Bitcoin Down as Tether Drops Again

Compared to last week, Bitcoin is down $130 on FXOpen or close to 2 percent. We are quoted at $6,433 dollars right now.

Bitcoin Down as Tether Drops Again

As we can see on the chart below, the zig-zag movement in BTC/USD continues. After last week’s small rally this week we’re witnessing a selloff.

BTC/USD daily chart

The divergence between Tether and USD-based bitcoin exchanges continues. On Bitfinex one coin is selling for $6,476 dollars at the moment. On other exchanges like BitStamp and Coinbase bitcoin is trading at average of $6,277 dollars. This is due to the lower price of Tether, a so-called ‘stablecoin’ that is used as a substitute for USD on exchanges that have banking issues. Tether is trading at 97 cents right now, 3% below it’s ‘peg’.

Three days ago Bitfinex increased their fiat withdrawal fee to 3% for some customers. This quickly resulted in the market discounting the value of tether from around 99 cents down to 97 cents. The market is indicating that the banking problems for Bitfinex are not over yet. Last month when the latest tether drama started we wrote about tether and it’s influence on the crypto ecosystem. Let’s repeat some of what we wrote for newer readers.

Bitfinex has been having problems maintaining stable banking relationships, leading to frequent fiat withdrawal issues over the past two years. Some of the owners of Bitfinex have ownership of Tether as well. Knowledgeable crypto users claim that Bitfinex basically owns Tether. Fiat currency and Tether are interchangeable on Bitfinex, in other words, any Tether deposited at the exchange can be withdrawn to a bank account as USD. Naturally, this leads to a close price relationship between the two, the bitcoin price on Bitfinex tends to be around the real market price of bitcoin / the price of Tether.

Technical Picture

Technically cryptocurrency Bitcoin remains in a range on the daily charts. We want to see a decisive breakdown below the $6,200 handle before we can call a downtrend. Above a rally could commence if we break $6,620 dollars per coin.

A caveat is in order here. Notice the large spike on the chart above. That happened on October 15th when the value of tether briefly crashed to 85 cents. This led to traders scrambling to buy BTC as a way to exit both tether and tether exchanges. On most tether exchanges prices spiked over $7,500 dollars. On most USD exchanges the spike was limited to $6,800 dollars. The spike higher on the tether exchanges sharply reversed later on.

With tether becoming ‘untethered’ again there is a possibility of this happening again. It’s important to get accurate pricing data from exchanges that don’t have fiat withdrawal issues like BitStamp/Coinbase. A breakout on tether exchanges, especially to the upside, should be taken with a grain of salt. In the unfortunate situation of tether losing substantial value we could have a scenario where prices spike on USDT exchanges and briefly spike but later crash on regular USD exchanges. Tether still facilitates a big part of trading across exchanges and this scenario could lead to a loss of confidence resulting in large crypto losses.

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Petar Kotevski

Petar is a forex trader and writer with 9 years of experience in financial markets. He has been following bitcoin since 2010. A year ago, as the BTC market matured, he started getting more involved by writing articles on bitcoin and other alternative currencies.

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