The source of bitcoin's current skyward trend was foreshadowed

[Hydrogen]

A 50% INCREASE IN TETHER SUPPLY POINTS TO ANOTHER BITCOIN RALLY: ANALYST

OCT 13, 2020

Bitcoin should brace for another upside move as a large Tether supply waits to enter its market, according to TradingShot.

The independent market analysis firm said that the USDT supply increased by more than 50 percent since August 2020. While it may have fueled the 18 percent price rebound in the Bitcoin market a month later, its actual impact on the cryptocurrency’s spot rate remains undiscovered.

“There has been a significant increase in crypto buying power, and such power has not been reflected yet on the price actions,” noted TradingShot.

Historically, Tether’s USDT serves as a leading indicator of Bitcoin’s price. In November 2018, for instance, the BTC/USD exchange rate fell 46 percent. The move appeared almost six weeks after USDT experienced a 44 percent plunge in its supply. Also, in May 2019, the number of USDT tokens in circulation shot up by 30 percent.

It followed BTC/USD surging from $5,700 to $11,350.

In the said instances, Bitcoin laggingly tailed the USDT market cap. TradingShot noted the same in the cryptocurrency’s current upside move that came almost a month after the USDT supply grew.

BITCOIN ACCUMULATION CONTINUES

Other on-chain indicators behaved as tailwinds for the ongoing Bitcoin price rally. TradingShot highlighted strong accumulation sentiments in the last few weeks despite BTC/USD’s correction from $12K to $10K.

“Price generally goes into a bullish trend on rising on-chain smart money accumulation,” the firm wrote. “In Nov 2018, the $6k level experienced smart money accumulation, and the price dropped to 3k in the next 2 months with more accumulation happening. While the BTC accumulated at 6k took an almost 50% loss, the price soon rose to 12k+, generating a 2x.”

Bitcoin market outlook, as presented by TradingShot. Source: TradingView.com

MINERS

A similar accumulation sentiment also grew higher among the miners – a section responsible for running the Bitcoin’s decentralized network, for which they receive newly minted bitcoin tokens. Typically, miners sell a good portion of their rewards to pay for their operational costs.

When their higher Ask price matches the Bid, it means that the market is willing to pay more to accumulate Bitcoin. – and vice versa. TradingShot noted that investors are buying Bitcoin en masse, which is why it has faced massive sell-offs without hurting its bullish bias.

“If the stock market drops 10%+, BTC will go down,” the firm added. “For most investors, the hedge for low yield environment or political uncertainty is still gold over crypto. And even though BTCmay recover quicker compared to stock indexes, the initial reaction is still likely correlated at this point.”

With the USDT market cap higher and an inflationary outlook in the future, Bitcoin demand expects to grow among mainstream investors.

https://bitcoinist.com/a-50-increase-in-tether-supply-points-to-another-bitcoin-rally-analyst/

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This was published around 3 weeks ago and predicts a big bitcoin up trend sustained by a 50% increase in tether supply. Tether may be emerging as one of the best leading indicators for predicting future bitcoin price moves. The relationship between bitcoin and tether has been acknowledged many times in the past. With some conspiracy theorists going so far as to claim tether is a conspiracy to manipulate the value of btc.

[beerlover]

Considering this was published 3 weeks ago, could we say that the big increase we have seen in the past week could be attributed to this? Or should we assume that even today we are still waiting for USDT to make it go up? I feel like at around $15k-16k range we are actually not doing that bad with the hype but also going higher than this would be requiring some more cash capital coming in, which could be via USDT if possible but if not it could be regular bank deposits going into the crypto market for new investments as well.

Whatever happens next I can say that USDT does really have a big impact on bitcoin price, you get to see if people are bullish or bearish on bitcoin according to how USDT is doing and that scares me because our market is depending on Tether company not doing anything illegal and not get all that money seized by governments.

[jaysabi]

I understand the claim that USDT is a leading indicator for bitcoin price, but I'm having trouble understanding why this is supposed to be. Without a rationale explanation for this, it's just a correlation like all the other correlations that are just a coincidence.  Can anyone explain it like I'm 5 why USDT is supposed to foretell btc price movements?

[erikoy]

Ah I see, this is how I should also look for the tether market when predicting bitcoin market or doing a trade.  Yes stable coins like usdt plays important role in trading with bitcoin without the need to convert bitcoin to fiat currency. This means that keeping the value of your money with stable currency may be possible by using the stable crypto like usdt and the very good thing is that we can make a smart trade when bitcoin market obviously going to a down trend that will save your money after the depreciation of bitcoin and then buy back bitcoin when market will be crashing so to earn more bitcoins in a cheaper price using the stable crypto.

[Hydrogen]

I understand the claim that USDT is a leading indicator for bitcoin price, but I'm having trouble understanding why this is supposed to be. Without a rationale explanation for this, it's just a correlation like all the other correlations that are just a coincidence.  Can anyone explain it like I'm 5 why USDT is supposed to foretell btc price movements?

One concern in buying and selling bitcoin is volatility. Stablecoins like tether overcome this to a degree by pegging their value to the US dollar. Those who use tether to buy bitcoin can be confident their buying power will not diminish over time.

The red line in the chart above represents tether supply(other line is BTC price movement). It represents how much tether people are buying. As the only thing tether can be used for is buying bitcoin. High demand of tether, translates directly to high demand for buying bitcoin. The big increase over september 2020: all of the tether bought would be exchanged for btc at some point. This elevated demand, would likely cause bitcoin's value to appreciate.

The only real question was when the exchange would be made.

AFAIK anyway. Feel free to disagree and correct if needed.    I'm here to learn just like everyone else.

[bitgolden]

I understand the claim that USDT is a leading indicator for bitcoin price, but I'm having trouble understanding why this is supposed to be. Without a rationale explanation for this, it's just a correlation like all the other correlations that are just a coincidence.  Can anyone explain it like I'm 5 why USDT is supposed to foretell btc price movements?

The main idea would probably be ; If there is more USDT wanted, that means there is more money involved, if there is more money involved that means there must be more money going into bitcoin.

The logic could actually stand very correctly, because if you do not need any USDT and people get out to fiat that means people are selling their coins and going to fiat route instead however if people want more and more and more USDT that means people are not getting out to fiat, it also doesn't mean they are going into bitcoin because it doesn't mean that but they are not out to fiat neither, which shows that there is a big chance they could be into crypto and could be buying. You are absolutely right that it is not a "proof" but it is just an idea and it is an idea that makes sense.

[davis196]

I understand the claim that USDT is a leading indicator for bitcoin price, but I'm having trouble understanding why this is supposed to be. Without a rationale explanation for this, it's just a correlation like all the other correlations that are just a coincidence.  Can anyone explain it like I'm 5 why USDT is supposed to foretell btc price movements?

It was already explained many times before.More Tether in circulation means more active crypto traders,which means more market liquidity and increased demand for crypto coins.
I remember that the launch of Tether back in 2017 had a huge role in the Bitcoin price explosion back then.
Crypto traders should pay close attention to stablecoins,even though I am not a big fan of those coins,they can provide great trading signals.
During the last three years,I thought that Tether will turn into an exit scam and the creators will run away with all the USD in their reserve.Well,now I have to say that Tether is actually legit.

[so98nn]

Interestingly it supports the on-going bitcoin trends. But have we checked whether the USDT has been injected in the market yet?
I guess this relationship is based on the fact that when large portion of people are trying to save their money in the stabelcoin as investment for the future interestes. Since the news came out as 50% of Tether will be at dispersal, that has to be in association with someone might be taking big fat wallet out from their pants!

Of course all of these are just predictions that we can do. The true relationship could be just grown over the time by such news.

I understand the claim that USDT is a leading indicator for bitcoin price, but I'm having trouble understanding why this is supposed to be. Without a rationale explanation for this, it's just a correlation like all the other correlations that are just a coincidence.  Can anyone explain it like I'm 5 why USDT is supposed to foretell btc price movements?

It was already explained many times before.More Tether in circulation means more active crypto traders,which means more market liquidity and increased demand for crypto coins.
[...]

Yes, but we don't know why so? There are many other coins with the stablecoin property like Tether. Well not pushing far, ETH (not a stablecoin) but with unlimited supply and stronger in injecting the liquidity should have more post enhancement affects on the Bitcoin.

However, the deployment of this news surely has some effects on BTC as we speak.

[Harriti]

This was published around 3 weeks ago and predicts a big bitcoin up trend sustained by a 50% increase in tether supply. Tether may be emerging as one of the best leading indicators for predicting future bitcoin price moves. The relationship between bitcoin and tether has been acknowledged many times in the past. With some conspiracy theorists going so far as to claim tether is a conspiracy to manipulate the value of btc.

I don't think Tether and Bitcoin are related to future market prediction. This article only analyzed 3 weeks ago but please look back at the beginning of March 2020.
Tether has been continuously getting more and more printed and the number is estimated to be close to $ 500 million before Bitcoin's historic dump dropped from $ 10k5 to $ 3k8.
Actually, the above theories are also reasonable but it is always not entirely true. we need more data on the general economy for easier analysis.

[el kaka22]

It is not just USDT but also all stablecoins that got attention as well. I know people do not like to talk about defi projects like they are a big deal but we are talking about stuff like DAI that got a lot of attention as well and when DAI got that much attention the same principle as USDT causing bitcoin to go up did happened for DAI as well, people got involved with it a lot just like they got involved with USDT and that could be a reason why bitcoin prices went up a lot quicker.

The easier you make it for people to get back into bitcoin the easier the increase will be, when people cash out to their bank accounts it is harder for them to reenter bitcoin world but when they cash out to DAI or USDT or anything similar, it is just one click away from getting back into crypto so that could be main driving force.

[Stedsm]

I believe that it's not just the stablecoins (let alone USDT) that helped BTC spike up but there's a lot more hype surrounding this rally was going on like:
- Square and Microstrategy injected millions in buying BTC
- PayPal's move of announcing about allowing users to "just trade in BTC in the portal itself"
- And then, this US election

Everyone was thinking of Trump's win because he used to be in favor of BTC and so, the markets reacted that way. I believe Tether will fall badly one day but maybe it's just me.

[manfredmann]

So there is a great relevance between the two crypto. Is there any chance that the owner or developer of tether crypto were also part of bitcoin development? If not then why is it so happen? Is it just coincidence? Or it is done in purpose because whenever they will sell their bitcoins instead of converting it to fiat it can be stored in a stable coins like Tether.

[sheenshane]

It is not just USDT but also all stablecoins that got attention as well. I know people do not like to talk about defi projects like they are a big deal but we are talking about stuff like DAI that got a lot of attention as well and when DAI got that much attention the same principle as USDT causing bitcoin to go up did happened for DAI as well, people got involved with it a lot just like they got involved with USDT and that could be a reason why bitcoin prices went up a lot quicker.

I tend to agree, that one of the reasons why USDT and DAI have a great impact on the Bitcoin price is because it's easy to access to reenter in the Bitcoin.  However, this may not serve as a basis nor an indicator since we are talking about bitcoin value. 

On the other hand, probably with the trend that was posted by OP, we can't assume that because of USDT it will be consistent in the increase in Bitcoin value and there are a lot of factors that can affect these changes like with Paypal's acceptance of Bitcoins or the recent event the presidential election, besides, we can only speculate on the trend and become complacent on it.

[Cnut237]

A 50% INCREASE IN TETHER SUPPLY POINTS TO ANOTHER BITCOIN RALLY: ANALYST

It makes sense, yes. However in this instance I don't think that's the reason. The rise coincided exactly with the start of the election results in the US. We saw traditional stocks and shares surge as well. If they are moving up at the same time as bitcoin, this points to an external 'non-crypto' driver. In this case, the US election.

As with everything, predicted outcomes are factored into price ahead of time. The general expectation was that Biden would win, and the Dems would gain control of the senate. What happened was a Biden win, but likely Rep controlled senate (depending on the GA run-offs in January).

This means that there was 'breaking news' that Biden wouldn't be able to force through his expected stimulus packages and tax hikes in the face of a Rep senate. This new information is I think is the main cause of the price rise across both crypto and non-crypto assets.