New findings from blockchain analysis firm TokenAnalyst shows that there is a correlation between the price of Bitcoin and the issuance of Tether—when new tokens of the stablecoins are issued, the price of Bitcoin goes up as often as 70% of the time.
The blockchain where Tether is being minted also matters. When Tether tokens are issued as ERC-20 tokens on the Ethereum blockchain, the price of Bitcoin was shown to go up 70% of the time. On the other hand, when Tether is issued on the Omni layer (which is built on the Bitcoin blockchain), the price of the first cryptocurrency moves up only 50% of the time.
TokenAnalyst’s Sid Shekhar said that the difference in terms of correlation are primarily due to Ethereum being an “easier means of transferring value quickly” than Omni-based assets: “Ethereum is a speedier chain than Bitcoin. As Tether is primarily used as a way to realize gains and get in and out of volatile crypto-asset positions in times of market movement, the speed of transferring into/out of it is critical.”
During 2019 alone, about 2 billion Tether tokens have been minted, which shows the importance that the stablecoin had during the bull run that Bitcoin had earlier in the year.
This information could serve as a tool to better predict future price moves. According to Shekhar, traders can track mints and burns of ERC-20 Tether tokens, which has served as a more reliable prediction tool for the price of Bitcoin.