By As of mid-October 2018, crypto markets are generally in positive territory, with virtually all of the major cryptocurrencies seeing . The exception is that of stablecoin, Tether (USDT), which seems to no longer be pegged to the dollar. According to CoinMarketCap, on 15 October 2018, Tether was trading at $0.96 and was down about 3.05%.
Tether is theoretically linked to the dollar due to the company’s claim that there is a dollar in the bank for each token issued. As a result, Tether is one of the most actively traded cryptocurrencies and is often used to substitute the dollar for trading purposes, due to the tokens being more easily transferred between exchanges. However, as of Monday, Tether suddenly started losing value against the dollar.
Reasons for the decline in price are not confirmed, but there is talk of a loss of “market trust” which may have resulted in the recent sell-off. The crypto twitter feeds are also buzzing with posts alleging that Tether is a “scam”. Furthermore, an article by Bloomberg which was released this week, speculated that investors may be “losing faith” in the coin as, although Tether claims to be backed one-to-one by the dollar, “the company has yet to provide conclusive evidence of its holdings to the public”.
Bitfinex’s Financial Health Issues
Previously, critics have accused Tether and its associated exchange, Bitfinex, of covering up a possible reserve deficit in Tether’s operating reserves. However, in a mid-year unofficial audit of Tether, it was confirmed that the company did have the correct amount of dollar holdings in terms of the tokens it had issued. This report was made in response to rumors that flew when Tether terminated its mandate with a third-party auditor earlier in the year.
In the beginning of October 2018, Bitfinex was under fire again as rumors were abound that the exchange was “insolvent” and facing possible banking issues. Bitfinex has, however, been quick to state that all allegations related to Noble Bank International and its recently terminated partnership with both Bitfinex and Tether, has had “no impact” on its operations, survivability or solvency.
Despite the exchange’s assurances, it appears that Bitfinex’s financial health issues are not over. In October 2018, Bitfinex briefly suspended all fiat wire deposits for major currencies including the dollar, euro, pound and yen. According to the exchange, most companies that deal with crypto face complications with fiat transactions and Bitfinex’s fiat problems were therefore not unusual. In a post on Monday, Bitfinex stated that its customers were still able to freely withdraw crypto and fiat currencies, although “fiat deposits have been temporarily paused for certain user groups” pending the implementation of a new fiat deposit system.
Correlation Between Tether, Bitcoin and Altcoins
The recent drop in Tether’s price saw a simultaneous increase in the price of Bitcoin on Bitfinex, which rose by almost 9% by mid-day Monday 15 October 2018. Bitcoin prices on Bitfinex are currently trading at a premium and Bitcoin is generally up this month, with steady growth.
Tether’s price plunge also saw a corresponding price spike by Ethereum on Monday, although Ethereum is still showing monthly losses. Similarly, Ripple’s price saw a somewhat less dramatic movement on Monday and, due to its performance in September, continues its monthly gains. According to CoinMarketCap, the top 10 and even top 20 coins are still in the green with steady growth. It therefore appears that Tether’s downturn has not had a knock-on effect.
What do you think of Tether’s market performance? Is the stablecoin truly pegged to the greenback dollar? Give us your thoughts in the comments below.
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