Hot Monday Morning in the Market
This Monday morning brought mixed feelings into the market. While major cryptocurrencies skyrocketed, investors are worried about the drop of the biggest stablecoin Tether.
The top three cryptocurrencies by market cap - Bitcoin, Ethereum and Ripple - are were up by around 10% on Monday morning before trimming their gains to less than 7%, while the other follow suit with slightly smaller price jumps. One notable exception, however, is Tether (USDT): the stablecoin pegged to the US dollar was down to USD 0.86 before recovering to USD 0.96.
Tether price chart:
Bitcoin price chart:
Top 10 coins by market capitalization (UTC 07:37 AM):
Although the rest of the market seems like a cause for celebration, Tether’s downward plunge got the whole community worried. The biggest question: is Tether truly backed by USD? The company has yet to provide conclusive evidence of this, despite their repeated insisting that all Tethers are redeemable at USD 1. Since cryptocurrency exchange Bitfinex and Tether share the same CEO, speculations about the extent of their involvement with each other abound. Bitfinex has come forward with a statement that they are not insolvent only a week ago, but that “complications continue to exist for us in the domain of fiat transactions.” In the eyes of traders, the downward spiral of one could spell disaster for the other.
Tether’s role as a dollar substitute has made it a huge part of the global crypto ecosystem. Playing a big part on exchanges that do not support crypto-to-fiat trading, it is easily transferable between all exchanges and other online platforms because it doesn’t have to travel through the banking system. This means Tether is the second-most actively traded cryptocurrency: it was used in more than 20% of transactions tracked by coinmarketcap.com over the past 24 hours.
Vijay Ayyar, head of business development at Luno, a cryptocurrency exchange, said for Bloomberg, “If traders start to flee Tether, it’s a potentially precarious situation, since it accounts for 20% of total volumes globally. It basically implies a lot of volatility ahead.”
Meanwhile, cryptocurrency exchange KuCoin has halted Tether deposits and withdrawals, citing “USDT wallet system maintenance” and without any information when trading may commence.
Bitfinex has news, also:
The community is worried: on the popular social network Reddit, user u/Toyake commented, “Tether is currently trading at 91 cents, this could very well be its collapse. If Tether goes down, the whole market goes down. Get the popcorn!” In short, the community believes that people are selling Tether and buying Bitcoin.