Tether, the most widely used stablecoin, has responded to the recent paper update by John Griffin and Amin Shams in trademark fashion. The strongly worded letter breaking down the flaws in the research paper is factful despite Tether’s obvious bias in this matter. A majority of analysts in the space are backing up Tether after having the chance to review the updated research note, November 8, 2019.
Certain Conclusions from Uncertain Data
The Journal of Finance is possibly one of the most renown financial journals across the space. So when Griffin and Shams announced their new paper will be published in the journal, it gave their paper a new degree of legitimacy.
Fast forward a few days later and the paper has been made public and extensively reviewed. The initial paper was flawed in making several detailed assumptions, and this paper is no different. The authors commonly equate correlation of factors to causation, and even admit that the patterns they see could be caused by market demand over issuance.
As forensic researchers, Griffin and Shams jobs involve detailed analysis of markets to discover potential relationships between the two. They are widely known for their paper highlighting manipulation in the volatility index (VIX).
However, as Tether claims and the authors occasionally admit, they made their conclusions in the absence of robust data with regards to exchange flows and order timing.
Usual Pro Bitfinex Brigade to the Rescue
Tether signs off by declaring that the duo had no basis to refute that Tether has sufficient reserve to back up their issuances. Tether have themselves admitted each token is backed is $.74 of hard cash and $.26 of loans and other assets. Given the implicit discount to these non-cash securities, Tether is probably pegged to about $.97-.99 worth of money each.
Gabor Gurbacs, the head of digital assets strategy at VanEck, and Mati Greenspan, an analyst at eToro, are a few analysts who have come out in support of Tether and Bitfinex. They are a part of a larger group that always comes to Bitfinex’s rescue on social media.
However, many other analysts have also called out Griffin and Shams over cherry picking data and assumption heavy conclusions.
2017 was a huge year for crypto investments and commerce. Anyone who was around at the time can attest to the sheer level of exuberance in the market at that point.
Now, we can only await Griffin and Shams’ rebuttal to Tether’s statements.