Firstly, many have raised concerns that tether is being issued by the people who own the Bitfinex exchange. Critics argue that there should not be such a close relationship.
But the issues run deeper than that. Fears have been raised that Tether Limited doesn’t actually hold enough U.S. dollars to back all the digital coins in circulation. These rumors have been circulating for a few months.
Earlier this week, Bloomberg reported that the U.S. Commodity Futures Trading Commission sent subpoenas on December 6 to Bitfinex and Tether, citing an anonymous source.
Tether has also been releasing more coins onto the market In January, alone Tether has released 850 million new digital tokens. The company has been increasing the number of coins in circulation over the past few months, and this has coincided with the record highs seen in cryptocurrency prices, causing some critics to suggest there is price manipulation going on.
“Over the past couple of months, a huge amount of tether has been created, it has shifted to the Bitfinex exchange and presumably buys bitcoin and other cryptos. This, I believe, has been keeping the price up,” Nicholas Weaver, a senior researcher at the International Computer Science Institute at Berkeley, California, told CNBC by phone Thursday.
To back these claims up, an anonymous statistical analysis posted online last week looked at the relationship between bitcoin price and tether. The conclusion was that tether is created when bitcoin is falling.
“Tether printing moves the market appreciably; 48.8 percent of BTC’s price rise in the period studied occurred in the two-hour periods following the arrival of 91 different tether grants to the Bitfinex wallet,” the analysis said.
