A new research from UC Berkley professors suggest that stablecoins, particularly Tether, are not used to manipulate Bitcoin price. According to Richard K. Lyons and Ganesh Viswanath-Natraj, there is no systematic evidence of stablecoin issuance driving crypto prices.
The researchers argued that aggregate stablecoins issuance does not drive crypto prices as some crypto community members have been alleging. Issuance behavior of stablecoins is the act of maintaining a decentralized system of exchange rate pegs and acting as a safe haven in the crypto economy, says the researchers.
According to the report, the researchers analyzed market inflows for Tether and other stablecoins from October 2017 to the present. They wanted to identify the extent to which aggregate stablecoin issuance drives the price of Bitcoin and the crypto market as a whole. However, the researchers claim their findings revealed that there is zero correlation between the two variables.
The researchers noted that stablecoin use has risen significantly in the past two years. The total trading between Bitcoin and Tether was estimated to have exceeded the volume of BTC/USD in 2019. According to them, the rapid increase in the use of stablecoin is consistent with their ‘raison d’etre’, which is, to solve the store-of-value problem by pegging the value to the US dollar. This was evident in the recent historic market crash in March, when the Bitcoin price tanked, but stablecoins saw record inflows.
Notably, their findings are in stark contrast with the previous report by John Graffin of the University of Texas and Amin Shams of Ohio State. The two professors raised accusations that the Tether stablecoin (USDT) together with Bitfinex manipulated the price of Bitcoin during the historic 2017 crypto market rally. They alleged that Bitcoin’s price rose just after Tether printed a massive batch of USDT, so this could have driven the price action.