This week, the most bought and sold coin by Accointing.com users was Tether (USDT), a stable coin pegged to the price of the dollar.
What is Tether?
USDT is backed one-to-one by the dollar allowing traders to store fiat value on the blockchain. Tether reduces friction for traders moving capital throughout the crypto space – it is faster and cheaper to transfer BTC into USDT than USD.
Why the hype?
Accointing users bucked the market trend this week and bought up Tether despite increases to its circulating supply tailing off amid falling demand.
The buying frenzy could be driven by recent market volatility as Tether is seen as an asset which can protect investments from exposure to market dips because of its stable value. In the past 3 months, Tether’s circulating market cap increased by 71% amid a market-wide price correction.
The graph shows negative correlation between BTC price and USDT’s circulating marketcap indicating that investors have been buying USDT as BTC price drops.
In line with this analysis, Tether’s market capitalization surpassed $60billion for the first time on May 19th when the announcement of China’s crypto currency ban caused a market wide price dip. At the same time bitcoin’s RSI score dipped below 30, indicating that bitcoin was oversold by investors looking to shed the coin.
The surge in interest could also be driven by Tether’s efforts to counter accusations that USDT tokens are not backed by adequate reserves. Tether began publicly reporting its assets and liabilities in March under the terms of a $18.5 billion settlement with the New York attorney-general, agreed in February.
With Tether now able to demonstrate that it has ample reserves to redeem the Tether tokens in circulation investor confidence could be increasing.
The rush to buy Tether is somewhat counter-intuitive given the falling value of the US dollar. On June 10th, the Federal Reserve announced that the CPI has jumped 5% more than expected, hitting a 29-year high, while Deutschebank forecast high inflation for the US in a report released earlier this week.
Even so, Tether’s low fees, high transaction speed and price stability may be what Accointing.com users are after. As the market undergoes a period of turbulence, an easy option to transfer funds quickly and at a stable price may well be what the market demands.
However, it’s likely that capital will flow out of stablecoins back into bitcoins and alts if the crypto market rebounds from its recent dip – especially if bleak predictions about the dollar prove true.