Tether (USDT) is one of the stablecoins in the cryptocurrency ecosystem. As a stablecoin, it has the backing of the U.S. dollar in the ratio of 1:1. However, the stablecoin dropped by 4% to $.096 USD in the past 24 hours. Now, it is making a slight recovery and is back to $.097 USD. This drop didn’t happen without having some negative effects. Beyond doubt, the surprising drop made it difficult for traders to purchase major cryptocurrencies, such as Ethereum (ETH) and Bitcoin (BTC), with USDT. Like a domino effect, the prices of these major virtual currencies rocketed on crypto-only exchanges such as OKEx and Huobi. Consequently, Bitcoin exchanged at $7,500 USD on Bitfinex.
Selling off Tether
In the short term, the instability and selloff of USDT may seem beneficial to the digital currency market. The reason is that the drop of USDT price has encouraged other cryptocurrency prices to spike. Nonetheless, in reality, it is not good for the market. Looking at overall coin performance, while BTC hit $7,500 USD on Bitfinex, there was no overall significant improvement in the global cryptocurrency market. A critic could argue that the drop of USDT mirrors lack of digital currency market maturity and formidable infrastructure. In addition, it could potentially scare away the much-awaited institutional investors. However, the price of another stablecoin – TrueUSD (TUSD) – increased by 8% to trade as high as $1.08 USD on Binance, suggesting that traders prefer regulated new stablecoins.
Tether (USDT) on the Market
Since 2014, Tether has played the critical role of US dollar to cryptocurrency-only exchanges. With that, traders can hedge their positions to the US dollar stability. Prior to 2018, USDT was the only stablecoin in the market, which compelled industry players to depend solely on Tether. However, Tether posed a serious threat to trades as it lacks transparency. Also, Tether’s operation is opaque. For instance, even up to this moment, traders remain unsure whether they can redeem USDT at 1:1 ratio to the US dollar, given the collapse of Tether’s banking partner, Noble Bank.
A cryptocurrency analyst and trader, Alex Krϋger, wades into the stablecoin saga. Krϋger pointed out that both Circle and Gemini are issuers that the U.S. regulates, making them more trustworthy. He said that one would expect that a greater percentage of USDT holdings to be migrated to the US-regulated issuers. Krϋger argued that it ought to be the case as traders believe that dealing with them (regulated issuers) carries lower credit risks.
Well, Bitfinex has released a statement, saying that it has obtained the approval of its banks to enable fiat withdrawal and deposits. The cryptocurrency exchange noted that this move will come into effect in the next 24 hours. According to cryptocurrency analysts, this statement could go a long way toward stabilizing USDT.
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