We have covered many topics across our blogs over the years, but I wanted to address one area which is currently being spoken about among traders and investors in the space. Is Tether the cause of bitcoins price rise?
Bitcoins Recent Price Rise
What’s Going On With Tether And BTC
Bitcoin prices are expected to rise with the printing of Tether worth $100 million. Analysts say that Bitcoins price might eventually hit all time high of $20,000
This volatility nature makes Cryptocurrencies unpopular among investors and financial institutions. Tether is, however, immune to this problem. It is a coin that was invented to solve the inherent volatility of Cryptocurrency market: these types of coins are known as Stablecoins.
Why Stablecoins Exist & How They Work
Digital Currency – Tether
Virtual currency Tether was launched in 2015, and since then it is the leading Stablecoin in the Crypto market and has a market cap of over $3,719,238,580. For every tether token issued, $1 is backing it up essentially dollar pegged. It is expected that when it has reached a certain point, one can exchange the token for the US Dollar. This provision makes Tether a secure coin and can be used by investors and traders without the fear of making losses.
Controversy & Tether
Tether USDT, has however been a controversial coin from conception, the exchange Bitfinex in the last year alleging Bitfinex are the same entity as Tether and that Tether tokens are NOT backed as claimed, thereby falsely inflating the value of the Crypto asset. A case was filed in court against Tether with the US justice department still investigating the matter. Some traders and analysts had alleged that tether was being used to buy Bitcoin at crucial times when the value of the token had dropped.
Tether also does not have a full audit, which is a requirement by the US government for any Stablecoin. They have been dogging this for a while with an attempt to audit it being done last year. The company claimed that it is large, and more time will be needed to finish the audit. These controversies, among others, are believed to crop from the fact Tether lacks a defined role in the Crypto market.
How and why Tether affect Bitcoins price
Since its introduction into the Cryptocurrency market, Tether market trends have been affecting the price trends of other cryptocurrencies more so Bitcoin. With the recent printing of Tether worth $100 million, Bitcoin’s price is expected to rise: the prices might consolidate for a while then rise. Contrary to the later, late last year, Tether worth $300 + million was removed from the market, and this made Bitcoin’s price to drop by 5% from a support of $6000.
The logic behind is that Bitfinex prints more Tether, many people will invest in them. Investors may choose to either buy the Tether using fiat currency or exchange it with other cryptocurrencies: most prefer exchanging it with Bitcoin then later trade the Bitcoins for USD when the prices are higher. Consequently, the printing of Tether will result in a bullish movement in the market for Bitcoin. Changes in bitcoin’s price will, in turn, affect other Cryptocurrencies.
How This Could Affect A Trader’s & Your Portfolio
The investors will dominate the market, especially when it comes to Bitcoin. Efforts by sellers to bring the price down will be suppressed by the high volume of tether-bitcoin trade. Altcoins will be expected to follow the same trend as Bitcoin.
However, on the other hand, traders should beware of the devastating ripple effects that will be experienced in case Tether collapses. The collapse is indicated by the many controversies that are surrounding the Cryptocurrency. Many exchanges, which have their volumes trading against tether, will suffer together with the traders who rely on it during downtrends in the Crypto market.
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Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Live from the Platinum Crypto Trading Floor.