Note: “This analysis is an adaptation from the work of Mati Greenspan, Senior Market Analyst at eToro.”
- Tether, for first time ever, releases proof of it being fully backed by the dollar
- Questions raised on Tether’s backing proves trust deficit still exist for crypto industry
- Deciphering Bitcoin cycles and its stability
Curious case of Tether gives an important message to crypto Industry- Lack of Trust
Tether stable coin status has always been under the question since the time its launch as the company never found it necessary to show an independent audit report that should that the leading stablecoin was completely backed by the US dollar. The coin, despite being popular has been questioned for its dollar backing evidence and has been linked to all kind of negative stuff such as bitcoin prices manipulation and its malicious alliance with Bitfinex, as both have the same CEO.
While there is no doubt that Tether is culprit of not coming out clear ever on allegations of its dollar backing, one must understand such questions were raised in the first place because of the trust deficit investors and people have, at large, on cryptos. The reason one can say that is because there has been no question raised ever on a fait currency for its backing or even to an institution like a bank before one applies for a loan. Infact as per regulations (Federal Regulations) in USA, a bank requires bare minimum deposits before it gives a loan
If cryptocurrencies must make it big and be the currency of the future. The important factor it needs to work on is “TRUST”
While the stability of Bitcoin and other cryptos has been there for quite sometime now, one has to believe it is part of the Bitcoin’s cycle. Like everything other asset or business, Bitcoin too has “Cycles” which too can be divided into various stages such as surge, retrace, and relax
If one studies a short history of bitcoin, one can easily match the various price movements on this chart. Let’s check on the instances
The year 2012-13 saw bitcoin’s second most famous price increase that began in 2012 and peaked in early 2013.
Later that same year we had another surge that brought us all the way above $1,000. This graph shows the peak of that price increase and the very slow gradual recovery that regained the all-time high in early 2017.
So the current stability is just a phase of relaxation for the bitcoin according to its cycles and that’s the reason renowned names like Arthur Hayes of Bitmex has stated that at the relaxation period could last for another 18 months.
But the case hear looks a little different, as Bitcoin is known commodity for people now, thanks to its run to USD 20000. This awareness among people is making the retracements and relaxation on the bitcoins cycle quick. Another impact of this missing surprise element now would be that, the price rise for Bitcoin will not be anything superficially vertical but steadier and more realistic. Liquidity, this time, is playing its role to stabilize the bitcoin but a limited supply of 21 million coins will always keep bitcoin in demand for a long term basis.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Mati Greenspan is the Senior Market Analyst at eToro, a global social trading and investment platform. Mati is a licensed portfolio manager in the European Union and his main focus is on macroeconomic analysis, portfolio diversification and cryptocurrencies. Follow him on Twitter at @matigreenspan