In this article, we analyze the correlation between the printing of new tokens of a USD-backed dollar cryptocurrency called Tether and the upraise of Bitcoin prices in late 2017, constituting probably one of the latest large-scale market manipulations and bubbles whose consequences only recently we started to see. The ideas and analysis methods of this article are not new, they are all taken from or inspired by the recently published paper “Is Bitcoin Really Un-Tethered?” by John M. Griffin et al. and the so-called Tether Report. However, the results shown here are probably the currently most updated on the internet and, hopefully, a bit easier to understand than the cited publications. The Jupyter Notebook used for this post can be found in the end of the article.

Tether (or USDT)

Tether is a clearly controversial cryptocurrency (or token, to be more correct) born in late 2014 and whose more than shady creators claim to be backed 1:1 by USD dollars held in reserve by Tether Limited. For this reason, Tether is known to be a “stablecoin”, because its value fluctuates very little around the US dollar value. Interestingly, the Paradise Papers leaks in November 2017 connected Tether Limited to two of the Bitfinex officials, unveiling an array of dark bonds and mutually beneficial relationships between Bitfinex and Tether. Despite all the rumors and evidence that Tether Limited may actually not have enough dollars to back the amount of Tether issued, together with a subpoena issued by the U.S. Commodity Futures Trading Commission, the cryptocurrency has steadily kept its USD-pegged value and is trusted by traders all over the world that use it everyday as hedge to keep their value during cryptocurrency bear markets.

From a technical point of view, Tether does not own its on blockchain. Instead, it runs on top of the Bitcoin blockchain using something called the Omni Layer Protocol. In practice, just as Bitcoin, all the Tether transaction chain or ledger is public and can be accessed through https://www.omniexplorer.info. In fact, in an attempt to provide transparency, Tether Limited made available the list of the top richest Tether accounts in which appear several accounts with balances and annotations about the ownership of the accounts (most of them cryptocurrency exchanges). Tether Ltd. also made available the current reserve of USD and the Tether printer address which has the following id:

On the omniexplorer page of the Tether printer account, one can see all the events in which Tether has been issued or printed. In the following plot I show the Tether printing events (gray vertical bars) corresponding from March 2017 to July 2018, together with the cumulative printed Tether in red, the Bitcoin price evolution and the Bitfinex/Tether subpoena issuance the 6th of December of 2017. Bitcoin prices have been obtained as 1-h candlesticks from the Coindesk Bitcoin Price Index.