Bitcoin Price Action Cools Following Tether-Induced Volatility

Bitcoin’s price action narrowed on Tuesday, as markets consolidated in the wake of yesterday’s Tether-inspired upsurge.

BTC/USD

The price of bitcoin reached a high of $6,897.60 on Bitfinex Tuesday, as markets returned to a narrower trading range. The leading digital currency by market capitalization and trade volumes was last spotted around $6,744, where it was little changed compared with 24 hours ago.

After spiking above $7 billion on Monday, trade volumes fell back to around $4.5 billion on digital currency exchanges. Turnover in the broader market amounted to $13.3 billion. At current values, bitcoin is capitalized at $114.3 billion, accounting for 54.1% of the entire crypto market.

The latest breakout in BTC followed another successful defense of a key technical and psychological threshold. Bitcoin is defending $6,000 with greater confidence, a sign that the market has established a firm price bottom. Last week, BTC fell to the low $6,200 region before staging a quick recovery.

Tether Instability

Bitcoin’s value spiked on Monday, reaching a high near $7,900 on some exchanges after Tether’s USDT token lost its one-for-one peg with the dollar. USDT fell by as much as 6% to $0.94 as traders cut ties to the controversial stablecoin. USDT was up 1.9% on Tuesday but continues to trade below $0.98, according to CoinMarketCap.

Traders utilize Tether to purchase other digital currencies, chief among them being bitcoin. BTC/USDT trades account for a large percentage of transactions on exchanges that support the stablecoin. A loss of the dollar peg puts tether in a precarious position as it signals a loss of investor confidence.

Tether has been caught in regulatory crosshairs for failing to produce compelling evidence of its dollar-backed reserves. The stablecoin has also been accused of artificially inflating the value of bitcoin during last year’s bull run. These and other concerns prompted the U.S. Commodity Futures Trading Commission (CFTC) to subpoena the company along with Bitfinex, a leading digital currency exchange run by the same executive.

Bitcoin has experienced higher than normal volatility over the past week as prices drifted between sharp losses and gains. After a weekend of relative calm, marked by a sharp decline in trading volumes, prices broke out on Monday as confidence in Tether eroded.

Bitcoin’s volatility index, which tracks fluctuations in the currency’s daily open price, has risen to 1.98% over the last 30 days, according to bitvol.info. The volatility index recently bottomed at 1.56%, the lowest since May 2017.

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.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi