Stablecoins are not driving up the price of Bitcoin and other cryptocurrencies, according to a new study from the Centre for Economic Policy Research.

Academics Richard K Lyons from UC Berkeley and Ganesh Viswanath-Natraj from the Warwick Business School looked at the issuance of Tether (USDT) and other stablecoins over the last three years, including during the price pump in late 2017.

Contrary to the popular belief that the Bitcoin price is being manipulated with fresh minted batches of Tether, the researchers found little correlation between prices and new stablecoins issuance:

“Our bottom line: We find no systematic evidence of stablecoin issuance driving cryptocurrency prices.”

So what is going on?

The researchers studied a variety of trading data and patterns between Tether and other crypto markets and determined that stablecoins were issued and used by investors in the way they were intended: as a stable store of value and a safe haven from market volatility.

“In periods of risk, some investors will choose to exchange into a better store of value,” the researchers note. “Portfolio rebalancing toward Tether and other stablecoins provide this function with minimal intermediation costs.”

They argue that stablecoin issuance is a response to market demand:

“Our evidence supports alternative views, namely, that stable-coin issuance endogenously responds to deviations of the secondary market rate from the pegged rate, and stable coins consistently perform a safe-haven role in the digital economy.”

Widespread belief of market manipulation

Tether conspiracy theorists have long pointed to a 2018 study by John Griffin from the University of Texas and Amin Shams from Ohio State that declared the 2017 bull run had been manipulated with Tether.

They found that “purchases with Tether are timed following the market downturns and result in sizable increases in Bitcoin prices.” The controversial claim caught the attention of both cryptocurrency enthusiasts and mainstream press.

The idea that the issuance of Tether precedes a Bitcoin price pump is now taken by some as a bullish sign. For example an article in Bitcoinist yesterday about “Tether printer divergence” argued the fact that the BTC price is yet to go up following a large amount of Tether being printed could point towards a new bull run.

Lawsuits on market manipulation

The University of Texas research was used against Tether and iFinex in lawsuits around market manipulation. This latest research casts doubts on those claims, which Tether has described as “without merit or legal basis”.