Bitcoin Leaps Toward $8,800 as Tether’s Market Cap Swells
Bitcoin’s price swung sharply higher late Friday, reaching a peak near $8,800 following an apparent surge in Tether’s market capitalization in recent months. The controversial stablecoin continues to exert a gravitational pull on bitcoin’s price despite an admission by the company that its tokens aren’t fully backed by U.S. dollars.
If history is any indication, the rise in Tether’s circulating supply could be a boon to bitcoin’s market value in the near future.
The bitcoin price peaked at $8,780.00 on Bitstamp, its highest in almost two weeks. The breakout was sharp and sudden, beginning around 16:00 UTC on Friday. Over the next four hours, the BTC/USD exchange rate would gain almost 4%. The cryptocurrency would eventually gain more than 5% over the 24-hour trading period, putting it one step closer to the coveted $9,000 level.
Bitcoin briefly traded here in late May but failed to hold it with any conviction. The price would go on to consolidate in the sub-$8,000 range until Wednesday when the bulls regained momentum.
Over that stretch, bitcoin maintained support near the 30-day exponential moving average (EMA). The crucial level has served as a major inflection point going all the way back to February.
At the time of writing Saturday, bitcoin was hovering around $8,723 on Bitstamp. The relative strength index (RSI) is back above 60, according to the daily chart.
Tether’s Market Cap Surges
Investors looking to predict bitcoin’s trajectory may find comfort in Tether, a controversial stablecoin that is backed by U.S. dollars but not at the one-for-one peg the company previously claimed. (In reality, Tether is only backed by U.S. dollars and their cash equivalents up to 74%).
The value of Tether’s USDT rose sharply at the start of the year and has more or less remained stable for much of 2019. At $1.01, USDT’s market capitalization stands at more than $3.4 billion, an increase of $650 million over the past month, according to CoinMarketCap.
In the last three months, Tether’s market cap has surged by roughly $1.5 billion.
As it turns out, bitcoin’s price tends to follow Tether’s market cap, although the relationship is a bit delayed. The following chart tracks bitcoin’s price relative to Tether’s market capitalization.
Here’s a closer look at this relationship over the past 12 months:
Since Tether’s market cap began to swell around three months ago, bitcoin’s price has gone parabolic. Continued growth in USDT’s circulating supply suggests bitcoin could be about to go a lot higher in the short term.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via TradingView and CoinMarketCap.