Bitcoin has now redipped to below $8,000, but has still largely recovered from last week’s $1,000 correction—hooray! And one of the reasons, as usual, is…Tether, which continues to dominate bitcoin markets even as it becomes increasingly entangled in a criminal investigation.
Analysis released by research firm Crypto Compare reveals that bitcoin-to-tether trading has accounted for 78.9 percent of Bitcoin’s total trading volume ($10.3 million) this month, a fifteen percent increase from last month. Tether also accounts for 97.9 percent of the bitcoin-to-stablecoin market, followed by the Paxos, Circle and True USD stablecoins respectively.
Compare that with the dollar’s role in bitcoin trading markets, which CryptoCompare puts at $1.6 million worth of Bitcoin’s trading volume.
Tether has long driven Bitcoin’s price, and the latest black marks on Tether’s record—in which it and its affiliate Bitfinex were accused by the New York attorney general of hiding an $850 million hole in its dollar reserves—have seen traders flocking from the stablecoin into Bitcoin in recent weeks, propping up the price.
Other factors have influenced price in recent days. As crypto skeptic and lifelong blockchain hater David Gerard notes, a massive 5,000 bitcoin sell on May 17 liquidated a load of long positions and tanked the price; that was around the time it dropped to $7,500.
But others insist the few blowbacks are inevitable—and actually reinforce Bitcoin’s value. Last week’s Binance hack was good for Bitcoin because the price remained resilient thereafter, and the margin trader-burning of last week was good for Bitcoin because, even though the price wasn’t so resilient, the number went back up again so it’s all fine.
Indeed, major investment bank JP Morgan, in a backhand way, has declared that Bitcoin has “intrinsic value” — even if it is trading a few orders of magnitude above it.
Intrinsic value for whom, though?
Tether the Big Stable Whale?