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Journal of Finance Vol. 75 No. 4 2020

Is Bitcoin Really Untethered?

John M. Griffin; Amin Shams1,2,3,4,5,6,7

1 Conference Board · 2 Gregor Mendel Institute of Molecular Plant Biology · 3 Chinese University of Hong Kong · 4 Fisher College · 5 Kruger (Canada) · 6 Clemenshospital Münster · 7 Marymount University

open access

Abstract

This paper investigates whether Tether, a digital currency pegged to the U.S. dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month‐ends. Rather than demand from cash investors, these patterns are most consistent with the supply‐based hypothesis of unbacked digital money inflating cryptocurrency prices.

DOI
10.1111/jofi.12903
Volume
75
Issue
4
Pages
1913-1964
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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