The capital market was drained and the currency circle was not absent.
According to data from the Omni browser, the stable cryptocurrency Tether (USDT), which was supported by the US dollar 1:1, issued another 250 million tokens on June 25. Many investors hope that the USDT “water release” can bring a wave of market for the weak cryptocurrency market, but the USDT can not assume this responsibility.
By comparing the market performance of USDT’s additional time nodes and mainstream cryptocurrencies, we find that USDT only has a certain boosting effect on the market in the short term, but it has little impact in the long run.
Frequent occurrences, and 250 million more in June
The USDT can be understood as the “funded currency” of the cryptocurrency market.
The cryptocurrency market was first traded as a legal currency. Later, due to regulatory uncertainty, there was a problem with the connection between the legal currency and the cryptocurrency: investors could not directly use the legal currency to purchase cryptocurrency. To solve this problem, the USDT appeared. Investors can first convert the legal currency in their hands into USDT, and then freely trade other cryptocurrencies.
With the development of the cryptocurrency market, USDT has become the basic anchor currency of the mainstream exchanges and acts as a “fundamental currency” in the cryptocurrency market. According to data released by Tether, there are currently 2.74 billion USDT in circulation and the price is basically maintained at $1.
It is precisely because of USDT’s “legal currency” status in the cryptocurrency market. The issue of the USDT has always been of great concern to the market. According to statistics, since 2018, USDT has been issued 5 times, accumulatively issuing 1.71 billion USDT, accounting for 62% of the current total market circulation. In addition, an anonymous report named “The Tether Report” pointed out that as of January 4, 2018, Tether had issued a total of 91 USDTs.
Is USDT a life-saving straw for cryptocurrency?
According to the experience of the capital market, the central bank has increased the liquidity of the market by lowering the quasi-quantitative easing monetary policy, which has brought a lot of good news to the stock market. In the cryptocurrency market, the USDT issuance function is similar.
The USDT additional issuance means that the liquidity of the cryptocurrency market has been released to a certain degree and buying has increased. This is potentially positive for the market.
Litecoin founder Li Qiwei issued a tweet on USD250 million in additional incidents and said: “In general, this is a sign of rising prices. People who deposit dollars and receive the USDT will produce Tether. These USDTs will be used to purchase cryptocurrencies. This is similar to someone depositing $250 million at the exchange. Of course, this does not mean that people will buy other cryptocurrencies at once.”
Looking at the overall performance of USDT’s additional timeline and the cryptocurrency market this year, USDT’s short-term increase has a certain stimulus to rebound or stabilize the decline, but in the long run, it has almost no effect. In other words, although the USDT issuance has boosted investor confidence in the short-term, it has not reversed the general trend of weakening the cryptocurrency market as a whole, and the boosting effect has gradually weakened.
Hidden worry: USDT credit risk
Tether has always been questioned by “Over amount Circulation”. The market’s confidence in Tether has also been waning. According to Coinmarketcap data, USDT prices have also been weakening in the near future.
Although Tether claims that it will deposit a deposit of US$1 or more per dollar for issuing 1USDT, no evidence has been provided after a deposit document was provided in September last year. Most USDTs in the current market were issued after September last year. Therefore, the market has always been highly suspicious of whether it has a corresponding reserve fund.
In addition, a series of reports, such as the termination of cooperation by former auditing companies, the departure of senior executives, and the dramatic reports issued by law firms, have made the “super-promising” incident more difficult.
Tether is not a perfectly decentralized company, but merely stores all assets as a centralised pledger. That is to say, Tether is naturally faced with a problem of lack of credibility. As the largest stable currency at present, it is still issued by a centralized institution. Once a confidence crisis erupts, the consequences will be disastrous. If Tether really wants to prove more innocence, it can only come up with more powerful evidence, or it will always be the sword of Damocles hanging over its head.