Four charts that show what’s going on with Tether

A recent article from Bloomberg alerted the world to what most people in crypto already knew: Tether—not Bitcoin—is the world’s most-used cryptocurrency. Well, that’s using the term “cryptocurrency” fairly loosely. Tether, after all, is run by the folks at iFinex and shares a lot of the same management as the exchange Bitfinex.

And it’s also really, really centralized. One doesn’t mine Tether’s tokens. It’s also questionable whether or not a dollar deposit with Tether automatically yields a token or if they just pop up out of thin air at the whim of the company’s management because of—Heaven forbid!—nefarious reasons.

Does it matter anymore? According to crypto traders, nope, it doesn’t. The market is addicted to Tether and it threatens to have the sort of results that addictions usually do. Once supply runs out or there’s an overdose, hearts will break and wallets will empty.

In the meantime, here are some charts we’ve been keeping internally because we, too, are addicted to Tether, albeit from the perspective of a narrator and not a user.

Since July, Tether has been weening itself from its own Omni protocol and is going on to Ethereum. It’s supposed to make withdrawals easier but it’s also going to be tougher to stop if, say, New York Attorney General Letitia James gets her way.

The supply of Tether, as we all know, has exploded to $4 billion from just $50 million a couple of years ago. But that’s not the whole story.

An interesting thing to note is that Tether’s velocity—its daily volume versus its total supply—has grown with volume. As of this post, each Tether token trades on average four times in a single day. It was under once per day a couple of years ago. In recent months, coinciding with the company’s legal troubles, averages spiked above 10 times per day.

Here’s another interesting relationship:

From this perspective, it looks as if Tether volume has driven Bitcoin prices.

Suspicious, right? Well, take a look here:

So a couple of things to be clear: Tether has stayed at roughly the same price (about $1) while Bitcoin prices have been extremely volatile. The chart looks at dollar volume divided by market cap. For Tether, market cap and supply are almost—almost—the same. For Bitcoin, they are vastly different. Tether and Bitcoin have both seen spikes in this type of velocity on roughly the same days, albeit in different terms. Keep in mind that Bitcoin doesn’t trade multiples of its market cap but in fractions.

We’re faced with a “chicken and egg” scenario with Tether. Is it the tool that manipulates the Bitcoin market or is it reacting to it? A study last year from the University of Texas suggest the former.

But what makes this question so vexing is that the only way to definitively prove it would be to gather evidence—perhaps internal memos or testimony—that specifically shows how Tether tokens would be used to move Bitcoin prices.

Until then, it’s tough to absolutely say. However, transparency isn’t Tether’s thing. The company has dodged questions and it took a long time for them to say they’re not 100% backed by dollars as they initially promised. They’ve also been stalling when it comes to producing documents in the New York AG’s case against them.

And if it walks like a duck, quacks like a duck, and swims like a duck, you’ve got yourself something sketchy.