Crypto Crash: Tether Stablecoin May Destroy Cryptocurrency Forever

It’s been a nightmare for cryptocurrency investors for a few months, with billions wiped out of the market in a matter of weeks, but things are about to get a whole lot worse.

It’s been a nightmare for cryptocurrency investors for a few months, with billions wiped out of the market in a matter of weeks, but things are about to get a whole lot worse.

A US financial expert has pointed out one thing that could bring down the entire cryptocurrency market forever, and it could happen.

“Tether is truly the lifeblood of the crypto ecosystem,” said Hilary Allen, a financial expert at American University The New York Times. “If it implodes, the whole facade collapses.”

Tether is what is known as a stablecoin, a newer type of cryptocurrency that aims to isolate itself from the extreme volatility of the rest of the crypto market by keeping prices stable, typically by being pegged to the price of a traditional currency. In the case of Tether, its value is pegged to the value of the US dollar, although it also issues tokens pegged to the euro, yuan, and gold.

It is the third largest cryptocurrency after Bitcoin and Ethereum with a market cap of nearly US$83 billion (AUD119.4 billion).

It was launched as RealCoin in July 2014, renamed Tether in November and traded in February of the following year.

Stay up to date with the latest cryptocurrencies on Flash. Over 25 news channels in one place. New to Flash? Try 1 month free. Offer ends October 31, 2022 >

But Tether is now in trouble and facing undue pressure from regulators and investors. Last year, it was fined $18.5 million (AUD$26.6 million) by the New York Attorney General for lying about its financial reserves, and recent crypto market dips may offer a teaser what might yet come.

As prices plummeted in recent weeks, investors rushed to cash out their tether, forcing the company to spend $10 billion (AUD14.3 billion). They have been able to meet demand, with executives saying they came through the crisis “pristine”, but experts say the coin may not be so lucky next time.

If Tether collapses, the shockwaves could devastate the entire crypto sector, which is already in dire straits.

The crypto winter has now turned into a “polar maelstrom,” an executive at one of the world’s largest banks said in a candid admission this week.

Throughout the year, the cryptocurrency has seen a bear run.

However, things took a turn for the worse last weekend as investors panicked after the US Federal Reserve hiked interest rates by 75 basis points.

It sparked fears of a global recession, and crypto investors quickly retreated, prompting mass selling and a drastic price drop for some of the world’s top blockchains.

At its bottom, the number one cryptocurrency, bitcoin, fell to $17,601.58 (AUD$25,300) on Sunday morning, although at the time of writing it had recovered slightly and was trading around $20,000.

That’s a massive drop considering Bitcoin was trading at $36,141.33 (AUD52,000) early last month, according to CoinMarketCap.

In fact, its lowest price over the past few weeks represents a whopping 74 percent drop in value since BTC’s all-time high in November, when it touched nearly $69,000 (AUD$99,000) per coin.

In fact, all of Bitcoin’s gains have been pretty much wiped out in the last two years of the pandemic – BTC hasn’t been this low since October 2020.

Though cryptocurrencies have endured multiple winters and price swings, the banking pro says this one was the most extreme given how widespread blockchain is today.

Irfan Ahmad of State Street Digital in Asia Pacific told the Australian Financial Review, “This is the first time Bitcoin and other cryptocurrencies have experienced such an inflationary environment.

“It’s the fourth crypto winter and the hardest in the face of wider adoption – we call it the polar vortex.”

However, Mr. Ahmad believes that some of the most well-known digital tokens like Bitcoin and Ethereum will survive the winter.

“But in terms of an asset class, we think [crypto] is here to stay,” he told the publication.

“There will be an evolution of players and protocols in the market.”

The cryptocurrency has faced a reckoning over the past few weeks — and particularly the past few days — as fears of a global recession mount amid rampant inflation and the US Federal Reserve’s rate hike.

The data showed that US inflation had hit a new high – rising to 8.6 percent in May, the worst level since 1981.

The US Federal Reserve raised interest rates by a whopping 75 basis points to combat rising inflation.

The cryptocurrency is closely related to the traditional stock market, and over the past week, markets like the Dow Jones have plummeted and entered a bear run.

Leave a Comment