The Intraday Bitcoin Response to Tether Minting and Burning Events: Asymmetry, Investor Sentiment, And “Whale Alerts” On Twitter

ArXiv ID: 2501.05232 “View on arXiv”

Authors: Unknown

Abstract

Tether Limited has the sole authority to create (mint) and destroy (burn) Tether stablecoins (USDT). This paper investigates Bitcoin’s response to USDT supply change events between 2014 and 2021 and identifies an interesting asymmetry between Bitcoin’s responses to USDT minting and burning events. Bitcoin responds positively to USDT minting events over 5- to 30-minute event windows, but this response begins declining after 60 minutes. State-dependence is also demonstrated, with Bitcoin prices exhibiting a greater increase when the corresponding USDT minting event coincides with positive investor sentiment and is announced to the public by data service provider, Whale Alert, on Twitter.

Keywords: Tether (USDT) Supply, Event Study, State-Dependence, Bitcoin, Sentiment Analysis, Cryptocurrency

Complexity vs Empirical Score

  • Math Complexity: 5.0/10
  • Empirical Rigor: 7.0/10
  • Quadrant: Street Traders
  • Why: The paper employs standard event study methodologies with statistical metrics like abnormal returns and significance testing, representing moderate empirical rigor focused on backtest-ready analysis. While it uses finance theory and hypothesis testing, the mathematical complexity is moderate as it relies more on statistical inference rather than dense or advanced theoretical derivations.
  flowchart TD
    A["Research Goal: Investigate Bitcoin's intraday response to USDT minting & burning events"] --> B["Data Collection<br>USDT Supply Changes<br>BTC Prices<br>Whale Alert Tweets<br>Sentiment Scores"]
    
    B --> C["Methodology: Event Study<br>Windows: -120min to +120min"]
    
    C --> D{"Key Computational Steps"}
    D --> D1["Calculate Abnormal Returns (AR)"]
    D --> D2["Calculate Cumulative Abnormal Returns (CAR)"]
    D --> D3["State-Dependence Analysis<br>Sentiment + Whale Alert"]
    
    D --> E["Main Findings & Outcomes"]
    
    E --> E1["Asymmetry Identified<br>Positive response to Minting<br>No significant response to Burning"]
    
    E --> E2["Time Decay<br>Response peaks at 5-30min<br>Declines by 60min"]
    
    E --> E3["State-Dependence<br>Stronger positive response<br>when + Sentiment & Whale Alert active"]