Key Points
- The US government has reportedly launched another investigation into Tether [USDT], causing market speculation.
- USDT’s influence on Bitcoin’s price dynamics is growing, hence the need to monitor the effects of the recent scrutiny surrounding Tether.
The US government has reportedly initiated another probe into Tether (USDT), a development that some are labeling as the latest “Tether FUD” tactic.
This move has raised eyebrows with some speculating that it is a deliberate attempt to instill fear and destabilize the market ahead of a potential Bitcoin [BTC] breakout.
USDT’s Influence on Bitcoin
Over 70% of cryptocurrency trades involve USDT pairs, and analysts caution about the risks associated with Tether’s centralization. Any disruption to USDT could have a significant impact on the entire market, especially as Bitcoin heads into the final week of the “Uptober” frenzy.
In the past week, USDT dominance has steadily increased, with daily gains exceeding 2%. Historically, a rise in USDT dominance often coincides with Bitcoin reaching market tops.
Market Reactions to USDT Scrutiny
The surge in USDT demand, driven by rising panic, has put significant downward pressure on Bitcoin, which is currently trading at $67K. This situation highlights the growing influence of USDT on Bitcoin’s price dynamics.
During the late trading hours when the news circulated, USDT inflows into exchanges surged dramatically, hitting a two-month high of over $2.3 billion.
Despite this spike, USDT dominance remained strong, posting a daily gain of nearly 3%. This suggests that many traders perceived the news as exaggerated or misleading, opting to maintain their net imports.
There’s a strong possibility that in the coming days, USDT deposits into exchanges could surpass net outflows. If the current Bitcoin price turns out to be a market bottom, it may attract significant liquidity, potentially driving its price higher.
On the other hand, stakeholders might shift their assets into other high-cap altcoins or memecoins, seizing the opportunity to exchange USDT for more affordable alternatives.
The last week of October may bring increased activity in the crypto market, with several coins poised for a potential parabolic rally.
Implications for Bitcoin
Currently, USDT stands at a crossroads. The investigation news triggered investor panic and massive selling pressure. Yet, the daily chart showed a bullish MACD crossover for USDT dominance.
The increased volatility in the market, sparked by Bitcoin’s dip to near $67K, has fueled speculation about a potential pullback to $64K, where the next bottom could form.
Despite 12 hours passing since the news broke, which typically prompts investors to offload USDT for Bitcoin, traders have yet to sweep the lows. This scenario reinforces the potential for a retracement, making the current price a less appealing entry point.
The coming week is crucial for Bitcoin, as its fate hinges on the market’s reaction to USDT. Currently, the likelihood of investors strategizing for a parabolic rally appears limited. This could dampen the chances of the crypto market closing October on a bullish note.