Firm Claims Inverse Correlation Between USDT and Bitcoin Price

[Hydrogen]

Recent research shows that there is an inverse relationship between the percentage of the Tether stablecoin on exchanges and Bitcoin’s price.

Recent research shows that there is an inverse relationship between the percentage of the Tether (USDT) stablecoin on exchanges and Bitcoin’s (BTC) price.

Cryptocurrency market insights firm Santiment published analysis showing that the percentage of USDT held on exchanges is inversely related to Bitcoin’s price. In a May 4 tweet, the firm noted that the recent correction probably is not a trend inversion in Bitcoin’s movement:

“In spite of the minor $BTC correction over the weekend, prices are beginning to rebound close to $9,000 again. According to our metrics, one thing that is still trending in the right direction is the percent of $USDT on exchanges. As this chart clearly indicates, there is an inverse correlation between Bitcoin's price and USDT's supply on exchanges.”

Source:  https://twitter.com/santimentfeed/status/1257381863452225537

Santiment also explained that since the percentage of USDT held on exchanges is decreasing, Bitcoin could go beyond $9,000 again.

Neither Santiment nor Tether answered Cointelegraph’s inquiry as of press time.

Stablecoins’ market caps grow

As the cryptocurrency market saw a major downturn in mid-March, altcoins saw their market caps grow. Still, as Cointelegraph reported at the time, Tether — the largest stablecoin by total market value — only gained about 0.5% in four weeks, while Circle’s USD Coin (USDC) saw a 40% increase.

Furthermore, during the recent Bitcoin’s rise to $9,000 Tether minted over 160 million new tokens within 24 hours in just two transactions.

https://cointelegraph.com/news/research-shows-inverse-correlation-between-usdt-on-crypto-exchanges-and-bitcoins-price

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Offering this as a different perspective to "tether is bitcoin market manipulation" pop culture media. I would guess inverse correlations between tether and bitcoin have arisen in the past. None of us pay close enough attention to tether metrics to notice it. Thankfully we have independent firms like Santiment to point these things out.

I've always thought the market cap of tether trading volume was too low to account for bitcoin price movements. The real fuel for bitcoin's 2017 ATH may have been provided by cross platform arbitrage. Driven by african and foreign crypto markets trading btc more than 20% higher than market averages in other regions. Just my $0.02.

[justdimin]

There has to be some correlation, after all the tether is printed when people want to get out of bitcoin and put their money into fiat, and the best way to do that is using USDT, so if you think about it the only reason why there is more usdt needed is when people do not want to be in bitcoin.

It is not because there is a new amount of USDT that bitcoin goes down, or when people actually sell USDT when bitcoin goes up, they use that USDT to buy bitcoin.

It all makes sense honestly, there is no way that people would buy usdt and btc at the same time, or sell them at the same time, these are 180 degree different things and when you buy one, you sell the other so it makes sense that there is a inverse correlation between them. Not something I already knew, but after seeing it, makes total sense.

[Lizzylove1]

This basically mean the more USDT we have in exchange, the more likely bitcoin is going to dump and the reverse should be true supposedly. Nevertheless, this can actually not be 100% accurate as it's just some pattern observation and they drew their possible conclusion. What if we have huge USDT in the market and no seller of btc is ready to short for fear of market uncertainty. Their study is correct to some degree because the market is heavily manipulated.

[DooMAD]

Whether this turns out to be a cause or a coincidence, people just need to place the emphasis on the real issue.  There are glaring risks in dealing with a centrally "backed" coin (with serious doubts over whether it really is backed or not). 

To put it another way:  if any other company said they were launching a coin and keeping some fiat funds in a bank account to back every unit of crypto 1:1, then continually printed new units into existence, then refused to carry out a public audit, then changed their terms and conditions to say it may not be backed 1:1 by US Dollars like they originally claimed it would be, surely people would get at least a little suspicious and stop sinking money into it?  But people willingly turn a blind eye when it's Tether. 

Is it some sort of shared hallucination?  Does convenience take precedence over common sense now?  I don't get it.   

[415jeremy]

Tether was accused in manipulating Bitcoin price for several times. In fact, USDT is one of the most convenient way to buy Bitcoin (and altcoins too),  the majority flow into bitcoin and other cryptocurrencies is from Tether. It's a mistake to use Tether supply to predict the long term price of Bitcoin. Tether is used as a gate-cryptocurrency by traders and investors, that explains this correlation.

[davis196]

The increased usage of Tether doesn't lead to a Bitcoin price pump.I think it's quite the opposite.The Bitcoin price pump is influencing the increased usage of Tether.By the way,there's something unclear about this article.
Inverse correlation means when one price goes down,the other price goes up.The correlation described in the article isn't inverse.It's direct,because the decrease of USDT held in exchanges leads to decrease in the BTC price,according to Santiment.
If the quantity of USDT goes up and the BTC price goes down,this is quite normal,because the traders are selling BTC for USDT.This isn't inverse correlation,it's just supply and demand.

[sheenshane]

IMO, It isn't clear to me the inverse correlation of the USDT and Bitcoin because if we have an increase in USDT exchange then there will be a pump on bitcoin's price for the will be an increase in the demand and if we have a decrease in USDT exchange then there will be a lower demand for bitcoins that will make a dump on the price, that means they are correlated and not inverse to each other this is how I see it.

However, regardless of their correlation Bitcoin's price still depends on its supply and demand for scarcity on the supply of Bitcoin and high in demand it will cause the price to become boosting upward. As of me, the article only shows the movement of price in the market and I really appreciated the article because it is informative to newbies in this crypto sphere.

[beerlover]

Tether is something we use for fiat basically, just for representing in order to not get all of to fiat and to our bank accounts. It makes things easier when you just let it be and not really turn them into fiat for real but something that represents fiat. So let's see what increases bitcoin price and what decreases bitcoin price.

Right now one thing is for sure, if there are more bitcoins bought than sold that increases the price, if there is more bitcoin sold than bought that decreases the price. So, when people actually buy tether, what are they using? They do not really buy usdt with usd, they buy usdt mainly with bitcoin. That shows that there must be a lot of bitcoin sold to go into usdt right? Which basically means automatically when there is a lot of USDT bought, price of bitcoin should drop as well.

[RapTarX]

Theoretically, it must be the oppose of what is described above. If there are more USDT supply in exchange, BTC price must go up while it's going down. Well, it's possible that traders want to be stable and that's the reason of having an inverse relationship.
When stablecoin mint a lot of coins, it refers people have more demand on USDT because they want to sell their BTC and hold on stablecoin. On the other hand, when there's low supply of USDT, it refers people have more demand of purchasing BTC.
Still, I'm confused about the reason behind the inverse correlation. I guess it would be better to have some more clarification.