Tether (USDT) Closely Watched amid Further Kraken Selling

The Tether (USDT) digital asset saw another selling spree on Kraken, which temporarily depressed the price to $0.95. This event added to the fears surrounding Tether after allegations surfaced that Noble Bank had dropped Bitfinex and Tether as its clients.

https://twitter.com/150c_vapour/status/1047198949407432704

These fears spring from doubts whether Tether has any recourse to legal banking at all to fulfill the promise of dollar backing.

https://twitter.com/djangobits/status/1047339294417977344

The movement of USDT is also puzzling to the crypto community. On October 3, Bitfinex saw significant inflows of USDT, climbing up on the Tether-rich list. Previously, Bitfinex was way down in the charts, but its balance has risen within a few days to almost 176.5 million USDT.

The concentration of USDT on Bitfinex has triggered speculation about a possible Bitcoin pump. At the time of writing, CryptoCompare data show that the exchange’s share of BTC trading has fallen to 27%. Crypto trading platforms offering a fiat off-ramp for BTC, such as Coinbase and Kraken, have increased their activity lately.

Additionally, the Tether rich list shows inflows of USDT into Huobi, Binance, and Bittrex but not Poloniex. The leading exchanges are also influential when it comes to BTC trading, and the inflow of new funds may rekindle BTC speculation.

The troubles with Tether come at a time when BTC prices are seen as being at a crossroads, with some projecting a strong year-end rally and others fearing a crash to as low as $1,000. Since USDT pairs account for around 55% of BTC volumes, a concerted increase in activity or bot trading to make use of the newly deposited USDT may move up the price of BTC.

The inflow of Tether to exchanges may also mean an attempt to move into another digital asset, possibly BTC. There are also rival stablecoins that may take up some of the additional volumes. However, with a supply of around 3 billion, a Tether exit would be problematic for a lot of holders.

Other stablecoins are attempting to build separate ecosystems for their related exchanges, with no intention of displacing the Tether ecosystem. Eiland Glover, CEO of Kowala, commented for Cryptovest:

“I expect Circle to push for USDC to be the coin of the realm in the Circle-Poloniex ecosystem. They are seeking vertical integration of crypto payments. Others like Gemini are similarly creating asset-backed tokens for use of their trading customers. This is akin to a casino printing casino chips to facilitate betting in their casino—the point is to create a tool that serves another core business. The revenue comes primarily from increased revenue on the casino business, to go with this analogy. Gemini wants the same thing: a stable, trusted, asset-backed token that facilitates trading on their platform.”

The model of having stablecoins with limited influence used on one marketplace also helps to limit repercussions in case one of the assets loses its dollar peg.