at $15,000 at the end of the period analyzed by the report, which is Jan. 4. If 40% of that price was directly attributed to Tether issuance, then the price of bitcoin without those new Tethers would have been about $9,000.