Tether Watch Might Help Predict Bitcoin Price - Analysts
By tracking issuance of new ERC-20 Tether (USDT) tokens, traders could predict bitcoin (BTC) price and move faster in and out of the crypto market, according to Sid Shekhar, co-founder of TokenAnalyst.
Blockchain intelligence firm TokenAnalyst looked into the correlation between BTC price and USDT supply, after observing that 2019 alone saw a net total of USD 1.5 billion worth of USDT minted on both Omni (USDT Omni) and on Ethereum (USDT ERC-20) blckchains. As a reminder, the most popular stablecoin, Tether, migrated to Ethereum from Omni on which it was originally built and which itself is built on top of the Bitcoin blockchain.
Through their research, the analysts came upon the following findings, as shared on their Twitter page:
- The price of BTC went up on 19 out of 27 days when USDT ERC-20 was minted: 70.0% of the time;
- The price of BTC went up on 12 out 24 days when USDT Omni was minted: 50.0% of the time;
- For USDT Omni, more tokens minted means a decrease in BTC price: there is a -1.6% correlation between the amount minted and BTC price movement;
- For USDT ERC-20, more tokens minted means an increase in BTC price: there is a 15.8% correlation between the amount minted and the amount of BTC price movement.
While, for USDT ERC20, there is a 15.8% correlation between the amount minted and the amount of BTC price movement (i.e more tokens minted = BTC price increase)— TokenAnalyst (@thetokenanalyst) October 3, 2019
Below is a chart showing the two 'eras' of USDT mints (on the separate blockchains) along with the $BTC price pic.twitter.com/29AWkiknuV
But this is not only an interesting finding, as savvy traders can make good use of this information to observe data and perhaps predict future price movements.
“Traders can leverage this knowledge by tracking mints and burns of the ERC-20 Tether token as it’s closely tied to movements in Bitcoin prices," Shekhar told Bloomberg. He explained that “the discrepancies are appearing recently primarily because Tether on ERC-20 is just much easier than Tether on Omni to use as a means of transferring value quickly.” Ethereum is a speedier chain than Bitcoin, he added, and this speed is of a vital importance when traders want to be in and out of crypto market quickly, so to make as much profit with Tether as possible.
However, the problem is that it's unknown for public why and when new Tethers are issued.
Meanwhile, as reported, just two weeks ago, crypto market analysis firm Coin Metrics discussed the possibility that this migration from Omni (USDT) to Ethereum (USDT-ETH) had been fueling the reversal in BTC/ETH daily transaction fees, as ETH shortly surpassed BTC again in September.
At pixel time (11:29 UTC), bitcoin trades at c. USD 8,200 and is down by 1% in the past 24 hours, but it increased by 2% in the past week. The most popular cryptocurrency is still down by 23% in the past month.