The crypto community was once again shaken earlier this week when news broke regarding the New York Attorney General’s (NYAG) office pursuing further investigative action into the controversial stable coin Tether and related crypto exchange Bitfinex.
Concerns surrounding Tether have plagued the crypto markets for well over a year, but Bitcoin’s relatively small drop that ensued after the latest development may signal growing fundamental strength behind BTC.
Concerns Surrounding Tether Rekindled
In a press release that was posted on April 25th, the NY Attorney General’s office boldly stated that iFinex – the parent company of both Bitfinex and Tether – may be defrauding NY-based investors who trade cryptocurrencies.
According to the press release, Bitfinex sent a whopping $850 million to a company based in Panama that resulted in the exchange losing access to these funds. In response to this, Bitfinex granted itself access to a significant amount of Tether’s cash reserves that are supposed to be used to maintain USDT’s 1:1 USD backing.
This news spread throughout the crypto industry like a wildfire, and rekindled concerns that USDT – which remains one of the most popular stable coins – is not actually backed 1:1 by USD, which would undoubtedly have a massive impact on Bitcoin’s price.
Bitcoin’s Price Barely Reacts to Tether News
Although the Tether news certainly validates some of the concerns that are circling through the community, investors clearly aren’t too afraid that anything will truly come about as a result of the NYAG’s investigation, as Bitcoin’s price has remained relatively stable.
At the time of writing, Bitcoin is trading down marginally at its current price of $5,250, down from its weekly highs of roughly $5,650.
Chris Burniske, a partner at venture capital firm Placeholder VC, spoke about the relatively small impact the Tether imbroglio had on Bitcoin’s price, noting that the spread between BTC’s price on Bitfinex versus other exchanges is making him “queasy.”
“On one hand, I’m impressed with how $BTC has held given the #Tether news, on the other hand the ~$200 spread between @bitfinex & other exchanges is making me queasy,” he noted.
Furthermore, Burniske also said that Bitcoin’s minor reaction to the news is emblematic of the current market sentiment, but further noted that he believes BTC needs to drop back towards either $4,000 or its 200-week SMA in order for the bull market to truly begin.
“On the other hand, we’ll see if Bitfinex can withstand the run on the bank & what further Tether boots drop. With $BTC needing to retrace to either $4K or the 200 week SMA to have a rock solid base for the bull market to come (IMO), we could get our last great opp of 2019,” he explained.
As the imbroglio surrounding the Tether and Bitfinex situation continues to unfold and as investors continue to migrate away from USDT and towards other stable coins in preparation for the worst, it will likely become increasingly clear as to just how large of an impact it will have on the markets long-term.