Will the market explode if Tether crashes? Here are three bold conjectures

Editor's Note: This article comes fromNakamoto Shallot (ID: xcongapp)Editor's Note: This article comes from

, Author: Akash Girimath, Compiler: Sister Xiao Cong, Odaily is authorized to publish.

foreword

Tether plays a vital core role in the cryptocurrency ecology, supporting the operation of this ecology. However, Tether has many black holes, which are like "bombs" that are closely tied to the heartstrings of the cryptocurrency market. Recently, it has been involved in a series of lawsuits Among them, will Tether fall? Or still too big to fail? What will happen if Tether crashes, or if there is no Tether in this world?

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foreword

This article revolves around a series of conjectures and assumptions about "if Tether leaves the market", and also discusses its status in the cryptocurrency ecosystem and how it will affect the cryptocurrency ecosystem.

Tether is perhaps one of the most important and largest entities in the cryptocurrency ecosystem, with a market share of over $4 billion. In addition, in the stablecoin ecosystem (GUSD, TUSD, USDC, PAX), Tether's market share is as high as 83%, and it has been in a monopoly position.

Tether was founded in 2014 with the sole goal of improving market liquidity and providing access to this revolutionary and nascent technology known as blockchain technology.

Recently, in response to an article claiming that "Bitfinex issued Tether to manipulate the encryption market", Bitfinex issued a statement stating that it strongly disagrees with the content of the article. The relevant article is based on wrong assumptions and may file a lawsuit.

But a day later, law firm Roche and Freedman filed a class-action lawsuit against Bitfinex and Tether, alleging market manipulation in various circumstances. Previously, the NYAG also sued Bitfnex for violating securities laws and providing services to New York residents in violation of the Martin Act, and the lawsuit is still ongoing.

With the slew of lawsuits and investigations against Bitfinex and Tether, it is critical to understand how things like the size of these two companies, and Tether in particular, are having an impact on the cryptocurrency ecosystem.

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The importance of Tether

In the long run, in the stable ecosystem [GUSD, TUSD, USDC, PAX], Tether has a market share as high as 83%. However, the combined share of other stablecoins in the market is only 17%.

It can be seen that Tether not only "rules" the stablecoin ecosystem, but also enjoys a monopoly on it. Furthermore, judging from Tether's trading in the market, it is clear that most of Tether's trading volume is placed on BTC.

According to data from Coinlib.io, more than 50% of Tether’s trading volume ($2 billion) is used to trade Bitcoin. The rest has flowed into Ethereum, Bitcoin forks, and other mainstream currencies. A small amount has also flowed into other stablecoins, such as Paxos and TrueUSD.

While this is only a hypothesis, Blockstream CEO and co-founder Adam Back doesn't seem to think Tether will disappear anytime soon, and many others feel the same way. He told AMBCrypto:

If Tether leaves the market, it will drown (appear) somewhere else! This kind of transaction is driven by demand, people want to use low cost and convenient way (simple or no registration friction)... but I'm not sure how it will go after Tether, their operation will not be interrupted by court proceedings .

However, let's keep an open mind, what would happen if Tether left the crypto market? We have three wild guesses/what-if scenarios.

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Conjecture 1: Panic spreads to the market

If the news of "Tether collapsed" comes out, the market may panic, and this sentiment will spread to the Bitcoin market, causing Bitcoin to crash.

However, what we can't speculate is the extent of Bitcoin's decline. Will it fall? Considering the current price of Bitcoin, if its price falls below a key price level or psychological price in people's minds, its market recovery will be slower in the future.

However, Blockstream co-founder Adam Back stated that “such an event is unlikely”:

While people and exchanges are adjusting, it may temporarily limit liquidity and widen spreads, but I don't think it will affect BTC much... People will withdraw USD through Tether or use exchanges to trade off of Tether . Some may acquire BTC as an easier way to exit.

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Although unlikely, if Tether were to suddenly shut down or leave the market due to some unforeseen event, the initially pegged asset to USDT would temporarily collapse, causing the value and demand for other stablecoins to rise as the supply and demand in the stablecoin market diverged. balance.

Tether had a black swan incident last year. At that time, Tether’s stablecoin USDT was not transparent due to the lack of transparency of the custodian bank, and there was a crisis in the custodian bank, and USDT did not have enough reserve funds to support a series of events. On October 15, 2018, Tether’s USDT crashed and plummeted. The price of USDT against the US dollar fell by 8%, reaching the lowest point of 0.9 US dollars. And this comes days after Bitfinex suspended USD deposits (but not withdrawals).

Meanwhile, the TrueUSD stablecoin is up 8% [$1.08], while the USD Coin stablecoin is up 11% [$1.11], which can only be explained by the need for a more secure Tether, given the dire situation. Stable Tethers.

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Cryptocurrency exchanges can generally be divided into two categories: those that provide “exit gateways” like Coinbase, and those that do not, such as Binance. With the former, the price of Bitcoin would come under enormous downward pressure, as people would tend to exit (leave the market) after experiencing so-called hypothetical misfortunes. However, thanks to exchanges like Binance, as people move to the next safest asset, which is Bitcoin, the buying pressure on Bitcoin will increase significantly, which has the effect of pushing up the price of BTC.

This discrepancy between bitcoin prices on different cryptocurrency exchanges would provide a temporary opportunity for arbitrage trading. Risk takers/enthusiasts will not hesitate to jump on the opportunity and blow a "turbulent world arbitrage" wind.

Also, another possibility here is that people could switch from USDT to other stablecoins instead of leaving.

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