[2018-10-15] Bitcoin Price Explodes to $7,500 as Tether Loses USD Peg

[BitcoinArsenal]

Bitcoin price surged 9 percent within hours as Tether started losing its grip on the USD-peg.
The BTC/USD pair closed yesterday on a modest 2 percent gain in pennant formation action following the recent drop. Nevertheless, the couple started picking momentum during the early Asian trading session and jumped to as high as 7800-fiat from its previous low near 6300-fiat.
Full article on Cryptocoinnews

[1714866552]

1714866552

[coolcoinz]

We went up so much because a small jump from USDT to BTC started a wave of stop losses on shorts.
https://www.tradingview.com/symbols/BTCUSDSHORTS/

Look what happened on shorts today. It's a bloodbath. There's always more than one reason for the rally. USDT started it, short stops got triggered, now there will probably be a healthy continuation because we've broken through the trendline.

[Ozero]

This was due to the fact that rumors about her fraudulent nature were spread about the USDT coin. Despite the fact that it is considered stable and can not deviate from the rate of one dollar, however, the USDT today fell to 0.85 dollars. This caused a certain panic and, apparently, many of the coin collectors of this coin began withdrawing their funds from it and buying a btcoin. Therefore, for three hours it was possible to observe a surge in the price of Bitcoin, which rose in price by $ 1,500. Now it all goes back to normal.
It is also interesting that another stable coin TUSD, which is secured by the dollar, increased in price and ranged from 1.10 to 1.24 dollars.

[figmentofmyass]

This was due to the fact that rumors about her fraudulent nature were spread about the USDT coin. Despite the fact that it is considered stable and can not deviate from the rate of one dollar, however, the USDT today fell to 0.85 dollars. This caused a certain panic and, apparently, many of the coin collectors of this coin began withdrawing their funds from it and buying a btcoin. Therefore, for three hours it was possible to observe a surge in the price of Bitcoin, which rose in price by $ 1,500. Now it all goes back to normal.

in order for the peg to hold, there needs to be an ability to exchange USDT for USD. this is impossible right now. if you need to withdraw USD from bitfinex, you need to buy BTC and dump it on another exchange. that's how the price disparity develops.

i think we were seeing some large holders cash out of bitfinex yesterday. since shorts have been so high, the price rise started squeezing them. i think the spike to $7700 was more about stops being run on bitfinex than about "tether FUD". that's why the exchange disparity is back under 5% again. but because of arbitrage algos, the extremes were still reflected across all USDT markets.

It is also interesting that another stable coin TUSD, which is secured by the dollar, increased in price and ranged from 1.10 to 1.24 dollars.

strange indeed. thanks for pointing that out.

[TraderTimm]

Read this -- https://www.reddit.com/r/BitcoinMarkets/comments/9obzf2/why_tether_could_collapse/

Lack of deposit options is creating premium differentials in BFX's markets compared to others.

And since they're intertwined with the operation of Tether, issues there too.

"Stablecoin" my ass.

[buwaytress]

Read this -- https://www.reddit.com/r/BitcoinMarkets/comments/9obzf2/why_tether_could_collapse/

Lack of deposit options is creating premium differentials in BFX's markets compared to others.

And since they're intertwined with the operation of Tether, issues there too.

"Stablecoin" my ass.

Exactly why people should rethink this drivel about stablecoins. If this is all it took to cause the peg to collapse, imagine what would happen if a similar event with even twice the magnitude happened, and across all Tether holding exchanges.

For all the volatility of Bitcoin, this is something foreseen many times for Tether and its ilk.

[Betwrong]

What I can't understand is why do so many people still believe in that Tether scam? If the coin was "designed to always be worth $1.00", according to devs, and then we see that it is $0.88, shouldn't we think that something is terribly wrong with this project? Yet many people are not only not dumping their USDT, but start buying more instead, because, for some unknown reasons, they are sure it will go back to $1. And right now (because of their demand?) it is $0.98 already. Really? People, c'mon!  Tether has never provided sufficient evidences that Tethers in circulation are backed one-to-one by U.S. dollars. So, what makes you believe it will not go to zero one day?

[Harlot]

Even if Tether is backed up by USD and is renowned a stable coin in the crypto market once they see a pump this stable coins will lose value as traders will obviously sell their tokens in participation of the pump. This stable coins are only meant for one thing and that is being a safe heaven for people who are seeing the crypto market in a blood bath but in cases such as price rallies and pumps stable coins are not the most appealing cryptocurrencies in the market when that happens as traders will obviously miss the pump.

[figmentofmyass]

What I can't understand is why do so many people still believe in that Tether scam? If the coin was "designed to always be worth $1.00", according to devs, and then we see that it is $0.88, shouldn't we think that something is terribly wrong with this project?

there's no reliable way to peg a cryptocurrency to fiat value---fiat is centralized and requires banks for money transmission. every tether is supposed to be backed by $1, and i think they probably are. but what good is that when there are no banks willing to transmit dollars to tether's customers?

Yet many people are not only not dumping their USDT, but start buying more instead, because, for some unknown reasons, they are sure it will go back to $1. And right now (because of their demand?) it is $0.98 already. Really? People, c'mon!  Tether has never provided sufficient evidences that Tethers in circulation are backed one-to-one by U.S. dollars. So, what makes you believe it will not go to zero one day?

do you ever hold USD on an exchange? how do you know those USD are backed one-to-one by U.S. dollars? it's the same thing. it's not like coinbase or binance provide audits to their customers.

[dfox101]

Tether is a joke from the very beginning. It is good that it loses USD peg.

[1Referee]

What I can't understand is why do so many people still believe in that Tether scam? If the coin was "designed to always be worth $1.00", according to devs, and then we see that it is $0.88, shouldn't we think that something is terribly wrong with this project?

I'm pretty certain that Bitfinex had a perfect world picture in mind in the way that other exchanges wouldn't trade USDT against other fiat currencies, but they couldn't be more wrong. That's exactly why Bitfinex has no USDT/USD pair because they know how contradicting it is with the main principles of their token.

In a free market where pegs don't have to be respected, you should expect the value to move up and down based on the sentiment at a specific time. In other words, a miserable miscalculation on Bitfinex's end.

USDT will only be virtually worth $1 if all exchanges agree to not have it trade against the USD, but that's never going to happen.

[Coin-1]

As I can see, the Tether price has already bounced back to $0.97. I guess that some large investors sold a very big amount of their USDT coins, so the Tether price fell down to $0.90 for a short time. The Tether team keeps their real US dollars in banks and now they have transferred enough money to the crypto exchange markets. I'm sure that they might continue to peg the USDT price of $1 worth.

In addition, the new ERC20-token TUSD based on the Ethereum blockchain can become a strong competitor to Tether in the future.

[strasboug]

I hope Bitcoin will hit $7500 soon, but that $7500 is only tether price. As for Tether, time will tell how good it is.

[Betwrong]

What I can't understand is why do so many people still believe in that Tether scam? If the coin was "designed to always be worth $1.00", according to devs, and then we see that it is $0.88, shouldn't we think that something is terribly wrong with this project?

there's no reliable way to peg a cryptocurrency to fiat value---fiat is centralized and requires banks for money transmission. every tether is supposed to be backed by $1, and i think they probably are. but what good is that when there are no banks willing to transmit dollars to tether's customers?

Yet many people are not only not dumping their USDT, but start buying more instead, because, for some unknown reasons, they are sure it will go back to $1. And right now (because of their demand?) it is $0.98 already. Really? People, c'mon!  Tether has never provided sufficient evidences that Tethers in circulation are backed one-to-one by U.S. dollars. So, what makes you believe it will not go to zero one day?

do you ever hold USD on an exchange? how do you know those USD are backed one-to-one by U.S. dollars? it's the same thing. it's not like coinbase or binance provide audits to their customers.

I agree with you. It's possible that not all the US Dollars on bank accounts around the world are actually backed by real money. What is strange in this situation is that Tether Limited/Bitfinex are constantly promising an audit performed by a third party to substantiate their claim of full-backing, but never actually doing so.

What I can't understand is why do so many people still believe in that Tether scam? If the coin was "designed to always be worth $1.00", according to devs, and then we see that it is $0.88, shouldn't we think that something is terribly wrong with this project?

I'm pretty certain that Bitfinex had a perfect world picture in mind in the way that other exchanges wouldn't trade USDT against other fiat currencies, but they couldn't be more wrong. That's exactly why Bitfinex has no USDT/USD pair because they know how contradicting it is with the main principles of their token.

In a free market where pegs don't have to be respected, you should expect the value to move up and down based on the sentiment at a specific time. In other words, a miserable miscalculation on Bitfinex's end.

USDT will only be virtually worth $1 if all exchanges agree to not have it trade against the USD, but that's never going to happen.

After reading your post I checked Tether Markets on CoinMarketCap and  was surprised by seeing this



So, they do have the USDT/USD pair , I thought. But then I went to Bitfinex and discovered that they don’t have the pair. Now, I don’t know what to think. Why do they show on CoinMarketCap that such pair exists if actually it doesn’t?

[hatshepsut93]

Exactly why people should rethink this drivel about stablecoins. If this is all it took to cause the peg to collapse, imagine what would happen if a similar event with even twice the magnitude happened, and across all Tether holding exchanges.

For all the volatility of Bitcoin, this is something foreseen many times for Tether and its ilk.

All stablecoins are inherently centralized, so what's the point of having centralized cryptocurrency in the first place? Yeah, people can conduct transactions without intermediaries, no one can seize their coins and so on, but still there is a huge central point of failure that can result in massive loss of value. It sounds paradoxical, but stability comes with the risk.

[LeGaulois]

Exactly why people should rethink this drivel about stablecoins. If this is all it took to cause the peg to collapse, imagine what would happen if a similar event with even twice the magnitude happened, and across all Tether holding exchanges.

For all the volatility of Bitcoin, this is something foreseen many times for Tether and its ilk.

All stablecoins are inherently centralized, so what's the point of having centralized cryptocurrency in the first place? Yeah, people can conduct transactions without intermediaries, no one can seize their coins and so on, but still there is a huge central point of failure that can result in massive loss of value. It sounds paradoxical, but stability comes with the risk.

For people who don't care and have no interest in decentralization and are only in the market for a profit. The banking industry has also few points of failure and it resulted as you describe a massive lost (crash 1919-2008, money devalued in countries,...) It's not a problem for the people I was referring to, at least they will still own a digital currency

[1Referee]

After reading your post I checked Tether Markets on CoinMarketCap and  was surprised by seeing this



So, they do have the USDT/USD pair , I thought. But then I went to Bitfinex and discovered that they don’t have the pair. Now, I don’t know what to think. Why do they show on CoinMarketCap that such pair exists if actually it doesn’t?

It's very deceiving, I agree. Bitfinex doesn't differentiate between actual USD or USDT on their platform, which means that their USD orderbooks (they are always nominated as USD) are mixed up with actual USD and USDT. In other words, we don't know what percentage of their daily USD volumes consist of actual USD. I would easily assume that the majority is USDT.

https://support.bitfinex.com/hc/en-us/articles/360010505034-Fiat-on-Bitfinex

[InvoKing]

I would easily assume that the majority is USDT.

I assume it is intended to be 50-50% but in reality we know what's mean bitfinex after all  
Bitcoin price pegged to USDT shouldn't be mentioned since it is a big manipulation leading newbies to sell their USDT at a low price and buy bitcoin with ~+$1k its real price.

[BitHodler]

All stablecoins are inherently centralized, so what's the point of having centralized cryptocurrency in the first place?

It's not meant to represent something decentralized. It's just a convenient value tool for people to hedge price drops and have these stablecoins be transferred to other exchanges for arbitrage opportunities.

With fiat you are forced to verify yourself, and it can't be transferred to exchanges in a quick fashion with how you rely on banks to process these transactions, which can take days in some cases.

I'm not a fan of stablecoins either, but there are enough traders globally who are actively using them in their advantage on a daily basis. As long as people can use them without verification they will remain popular.

[figmentofmyass]

After reading your post I checked Tether Markets on CoinMarketCap and  was surprised by seeing this



So, they do have the USDT/USD pair , I thought. But then I went to Bitfinex and discovered that they don’t have the pair. Now, I don’t know what to think. Why do they show on CoinMarketCap that such pair exists if actually it doesn’t?

i've seen this question asked a few times. i don't think bitfinex or coinmarketcap has commented on the pair specifically. the most popular theory is that coinmarketcap is getting data from the bitfinex USDT wallet, and that USDT/USD trades represent customer transfers in and out of the wallet.

some discussion on reddit:
https://www.reddit.com/r/bitfinex/comments/7rwis5/bitfinex_usdusdt_pair_on_coinmarketcapcom/
https://www.reddit.com/r/BitcoinMarkets/comments/7s9iux/the_bitfinex_usdtusd_pair_that_doesnt_exist/

[hatshepsut93]

For people who don't care and have no interest in decentralization and are only in the market for a profit. The banking industry has also few points of failure and it resulted as you describe a massive lost (crash 1919-2008, money devalued in countries,...) It's not a problem for the people I was referring to, at least they will still own a digital currency

It's okay if they understand the risk, but the bigger problem is that stablecoins are painted as some sort of improvement over traditional cryptocurrencies, and that people should be using them as a currency because of their stability, as they suffer less from volatility than traditional cryptos. This is really bad, because stablecoins reject the core value of Bitcoin/any true cryptocurrency - no central point of failure.

[Betwrong]

Thanks for the great links, @1Referee and @figmentofmyass! After reading from them and some more I think I can try to summarize the obtained information.

Anyone can deposit both USD and USDT on Bitfinex. However only fully KYC-verified users can withdraw USD. Other, non-verified, users can only withdraw USDT, say to Kraken, exchange it for USD there and then wire to any account they want. Since many users are not verified, this situation contributes to the creation of the huge “trading” volume of the USDT/USD pair, while, in fact, there is no actual trading. Anytime someone withdraws USD from Bitfinex they “trade” it for USDT first and then withdraw. On top of all of this, if someone deposits USDT on Bitfinex it is automatically “traded” for USD and the person in question has USD on their account, which also contributes to the  USDT/USD “trading” volume.