Market Overview

Tether Implodes in 4% Drop = An Important

The price of Tether (USDT), a crypto stablecoin backed by the US dollar pegged to $1, has fallen by around 4 percent in the past 24 hours to $0.96. As USDT fell, it became more expensive for traders to purchase major cryptocurrencies like Bitcoin and Ethereum with USDT, pushing the premium of cryptocurrencies up on crypto-only exchanges like OKEx and Huobi. At its peak, the price of Bitcoin achieved $7,500 on Bitfinex, as CCN reported on Monday. Ostensibly, In the short-term, the sell-off and instability of USDT may seem beneficial for the crypto market due to the increase in the price of most cryptocurrencies but in reality, it really is not.

Bitcoin achieved $7,500 on Bitfinex but the inflated price of BTC by USDT is of less significance to the global cryptocurrency exchange market. It can be argued that the decline of USDT portrayed lack of maturity and strong infrastructure in the market, which could push away institutional investors such as pensions and academic funds that are interested to commit to the asset class.

In the long-term however, the decline of Tether could positively affect the crypto market as it will lead traders to regulated, audited, and transparent alternatives like Gemini Dollar (GUSD), Paxos (PAX), and TrueUSD (TUSD). Already, the price of TUSD has increased to $1.08, by more than 8 percent, and has risen quite substantially against USDT on Binance, which suggests that traders have started to favor newly emerging stablecoins that have the backing of banks and authorities.

Since 2014, Tether has provided cryptocurrency-only exchanges an alternative to the US dollar with which traders can hedge their positions to the stability of the US dollar. Prior to 2018, there were no alternatives to USDT, forcing the industry to depend on USDT as a widely accepted stablecoin.

Tether Implodes in 4% Drop = An Important, CCN, Oct 15
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