Bitcoin has jumped almost 10 percent in early Monday, after fears that it would slide below the psychological $6000 mark at the end of last week. The market cap of BTC grew by almost $10 billion in minutes, as the coin surged from $6230 to trade around $6700 at press time.
What fueled such an unexpected price increase? It turns out that the controversial stablecoin Tether (USDT) is most likely responsible for it. Prominent exchanges who support USDT, like Bitfinex, Kraken, Binance and OKEx have all seen the BTC price shoot well above $7000, Meanwhile, exchanges that do not deal with USDT have experienced only a minimal bitcoin price movement.
Bitfinex Premium $1000+ pic.twitter.com/bf9vWCSRCg
— Bitfinex’ed 🐧 (@Bitfinexed) October 15, 2018
USDT is used as a substitute for the US dollar in the crypto space and is the second most-traded crypto, behind only bitcoin, used in about 20 percent of all digital currency transactions. Its issuers have claimed that every USDT token is backed by 1 US dollar, although these claims have never been confirmed by an independent auditor. The stablecoin has been accused of bitcoin price manipulation and its parent company Tether Foundation is closely tied with Bitfinex, even sharing the same CEO.
The stablecoin now seems to be in trouble as USDT is losing the grip on the USD peg. Tether had dropped as over 10 percent on some exchanges, even touching $0.90 on Kraken. It currently sells for around $0.96 in most of the exchanges.
$USDT traded 0.91 handle! pic.twitter.com/KSXUol4DX7
— Alex Krüger 🇦🇷 (@Crypto_Macro) October 15, 2018
This essentially means that traders are starting to doubt USDT’s credibility and have started to move their holding into other cryptocurrencies, namely BTC, which has surged as a result. This could have disastrous consequences not only for USDT but for the entire crypto sphere, as the collapse of the stablecoin would likely cause severe volatility and cast further doubt over cryptocurrencies as a viable financial instrument.
Speaking to Bloomberg, Vijay Ayyar, head of business development at crypto exchange Luno, said that, “If traders start to flee Tether, it’s a potentially precarious situation. It basically implies a lot of volatility ahead.“
Would be quite an irony if a Tether collapse would send bitcoin out of this bear market.
— Alex Krüger 🇦🇷 (@Crypto_Macro) October 15, 2018
Even though Tether has always had numerous skeptics, the crypto market treated the coin as if every token was backed by USD reserves. However, the faith in the stablecoin has started to dwindle and the speculation over its solvency was re-ignited, as Bitfinex lost its banking partner Noble Bank. The refusal by HSBC to service Bitfinex and Tether have only intensified the concerns. Bitfinex is expected to announce an update on its banking situation within a week.
Meanwhile, dollar-pegged USDT competitors, such as TrueUSD (TUSD) and Circle‘s USDC have benefitted from the downslide of Tether, rising to $1.03 and $1.02 respectively. Another stablecoin, Paxos Standard, is currently trading at $1.06 against USDT at Binance.
Bitfinex had suspended fiat deposits for some accounts on October 11th and have issued an update today, ensuring that all withdrawals are working as usual and “a new and increasingly robust fiat deposit system will be available in the next 24 hours.“ However, an official announcement over the USDT depreciation is yet to be released.
Jehan Chu, a managing partner at Kenetic Capital claimed that, “Faith in Bitfinex’s financial situation and ability to fully back Tether has been a recurring question. Tether’s stablecoin dominance will only persist if they can settle community criticisms about their lack of transparency once and for all.“
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The post Bitcoin Rallies as a Massive Selloff Casts Doubt Over Tether’s USD Peg appeared first on Toshi Times.
Source: Toshi Times
Original Post: Bitcoin Rallies as a Massive Selloff Casts Doubt Over Tether’s USD Peg
