Bitcoin Tether arbitrage

By mapping the blockchains of Bitcoin and Tether, we are able to establish that one large player on Bitfinex uses Tether to purchase large amounts of Bitcoin when prices are falling and following the printing of Tether. Such price supporting activities are successful as Bitcoin prices rise following the periods of intervention. Indeed, even 1% of the times with extreme exchange of Tether for Bitcoin have substantial aggregate price effects.
The buying of Bitcoin with Tether also occurs more aggressively right below salient round-number price thresholds where the price support might be most effective. Negative EOM price pressure on Bitcoin in months with large Tether issuance points to a month-end need for dollar reserves for Tether, consistent with partial reserve backing. Our results are most consistent with the supply-driven hypothesis.