The demise of Tether has been a car crash in slow motion. An unswervable event that has played out over the course of months, it has reached a crescendo in the past 24 hours, with tether slipping significantly from its dollar peg. It is possible, perhaps even probable, that it will regain parity with the U.S. dollar. But by then, the damage may have already been done.
Also read: The Daily: Tether Sheds Its Peg
The Beginning of the End
or the Start of a New Dawn?
A cryptocurrency losing 10 percent of its value in a week would not normally be news. But when that cryptocurrency is a supposedly “stable” coin — and one whose very stability is relied on by a huge tranche of the market — its slippage is big news. One small slip for tether can result in a giant leap for other cryptocurrencies; it is no coincidence that BTC’s climb to $7,500 in the past 12 hours, as well as its subsequent decline, was triggered by tether’s instability.
A precis of the events that led to this state of affairs goes as follows:
- Tether’s trading volume has built up over time, leading to it becoming the second most traded crypto after BTC (USDT 24-hour volume currently stands at $4.8B)
- Bitfinex’s failure to publish an audit has led to fears that tether could be backed by nothing, or at least not enough to cover the 2.5 billion tethers in circulation
- Bitfinex’s struggle to obtain a banking partner has exacerbated the problem
- Rumors of Tether/Bitfinex being subpoenaed and potentially shut down have swirled for months
- Last week Bitfinex lost its latest bank, HSBC, forcing it to suspend fiat deposits
- A steady stream of
