USDT Bump? Why the Tether Scandal Could Send Bitcoin Soaring
Bitcoin’s price continued higher on Wednesday, picking up where it left off 24 hours ago, as traders eyed a fresh market entry in the wake of a sharp pullback at the end of last week. At current levels, bitcoin remains in a dominant uptrend despite controversy surrounding Bitfinex and its alleged use of the Tether (USDT) stablecoin to mask the loss of hundreds of millions of dollars.
BTC/USD Update
After completing its third consecutive monthly gain, the value of bitcoin continued higher on Wednesday. The largest and most influential cryptocurrency climbed 1.6% to $5,378.03, according to aggregate data provided by CoinMarketCap.
On individual exchanges, BTC still had a significant premium on Bitfinex. At last check, the quoted price for BTC/USD on Bitfinex was $5,611. The same currency pair was quoted between $5,280 and $5,290 on most major exchanges.
During the month of April, bitcoin’s value appreciated by more than a quarter, adding to the nearly 7% increase in March and the 12% uptick in February. The three-month winning streak is the first such feat since the first quarter of 2017. As Hacked previously reported, bitcoin’s historical track record suggests that dominant market trends typically last between five and six months.
The bulls are now eyeing a re-test of the $5,600 region, which corresponds with last month’s high and the peak for 2019. A breakout beyond this level may lead to an eventual retest of $6,000, a level not seen since early November. Analysts are divided as to whether the current uptrend will produce such highs or whether we can expect a shakeout before reaching that materially significant region.
Read more: Bitcoin is on the Cusp of a Two-Year Milestone.
Tether Bump?
The cryptocurrency market experienced a sudden flash crash last Thursday amid revelations that the New York Attorney General’s office had filed a lawsuit against Bitfinex’s operator over allegedly co-mingling corporate and customer accounts to hide the loss of some $850 million. The regulator also called on Bitfinex to cease all operations in the state of New York.
Bitfinex has responded to the affidavit by accusing the Attorney General’s office of acting in “bad faith,” adding that the exchange and Tether remain “financially strong.” According to various reports, Tether’s general counsel has since acknowledged that USDT is only backed by U.S. dollars and cash equivalents up to 74%. As a stablecoin, Tether has always claimed to hold a one-for-one ratio between USDT and dollar-backed equivalents.
Despite USDT’s growing influence in the crypto world, its potential decline as a reliable stablecoin could actually benefit bitcoin’s price – at least in the short term. According to CoinMarketCap, USDT has daily trade volumes of more than $11 billion, with the vast majority of transactions concentrated in BTC/USDT. If traders lose confidence in Tether and begin to exchange their stablecoins for bitcoin, we can expect a significant rise in the value of BTC.
Tether and Bitfinex are no strangers to controversy. The two companies, which are headed by the same chief executive, faced a U.S. federal subpoena in late 2017 for their alleged role in pumping bitcoin’s price during the bull market. By October of last year, Tether had purged some 500 million USDT from its treasury wallet.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
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