Movements of Tether often coincide with changes in bitcoin historically but that trend has not been holding true recently. Tether recently saw $500 million created in the crypto which would typically be the lead in to a bitcoin rally. Instead, bitcoin has dropped even further as it sits well below $7,000.
Tether has long been looked at as a safe haven for crypto investors though due to its relatively low volatility. It is said to be backed by $1 of fiat currency so the coin typically hovers around the $1 mark. This offers a stable option for those looking to invest in a more conservative manner.
Tether has faced accusations in the past about its correlation to bitcoin. Reports have been released on multiple occasions describing the manipulation of bitcoin caused by Tether. The crypto was even subpoenaed by a US trading commission but no final rulings against the coin came out. Other reports had findings that Tether could be tracked to ether, bitcoin and Litecoin over 85% of the time. During the crash early in 2018, correlation was near 93% between Tether and the 3 coins.
Since the spring, the correlation between Tether and those 3 coins has started to fade out. It instead has been replaced by a stronger relationship with NEO and EOS. Even with the growing relationship, the creation of the coins this month did not push NEO or EOS higher which came to a surprise of many researchers. A Chainalysis paper commented,
High volatility for low-volume Tether trading pairs is a typical sign of pump and dump activity. A sudden spike in a particular trading volume followed by an abrupt decline is characteristic of price manipulation.
The release of the coins was also interesting due to Tether’s relationship with Bitfinex. Bitfinex is Tether’s only direct client so all of their coins released initially went through Bitfinex before being transferred to an exchange such as Bittrex, Binance or Kraken. This relationship has also raised questions about possible conflicts of interest and how exactly the partnership works due to their shared management team.