Bitcoin Approaches $7K Level As Tether Sells Off

Mae Love
October 18, 2018

The only exception to this has been the USD-pegged stablecoin Tether (USDT), which fell by as much as 8%, as its crypto peers surged.

At the moment of this writing, Tether (USDT) fell to $0.964, dropping by about 2.30% in the last 24 hours.

According to Tether, the audit was canceled because Friedman LLP was taking too long, its procedures were too detailed, and it would be impossible to complete the audit in the desired timeframe. "USDT provides an alternative to Proof of Solvency methods by introducing a Proof of Reserves Process.In the Tether Proof of Reserves system, the amount of USDT in circulations can be easily checked on the Bitcoin blockchain via the tools provided at Omnichest.info, while the corresponding total amount of Dollars held reserves is proved by publishing the bank balance and undergoing periodic audits by professionals".

Volume rushed back into the crypto market this morning after Binance tweeted out a report from Token Insight giving Tether an investment grade rating of B (On the 10 point scale from AAA to D).

The Tether-related panic also saw the stablecoin's price drop to a low of about $0.87, before it quickly recovered to $0.93.

Last week, Bitfinex sent almost $300 million worth USDT tokens to the Tether treasury address. On October 9, Bitfinex sent $100 million USDT tokens followed by another $200 million on October 14.

Unlike other cryptocurrencies that fluctuate wildly in value, one tether generally equals one dollar.

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In a word with CoinDesk, Bitfinex's communications director Kasper Rasmussen said that "the supply of USDT decreases upon redemption".

Last Thursday, when Bitfinex revealed that fiat deposits are paused, some investors became suspicious due to the lack of details from Bitfinex regarding the mentioned "complications" that made the exchange halt fiat deposits. "This subsequently lowers the circulating supply of USDT whilst the fiat United States dollars previously held by Tether goes to the redeeming party". Exchanges are not the only objective for coins that are tied to fiat currency, or other commodities, as they offer a hybrid of the versatility and programmability of crypto with the stability of more traditional fiat currencies and assets.

Bitcoin hit $7,500 on Bitfinex but the high price of BTC in terms of USDT is of no value to the worldwide cryptocurrency exchange market.

Critics - who claim USDT tokens aren't backed by any Dollars - reacted to the development claiming Bitfinex and Tether no longer had a banking relationship and were insolvent. Now, just three weeks after Noble Bank's apparent collapse, crypto media outlet The Block has revealed that the Tether Foundation has likely found itself in the Caribbean, striking a deal with a local bank. At the Kraken exchange, the price is 95 cents, while at Binance the price is 96 cents.

In a dramatic reversal of sorts, bitcoin price and cryptocurrency markets, which had been in a swoon for most of this month, surged on Monday morning even as the price of Tether, a controversial stablecoin which trades at parity with the U.S. dollar, declined.

Moreover, as Tether controversy continues to gain steam, crypto exchange are switching to these alternatives. "Soon, however, we will add other stablecoins to our list". It is usually not now possible to buy alternative cryptocurrencies such as Tether directly using United States dollars.

It is therefore unsurprising that others are moving into the space to compete for that business - and perform the kind of service that Tether has always been synonymous with.

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