After the recent downturn that saw bitcoin hit a low of $7900, Bitcoin (BTC) seems to be picking upside momentum. Many analysts believe that this momentum is being pushed by Tether (USDT) printing of $250 million worth of USDT tokens. This could be true considering that in 2017, the amount of Tether printed increased by over 8000%. In that same period, the value of Bitcoin rose significantly, from $1000 to over $19,000. Clearly, there is a correlation between the two. But is this good news for Bitcoin investors?
Well, it depends on how you look at this market. If you are a short-term trader looking to make money from day trading Bitcoin, such a pump is great. That’s because you can make a quick buck on the upside, and once you notice signs of weakness in this market, you can go short.
Besides, if this pump pushes Bitcoin (BTC) above $10,000, new investors could start jumping in, further pushing up the price. It could be 2017 all over again. We all remember that once Bitcoin started pumping above $2000, investor interest started growing and this continued to support the price until it hit a climax of over $19,000 in December.
However, for a long-term investor betting on Bitcoin and the long-term success of blockchain technology, this could spell doom to their investment. That’s because it would mean that the price of Bitcoin is not anchored on any fundamentals, but rather on an artificial and heavily inflated pump. As such, were tether to collapse, there could be a catastrophic drop in the price of Bitcoin. While this may look like a far-fetched idea, we have seen tether get subpoenaed by U.S authorities in the past. That a pointer to the fact that tether could be a huge problem for Bitcoin, in case it is the main factor driving up bitcoin.
The worst part about a collapse of Bitcoin due to tether related issues would be the erosion of investor confidence in the cypto market. There are lots of people out there with a bad taste in their mouths right now, after Bitcoin dropped by more than 50% from its December highs. Since that time, new money has been hard to come by in crypto. On Google trends, searches for Bitcoin, and other major cryptos have been consistently low. Even the recent price rally in April failed to drive in investors into Bitcoin. While new money will return if price continues to rise, another crash, more so, one tied to Tether (USDT) could see any interest in cryptocurrencies disappear for good. In other words, it could simply lead to a slow but sure death of the crypto market. Even institutional players would stay away from this market.
Luckily, the future is not all doom and groom. So far, Tether (USDT) has not been indicted for anything. As such, there is really no reason to believe that it might collapse and drive down the crypto market. If anything tether has up to this point helped investors hold value in times of market turmoil. As such, tether pumping in more tokens is actually a good thing, one that could reignite interest in crypto in the long-run. The key is to be a savvy investor, and keep abreast with all the latest happenings, so that you don’t lose your shirt along the way.