The price of bitcoin has remained remarkably calm in recent days, in contrast to the decline last week. You can even do it almost stably. Talking about stable, in this analysis we look at the role of tether on bitcoin.
What is tether?
Tether is a so-called stablecoin, a cryptocurrency that follows the rate of a national currency. Tether (USDT) is linked to the dollar and is widely used on cryptocurrency exchanges. On stock exchanges you can see that in the trading pair BTC / USDT.
Tethers are issued by Tether Limited. The intention is that for every tether there is also a dollar in the bank account of Tether Limited. Tether is also covered by other assets, but the Tether Limited website is not very clear about that.
Tether Limited coincides with the cryptocurrency exchange Bitfinex under the umbrella body iFinex. Both organizations are quite controversial in the crypto world. This is partly due to the suspicion that tether has an influence on the bitcoin rate.
More volume in tether than in bitcoin
Something quite unique is now happening with tether. More is traded daily in tether ($ 16.8 billion) than in bitcoin ($ 14.2 billion). Ethereum comes at an appropriate distance with 6.4 billion dollars.
And not only that, tether is now in fourth place in terms of total market value. Only bitcoin, ether and ripple (XRP) are higher.
It is an assumption, but the high trading volume of tether may have something to do with the fall in prices last week. Investors are shocked by the sudden fall of bitcoin and altcoins, and have converted their crypto coins to tether to cover further losses.
Is the bitcoin price driven by tether?
It is often written that tether influences the price of bitcoin. And that is not a crazy idea somewhere. On the graph below you can see the connection. We have placed the number of tethers in circulation (blue line) on the bitcoin course:
In October 2018, Tether Limited burned 500 million tokens. A month later the price of bitcoin collapsed.
Also notable, since April this year, Tether Limited printed a lot of tokens. In the same period, the bitcoin rate rose from 3,700 euros to the peak of 12,200 euros.
But from July this connection seems a lot weaker. The price of bitcoin dropped from 12,200 euros to 7,250 euros but the number of tethers in circulation did not change.
Whether the price of bitcoin is really driven by tether is hard to say, but the connection is striking.
Where is the bitcoin price going now?
We can guess at the number of tethers that will be printed in the future, but that does not make us any wiser. That is why we are once again focusing on the bitcoin course. Where are we going?
For a change we look once at the bitcoin course in the long term. In the short term it is difficult to say how the price will move. The graph below shows the price from the end of 2012 up to and including now. Our analyst Adger Jooren explains the current situation on the basis of Fibonacci:
“You can see that we rose from the bottom in mid-December 2018 to the 61 percent Fibonacci level (red line on the graph).
In the coming months, the bitcoin rate may move between the 23.6 percent and 38 percent Fibonacci levels (green arrow). That level is now between 6,400 euros and 8,600 euros. In the past, the rate has fallen to this zone more often.
Ultimately, this can form a good basis for bitcoin to continue rising. “
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