Tether, the creators and issuers of the tether (USDT) stablecoin, said this week that its dollar-pegged cryptocurrency is once again backed 1:1 with its fiat reserves, after a company affidavit back in the spring noted that only “74 percent of the current outstanding tethers” were backed by “cash and cash equivalents” at the time.

The assertion comes as the latest wrinkle in a major episode of intrigue for the cryptoeconomy, insofar as various ecosystem stakeholders have debated the solvency of USDT for years.


The new Tether declaration came in response to reports this week that a new, forthcoming study from University of Texas Professor John Griffin and Ohio State Assistant Professor Amin Shams would argue that a single, unnamed entity used tethers to manipulate the meteoric rise of the bitcoin price in 2017.

While the researchers’ study is yet to be published in the Journal of Finance, various cryptocurrency analysts who have looked into the report — or outright previewed it in its entirety — have contested its conclusions as highly problematic and inaccurate.

Likewise, the Tether team has said they’ve reviewed Griffin and Shams’ new research, and in a defiant retorting statement against the professors’ work, argued no such manipulation has occurred and that USDT is entirely backed by reserves again:

“All Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets. It is reckless – and utterly false – to assert that Tether tokens are issued in order to enable illicit activity. Tether token issuances have quadrupled since December 2017. This growth is not a product of manipulation; it is a result of Tether’s efficiency, acceptance and widescale utility within the cryptocurrency ecosystem.”

It’s a firm response, to be sure, but it’s unlikely to be the last word on the matter, even if Tether sticks to its same talking points.

The USDT issuer and its affiliated cryptocurrency exchange, Bitfinex, are currently embroiled in court proceedings with the New York Attorney General’s office, which alleges the tandem defrauded users by turning to tether’s cash reserves to cover an unexpected $850 million USD loss at Bitfinex. Relatedly, that shortfall is regarded by many analysts as the reason the exchange launched its own platform token, LEO.

Researchers’ New Study Causes Strong Backlash

Griffin and Shams’ study was easily among the biggest headlines in the cryptocurrency ecosystem this week, mainly because of how many crypto analysts resoundingly contested its findings.

The researchers were already known in the space for publishing a 2018 paper in which they argued tether was used to manipulate the bitcoin price. Their new study expands on that paper in alleging a single entity — or “whale” — appears to have been responsible for the entirety of said manipulation.

Per an excerpt from the study, the professors wrote that USDT that weren’t fully backed by reserves were pumped into bitcoin whenever BTC fell to certain price thresholds:

“This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges. Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”

Yet that assertion seems far from definitive per an array of cryptocurrency analysts who sounded off against it accordingly.

“I have now read the entire updated paper by Griffin and Shams and I have to say that it’s still riddled with errors and fundamental misunderstandings about how the stablecoin deposits and redemptions work,” Larry Cermak, Director of Research at The Block, noted this week.

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