Bitcoin experienced a brief, strong rebound this Monday, with the price briefly peaking to a level of $7,800. At the time of writing, the price has since been ‘normalized’ again to approximately $ 6,600, according to data from CoinMarketCap.
Price rise linked to Tether effect
There are a number of reasons why the price of bitcoin rose unexpectedly. For example, there is less confidence in Tether (USDTD) as a stablecoin. Investors are, therefore, fleeing to bitcoin as a safe haven. Tether claims it is backed 1:1 by USD. However, this has never been confirmed by independent auditors. These reasons have hugely contributed to a strong distrust in the so-called stablecoin.
More volatility to be expected
Doubts arise because the value of USDT fluctuates at various crypto exchanges. At the Kraken exchange, the price is 95 cents, while at Binance the price is 96 cents. As soon as too much Tether is withdrawn from the market by investors, it puts the entire cryptocurrency market in trouble.
Tether accounts for roughly 20 percent of the market volume. The daily trading of Tether is usually used to represent the crypto market volatility. If the volume of USDTD is suspiciously large in the midst of a market correction, it could signify investors are trading cryptos for Tether (USDTD).
Relationship between Bitfinex and Tether
The relationship between the crypto exchange Bitfinex and Tether is fairly close, something that has always been denied by both startups. First of all, they share the same founders, Phil Potter and Giancarlo Devasini, according to a post published by the New York Times. Devasini is the director for both companies, Bloomberg reported earlier.
Bitfinex acts as the primary channel for USDT. According to previous research, including from Northwestern University or Kellogg School of Management, this close relationship is unhealthy. As soon as more Tether enters the market, the price of bitcoin is artificially boosted.