Here’s Why Tether FUD Could Be Good for Bitcoin

The bitcoin market is once again in turmoil, and the reason is an old familiar one: no, not the US Federal Reserve, but concerns and rumors about Tether’s stablecoin, USDT. Anyone who has been active in the bitcoin and crypto markets for some time knows that rumors about USDT’s lack of support are a part of every bear market. And this bear market feels especially “good” about it as Tether FUD is now reappearing in this cycle.

As NewsBTC reported earlier today, USDT briefly lost its peg to the US Dollar as the Curve 3 pool lost its balance. This is because whales are selling USDT and trading it for USDC and DAI. However, according to Tether CTO Paolo Arduino, the company is “ready to cash out any amount 1:1 against the US dollar”.

Historically, the de-pegging of USDT is not an uncommon occurrence. Samson Mow, CEO of bitcoin-focused company JAN3, writes,

Tether FUD is always FUD bottom. This is what they take out when there is nothing left. soon.

Analyst Miles Deutscher shares a similar view. He explained: “Fun fact: stablecoin FUD often marks local bottoms,” and shared the following chart.

Bottom signal for bitcoin price?

As can be seen in the chart, Tether FUD first appeared in late June 2022. At the time, news emerged that hedge fund Fir Tree Capital Management was shorting Tether following the collapse of the Terra Ecosystem stablecoin Terra USD. Contrary to speculation, however, Tether was able to process all USDT redemptions even though the USDT value temporarily dropped to $0.9520.

In mid-November 2022, cryptocurrency exchange FTX went bankrupt after its competitor Binance pulled out of a purchase agreement. Tether FUD hit a 6-month high and USDT price dropped to $0.9970. Again, Tether was able to handle all the redemptions while the market found a local bottom.

Most recently, USDC Dapping provided a local bottom signal in March this year. The event was triggered by the collapse of a counterparty from stablecoin issuer Circle, Silicon Valley Bank (SVB). Crypto whales also tried to profit from the situation at the time, while other USDC holders sold in a panic.

Tether emerged as the clear winner from the latter situation and has since been able to capture a larger market share from USDC. Recently, Tether reported huge profits, some of which they are investing in bitcoin, as reported by NewsBTC.

This is another reason why cryptocurrency expert Thor Hartvigsen believes that the likelihood of Tether not having enough funds to settle all USDT redemptions is “extremely small”. Add: “According to Tether, the company made a profit of $1.48b in Q1 alone, leaving a reserve surplus of $2.44b. They are further reducing bank deposits (put less than $0.5b here) and have acquired over $53b in US Treasuries during 2022.

Remarkably, the price of USDT has already returned to its default levels at press time. USDC/USDT price on Binance after climbing up to $1.0042 temporarily, it was already back to $1.0019.

At press time, the bitcoin price was hitting Tether FUD and hovering just above $25,000. However, there is some significant downside on the downside of the 200-day EMA (blue line). Recently, BTC fell below this indicator, known as the “bull line”, during the USDC de-pegging. Therefore, bitcoin bulls are well advised to react similarly to March to prevent further declines.

Featured image from iStock, chart from TradingView.com