Bitcoin (BTC): 5 Reasons for the Latest Price Spike
Bitcoin rose on a Tether (USDT) trading anomaly, as the markets reacted to the movements on Bitfinex.
Bitcoin (BTC) suddenly swerved toward $6,700, an unexplained move after days of price weakness. Contrary to being the start of a rally, this price move may be an anomaly, as the latest developments show. Here are the five reasons for the latest price spike:
Bitfinex contagion: As it is widely known, Bitcoin is often traded by bots, which activate on any larger price movement and amplify it. This is the reason why when the price rose on Bitfinex on Monday at around 06:30 UTC, all other exchanges followed. The price of BTC saw upward bidding and easily reached levels above $6,600.
Tether (USDT) Breaking the Dollar Peg: The USDT digital asset still serves to provide a dollar-like price for Bitcoin. However, USDT is not worth exactly one dollar, but slightly below that. One of the indicators is the “Bitfinex premium”, a higher BTC dollar price, which reflects the lower Tether value. Tether has been losing trust since losing the backing of banks, and thus its strongest protection - the dollar peg. The trading on Kraken shows that USDT has been selling for 85 cents to the dollar recently.
Bitcoin as Safe Haven: Just like traders parked value in USDT at the start of the bear market, now, there may be a return to BTC positions. Given the above point, buying Bitcoin right now would be the better idea, as it would offset the drop in USDT. In the past days, traders withdrew BTC from the Bitfinex cold wallet. However, in a sudden reversal, more than 8,000 BTC re-entered the exchange, possibly for further speculation.
FOMO Striking Again: Just as the prices are on the move, some traders may be in for the speculation. There is also a chance to arbitrage Bitcoin, as there are other exchanges based on USDT. However, the Binance price is closer to $6,596, while on Bitfinex, BTC traded with a stated price of $6,800 and above, reaching as high as $7,280. While the price is unreal and does not reflect the dollar value, in the end, it is a chance to own more BTC.
Dollar-Baser Trading Taking Over: While USDT trading is lower, and the Tether project is actually pulling coins out of circulation, the volume of dollar-based trading is expanding. As the market becomes more active and liquid, there may be a chance for a fairer Bitcoin valuation. According to CryptoCompare, USD/BTC pairs take up more than 32% of volume, and despite the lower price, the USD pairing may become dominant, displacing USDT.
It is hard to estimate how much the Bitcoin trading anomaly would hold, and whether USDT would continue to crash, or return nearer to $1. What is curious is that the current events are seen as a potentially lucrative pump, creating speculative behavior without much regard for the potential instability of USDT. It is possible that the trading opportunities will draw attention from the state of Tether and BItfinex, at least for a short while more.
Neither the author nor the publication assumes any responsibility or liability for any investments, profits, or losses made as a result of this information. Cryptocurrency trading and investing are risky propositions, and market participants are advised to always conduct thorough research.