Will there be a risk of thunderstorms due to the crazy increase in USDT?
Today, in an article about USDT, a retail trader is worried that USDT will be as low as 3.5 against RMB. Jiang Zhuoer, CEO of Libitt Mining Pool, once boldly predicted: “In the next few years, countless people will go bankrupt due to the USDT thunderstorm.” This prophecy is very eloquent, unsurprising, and the consistent style of pledging never to break it.
What is the point of Jiang Zhuoer saying this? He believes that it is impossible for the US to tolerate a USDT outside of its control to help Iran settle such a thing. Since USDT is not regulated, but it also has a centralized entity that can be traced back, it will definitely be killed by the US government. Moreover, now USDT is already half-disabled; 800 million US dollars have been frozen. Under the US judicial system, this 800 million US dollars will not be released, which is basically equivalent to a suspended death sentence.
According to an analysis of USDT data released by an anonymous source, from March 29, 2017 to January 4, 2018, USDT was added 91 times in total, and 48.8% of the probability of BTC surging occurred within two hours of entering the Bitfinex wallet after the increase in USDT was issued. Therefore, it was determined that there is a close relationship between the USDT issuance mechanism and the price of Bitcoin. [1] As a result, USDT has been frequently issued on various public chains recently, raising doubts about India's USDT Tether manipulating Bitcoin.
Tehter has always been rumored that the funds in its reserve pool have been misappropriated by the associated exchange Bitfinex. Although it is now reported that the misappropriated funds have been returned, the assets anchored on its balance sheet are no longer 1 US dollar reserve corresponding to 1 USDT; the reserve pool is replaced by US dollars, cash equivalents, and third party loans. Tether is a true Federal Reserve expert!
The above problems caused the USDT to fluctuate greatly in May 2019. The average amplitude of USDT against RMB was over 10%, and the market was in a state of turmoil. According to the conspiracy theory, this incident was created to bring other compliant stablecoins to the top. However, since USDT accounted for more than 90% of the stablecoin market at the time, it was difficult to replace it all of a sudden. Because the exchange holds a large amount of USDT, it can be said that it is in the same boat as USDT, all parties in the market joined forces to stabilize the price of USDT and avoid a bigger hurricane.
After this USDT black swan incident, I really had lingering feelings about USDT. When I was trading cryptocurrencies for a short time, I did try to temporarily park on other compliant stablecoins, but I found that USDT's transaction depth was much better than other stablecoins, and the trading difference was relatively narrow. The transaction was successful in an instant using USDT, and it was difficult for other compliant stablecoins to compete with USDT at all.
According to recent media reports, USDT has surpassed XRP to take the third position in the cryptocurrency market capitalization, leaving behind several other stablecoins. Is this because of users' usage habits, or is it that some members of the coin community are disdainful of the authorities? USDT lazily ignored all kinds of conspiracy theories accusing it of manipulating the rise of Bitcoin and ran wild on the way to increasing issuance. At present, the total market value of USDT has reached 6.8 billion. Of these, the value of USDT circulating on Ethereum is about 5.6 billion, accounting for more than 80%.
(Photo credit: MYKEY, Coinmetric)
From a technical perspective, the transfer fee for USDT using the Omni protocol on the Bitcoin network is quite expensive. This is probably one of Tether's original intentions to issue USDT on Ethereum, which claims to be blockchain 2.0. However, Ethereum 1.0 also has many problems. Currently, USDT accounts for 60% of Ethereum usage, but Ethereum often causes congestion due to popular applications. Compared to EOS, Ethereum's transfer fees are obviously expensive. Sun Yuchen cannot be blamed for molesting V God because of this. The transfer speed and fees of the counterfeit version of Ethereum are definitely faster and cheaper than Ethereum. Issuing USDT on different public chains is definitely needed to match the application on this public chain.
After the 3.12 Black Swan incident, USDT increased its market value by nearly 2 billion US dollars in less than two months. In response to this, the coin industry is in turmoil. Conspiracy theories believe this is a precursor to USDT manipulating the Bitcoin price to skyrocket. According to ChainExt's “USDT OTC Discount Premium Index”, this year's premium rate is the most significant in the index's historical data. In particular, it reached a high premium rate of 8% on March 16, and only recently returned to a value close to $1, or even a negative premium.
ChainExt USDT OTC Discount Premium Index (Image source: ChainExt)
As we all know, during the biggest black swan incident in the history of cryptocurrencies on 3.12, the coin industry was in a state of frantically stomping on each other. Without knowing where the bottom was, everyone scrambled to take refuge and exchange the cryptocurrency for USDT, a stable US dollar stablecoin in the short term. Bitcoin fell from 8,000 US dollars to 3,800 US dollars on 3.12, and traded nearly 100 billion US dollars. It is conceivable that demand for USDT will increase dramatically and generate a high premium. Afterwards, in order to resolve the market's liquidity depletion crisis, the Federal Reserve issued an additional nearly 2.3 trillion US dollars to bail out the market. Infinite QE has caused money from around the world to flee in search of stored value instruments such as gold and bitcoin. Institutional investors, such as hedge funds, etc., are scrambling to invest in cryptocurrencies such as Bitcoin and Ether at a relatively safe rate, which is probably the reason for the sharp increase in USDT as a bridge into the market.
In terms of retail investors, according to Coinbase data, after receiving government subsidies, many Americans switched to US dollar stablecoins on Coinbase, and retail investors in Asia are more in demand for USDT. They are likely to be used for cross-border value transfers, and traders may also hold stablecoins as a gateway to cryptocurrencies. Currently, USDT has a cross-industry and cross-market demand that includes transactions, loans, and payments. The increase in USDT margin contract products and their currency value is stable compared to Bitcoin and Ether, and the ease of cross-border transfers and payments have become another reason for the increase in USDT issuance.
Also, many Binance users have recently reported that when they use Alipay accounts to exchange USDT or Bitcoin for RMB, Alipay freezes their accounts on the grounds that they are suspected of receiving funds from unknown sources. These reasons also indirectly force the money in the coin industry to use USDT as a daily value transmission tool for rewards, cross-border transfers, etc.
As a result, the world is absolute. The reasons that may cause USDT to explode include strong intervention by the US government, or many people simultaneously demanding that USDT be exchanged for US dollars, causing Tether to crowd out a crisis. Otherwise, USDT, which already has a first-mover advantage, has formed usage habits. Compared to cryptocurrencies such as Bitcoin, which are highly volatile, its use may be further broadened, replacing the US dollar as the cryptographic cash in everyday life. US dollar stablecoins with compliance labels don't necessarily make them popular in the crypto space.
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Note: [1] “Rumors, Manipulation, and the Black Box of USDT Trust Crisis Approaching”
http://finance.sina.com.cn/blockchain/coin/2018-10-15/doc-ihmhafir7627355.shtml
By Claire Wu, a writer from Twitter
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