USDT (Tether) FUD Leads to Another Crypto Bloodbath
Another red today, things are looking gloomy in the crypto world. The latest culprit? USDT.
USDT is a cryptocurrency pegged to the US Dollar. 1 USDT is (supposedly) backed by 1 USD on the bank account of Tether, the issuing company of USDT. However, since June 2017, concerns were raised on the growing supply of USDT, without the company providing proof of actual backing. You can find more background information in my first article about USDT. Since then Tether came out with a reassuring statement as it provided proof of 1 -1 backing with the USD as it was audited by Friedman. More on that can be read in my second article which further covered the USDT saga.
Since then, the supply of USDT increased 'exponentially' from 444 mln to 2.25 bln TOKENS raising new concerns about the backing of the cryptocurrency with actual US Dollars. Many accused Tether and Bitfinex, which share the same CEO, to be involved in a scheme to 'print USDT'. Essentially the concern is, again, that there is no USD balance offsetting the current USDT supply.
In itself, nothing new of course, but this week Tether and the accountancy firm that performed the audit in 2017 parted ways, which led to increasing rumors. And today the real bomb shell was thrown at the market as the US CFTC subpoena'd Tether and Bitfinex to supply the financial and legal information proving the the backing of the crypto currency.
To top it all off, Cryptopia came with the following announcement:
"Unfortunately, our current bank has notified us that they intend to close our NZDT account on 9 February. Due to this, we are announcing an immediate halt to NZDT deposits from COB today and we are asking all customers to cease sending NZD deposits to our NZDT account. We will continue to send withdrawals up until the 9th of February if you wish to withdraw your NZDT balance. We will also place a significant sell wall on the BTC/NZDT market at a very competitive market rate to enable any users currently holding NZDT to be able to convert this to BTC at the best rates available in NZ. Due to the extremely short notice from the bank (and little opportunity to present our case and provide compliance documentation to demonstrate our commitment to the applicable regulations), we believe this is the best course of action to protect our users."
This all created more Fear, Uncertainty and Doubt in the market, leading to new lows in total market cap since the futures expiration.
The decline is understandable of course. Imagine if USDT indeed was not backed by USD. This would mean that the price of BTC and other cryptocurrencies was seriously inflated in the past, creating far more demand than actually is or was there for cryptocurrencies.
That would mean prices seen in the past would be harder to achieve in the future, given the lower demand if USDT would prove to be a scam.
On the other hand one should quantify the the actual impact USDT should have on the market. As can be seen in the graph above, total market cap is currently around $500 bln, meaning USDT only covers 0.5% of the the entire market. The decline off the market today is over 20 times that number. Based on rumors and FUD. Justified?
Maybe. But Ill use theopportunity to buy more where I can as I have the feeling large players are driving the crypto prices down with news articles promoting FUD and of course by (short) selling crypto currencies and derivatives (i.e. futures).
What do you think is happening?
Stay tuned!
References:
http://omnichest.info/lookupsp.aspx?sp=31
https://www.bloomberg.com/amp/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc?__twitter_impression=true
https://steemit.com/bitcoin/@attalis/tether-still-a-legitimate-peg-to-the-usd
https://steemit.com/bitcoin/@attalis/is-tether-still-a-viable-alternative-to-fiat-to-crypto-trading
Update: Bloomberg just updated their article stating the subpoena was already issued on December 6th. When something smells, looks and and act as FUD spreading, it probably is FUD Spreading. These whales must be having a field day in the current market.
I feel like this is more than just a bump in the road, I could be wrong - but come on - this is the perfect storm - major uncertainty, a very headline-able Crypto falling apart (Tether? How many puns will CNN be able to make out that) and the possibility of another major ding in the public eye about the nature of Crypto. And if the worst case people are true - bear market.
The market will recover in time, but in the short term - I'm skeptical.
Agree with you mate, it is a perfect storm. First futures, then exchange hacks then Tether. Perfect storm or a lot of coincidence? Either way we are in a bear market since early this month. Doesn't mean you can't buy of course. I like to buy when the prices are low. Thanks for commenting by the way.