Tether (USDT) Unravels as Bitfinex Bitcoin (BTC) Premium Shoots through the Roof
After days of troubling transactions slowly draining Bitfinex of Bitcoins and pumping in Tethers, the Bitcoin trading premium exploded, in effect breaking the dollar peg of USDT.
Within about an hour on Monday, the Bitfinex trading premium on Bitcoin (BTC) went through the roof, soaring from around $138 to as high as $700. This is seen as the launch of a catastrophic or at least anomalous event for Bitcoin trading since the price on Bitfinex reflects the fact that Tether (USDT) has effectively broken its dollar peg. As of 06:35 UTC, BTC continued to shoot upward on Bitfinex, going as high as $7,045, with no end in sight. Later, prices moved up to $7,280.
https://twitter.com/Bitfinexed/status/1051716235254267905
With such an event, the disastrous predictions of Tether skeptics are starting to make more sense. Over the past weeks, the slow buildup of negative developments for Bitfinex and Tether led to a sudden break in the peg:
https://twitter.com/Bitfinexed/status/1051715752322105345
OnKraken, the price of USDT is in freefall as of 6:30 UTC on Monday, breaking down within minutes from the worrying $0.97 to as low as $0.94, with no signs of recovery. It slid to $0.90 with a big sell wall as of 06:50 UTC. USDT has gone as low as $0.85 in the past, but this time, no one knows how deep the losses would go, and if Tether would survive.
For days, Cryptovest has been reporting on the developments around the Bitfinex Tether and Bitcoin wallets, as well as the lack of bank backing for the two projects. USDT trading affects 50% of Bitcoin volumes, and a loss of value may lead to a massive price pump.
BTC prices shot up to $6,709.26, and the price pump quickly spread throughout exchanges as a form of trading contagion. Bots and human decisions may lead the dollar price higher, but there is an attempt to exit Tether. Within an hour, the trade of USDT in BTC pairs fell from 52% to 46%, based on CryptoCompare data, and there are attempts to sell for USD. But doubts exist whether trading will continue in this manner, and the USD price of Bitcoin may diverge wildly from the BTC price.
https://twitter.com/Bitfinexed/status/1051714035895468032
More than 36% of BTC dollar-denominated trading happens on Bitfinex, but those prices and volumes include USDT trading as well.
Cryptovest will be tracking the developments of USDT and Bitcoin to see if stability returns or this proves to be a terminal event with a mass exodus and loss of trust in a major exchange.
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.