With the New York Attorney General putting further pressure on Bitfinex and Tether, one can imagine the disastrous consequence of the market’s leading stablecoin imploding. This recent correction might be a taste of what that would look like.
With Bitcoin oscillating right under the $10,000 price point, the entire cryptocurrency market has been struggling. More short-term pain is expected, and we can only imagine how bad this could get if Tether were suddenly to stop its virtually endless money-printing machine.
This is the result of Tether stopping the printing machine. Now imagine Tether collapsing. pic.twitter.com/ARc2rx4TIU
— Paul Everton (@realpauleverton) August 22, 2019
Tether (Normally) Ties With Bitcoin
The correlation between Bitcoin’s price movement and Tether have been well-established. For example, looking at just 2019, one will find that the 30-day moving average of Tether’s velocity (trading volume divided by market capitalization) can easily be placed over Bitcoin’s price movement. The result is a very close match, with Tether’s minting of new USDT generally preceding a major move up. As of recently, however, this metric has plummeted which would seem to suggest that Bitcoin will be going south soon for further short-term pain as well.
Tether has been steeped in controversy for some time now. Critics have been expecting the stablecoin’s collapse for years, and it’s become something of an open secret. Everyone knows that Tether is on shaky footing, but it remains, by far, the most-used stablecoin on the market with tens of billions of dollars in daily trading volume. However, Tether’s implosion only seems impossible now—if the doomsday predictions end up being true, there will be many commentators saying ‘I told you so.’
Will Bitcoin Benefit From a Tether Collapse?
The real scare is the fact that we cannot possibly know what impact Tether’s end would have on Bitcoin’s price. Some speculate that its collapse might even cause a Bitcoin price spike since all its money would have no choice but to pour into BTC or another stablecoin. Yet, the stablecoin seems to be further insulating itself to prevent this from happening. Not only is it managed on multiple different blockchains, but it is even pegged to various fiat currencies. Recently, it was revealed that Tether plans to issue a new stablecoin pegged to offshore Chinese renminbi.
The house is not on fire for Tether yet, but based on its recent minting activity, Bitcoin seems poised for a further correction.
What do you think would be the impact of Tether imploding? Can one track Bitcoin’s price movements by looking at Tether’s minting history? Let us know your thoughts in the comments below.
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