Bitcoin, the flagship cryptocurrency, has seemingly been managing to maintain this week’s gains after it saw a sudden spike that helped its price surge to over $7,200 before coming back down to about $6,700.
The cryptocurrency kept on declining since then and at press time, BTC’s price has dropped about 0.42% in the last 24-hour period, as it’s trading at $6,500, according to CryptoCompare data.
Bitcoin’s sudden spike was seemingly caused by a massive USDT selloff that, analysts believe, saw most users abandon the stablecoin to put their money on BTC. At the time, most altcoins maintained their close price correlation to the cryptocurrency, likely due to arbitrage bots.
The Tether-related panic also saw the stablecoin’s price drop to a low of about $0.87, before it quickly recovered to $0.93. At press time the cryptocurrency still hasn’t managed to maintain its peg, as it’s trading at $0.95. Tether’s USDT lost its peg to the US dollar earlier this year when it was revealed that Nobel Bank, a financial institution in Puerto Rico, was looking to sell itself after losing both Bitfinex and Tether as clients.
Critics – who claim USDT tokens aren’t backed by any USD – reacted to the development claiming Bitfinex and Tether no longer had a banking relationship and were insolvent. This saw traders factor in the risk of using USDT to trade, leading to a premium that’s now at 4.38%, meaning buying one BTC with the stablecoin costs $280 more than it does with USD.
Earlier this week, Bitfinex released a statement addressing a pause in fiat deposits it made on October 11, in which the popular exchange revealed it was working to put in place a “new and increasingly robust fiat deposit system.” While the statement reduced the risk premium, it didn’t eliminate it.
After falling from its weekly high, bitcoin’s price has been slowly dropping, even as positive developments are announced. As CryptoGlobe reported, Fidelity Investments, one of the world’s largest financial services firms with over $7.2 trillion under management, is set to launch a crypto custody and brokerage for institutional investors called Fidelity Digital Asset Services.
While the market didn’t respond with a positive price reaction, the community still sees this as a major development. Speaking to MarketWatch Bruce Elliott, the president of ICOx Innovation, stated:
For many reasons, seasoned investors have either been shut out of crypto markets or have been slow to invest up until now. This is a signal that financial markets and regulators are gaining clarity and comfort on the outlook for trading cryptocurrencies
Most other top altcoins have also dipped into the red. Ethereum’s ether, the second-largest by market cap, is down 1.35% in the last 24 hours, and is trading at $206, while EOS slipped 0.90% to $5.51.
Litecoin and bitcoin cash are among the altcoins that dropped the most, being down 2.82% and 1.99% respectively. LTC is currently trading at $53, while BCH is at $449. Monero, a cryptocurrency that’s set to hard fork tomorrow, October 18, is down 1.28% to $107.73.