Study Says Tether Helped Prop Up Bitcoin During 2017 Rally
Image credit: Shutterstock
Key Takeaways
- University of Texas researchers found that large Tether flows through Bitfinex repeatedly followed declines in Bitcoin’s price.
- Less than 1% of the trading hours examined were associated with 58.8% of Bitcoin’s price increase and 64.5% of the returns recorded by other major cryptocurrencies.
- The evidence pointed toward deliberate price support, although the study did not identify the traders controlling the relevant wallets.
Updated: September 10, 2026
A University of Texas at Austin research paper placed Tether and Bitfinex at the center of a serious allegation about Bitcoin’s 2017 rally. The researchers argued that newly issued Tether may have been used to prop up Bitcoin whenever its price began to fall.
Finance professors John M. Griffin and Amin Shams found that Tether frequently moved through Bitfinex and other exchanges after Bitcoin recorded negative returns. Bitcoin’s price then tended to recover in the hours following those transfers.
The paper stopped short of identifying the traders responsible for the transactions. However, the timing and concentration of the purchases led the researchers to reject organic investor demand as the most convincing explanation for the pattern.
Researchers Trace Tether Through Bitfinex
The 66-page working paper, titled Is Bitcoin Really Untethered?, examined blockchain transactions and cryptocurrency trading during Bitcoin’s dramatic rise in 2017. Griffin and Shams investigated whether newly issued Tether reflected genuine dollar deposits or was being pushed into the market to support prices.
The researchers grouped related blockchain addresses into clusters to trace the movement of tokens. Tether commonly moved from its issuing wallet to Bitfinex before being transferred to other cryptocurrency exchanges, including Poloniex and Bittrex.
The transactions repeatedly followed the same sequence. Bitcoin’s price declined, Tether arrived at an exchange and Bitcoin was purchased. Its price then tended to rise, while there was little evidence of an equivalent flow in the opposite direction after the recovery.
Findings Point Away From Organic Investor Demand
The researchers compared two possible explanations for the activity. Under a demand-driven model, investors would deposit dollars, receive Tether and use the tokens to buy cryptocurrency. Under a supply-driven model, newly issued Tether could be pushed into the market and used to buy Bitcoin during periods of selling pressure.
The timing of the transfers, their concentration after negative returns and their connection with new Tether issuance led the authors to conclude that the evidence was “most consistent with the supply-based hypothesis.” Put more directly, the paper found stronger evidence of Tether being used to support Bitcoin’s price than of ordinary investors entering the market with fresh dollars.
Less Than 1% of Hours Were Linked to Half the Rally
The most striking results involved a small number of trading periods in which unusually large quantities of Tether were exchanged for Bitcoin. Those periods were closely associated with a disproportionate share of the cryptocurrency market’s gains.
“Even less than 1 percent of extreme exchange of Tether for Bitcoin has substantial aggregate price effects.”
The researchers calculated that these trading hours were associated with 58.8% of Bitcoin’s price increase during the period studied. They were also linked to 64.5% of the returns recorded by six other major cryptocurrencies.
Tether purchases frequently appeared when Bitcoin traded just below round-number price levels. That pattern suggested buyers were stepping in at moments when further declines could have damaged market confidence.
The figures do not prove that every price increase resulted from manipulation. They do, however, undermine the argument that Bitcoin’s rally was driven entirely by independent buyers responding to market conditions. The study also raised questions about Tether’s claimed dollar backing, which the researchers could not independently verify.
Subsequent regulatory findings confirmed that Tether had not maintained the dollar reserves it claimed during the period. In 2021, the CFTC found that Tether held sufficient fiat reserves on only 27.6% of the days examined in a 26-month sample covering 2016 through 2018. The agency ordered Tether to pay a $41 million penalty over misleading statements about its reserves.
Tether and Bitfinex Deny the Allegations
The US Commodity Futures Trading Commission had already subpoenaed Tether and Bitfinex in December 2017, several months before Griffin and Shams released their paper. The agency did not publicly reveal the full scope of its requests, and the subpoenas were not findings of wrongdoing.
In a 2019 response to the revised study, Tether rejected the researchers’ conclusions and argued that they had relied on incomplete and selectively chosen data. The company maintained that its tokens were issued in response to market demand and had not been used to manipulate cryptocurrency prices.
