- Average daily price swings in the S&P 500 have surpassed that of bitcoin
- Amidst a black swan event like coronavirus, markets are struggling to find their footing
- While central banks are pumping money into the global market, Tether is also printing “money out of thin air”
These last few weeks, the crypto market suffered a sharp decline in prices, with bitcoin losing 25% of its value in less than a month. However, while these losses might have been just another bad week or month for the world’s leading cryptocurrency, global markets are down in the dumps.
The US stock market had its worst decline since the 2008 financial crisis. Despite recording a considerable jump in prices, we are either in the beginning or middle of a bear market. The CBOE Volatility Index (VIX) is at its highest levels in the last 11 years.
Incredible how rare the last 2 days of market price action are: Only happened 2 other times in the past 77 years. Maybe coming macro shock bigger than I was expecting. In '87, '08, rate cuts and qe helped, not so much room left with those tools. After the storm, new era dawning? pic.twitter.com/eYmqfyxsjJ
— Dan Tapiero (@DTAPCAP) March 11, 2020
Bitcoin meanwhile is still up 6.75% so far in 2020 and unlike the global markets, crypto investors aren’t uncomfortable with the ongoing volatility. New York-based digital asset analysis firm TradeBlock noted that the average daily price swings in the S&P 500 have surpassed that of bitcoin.
The Black Swan
For now, bitcoin hasn’t found its holding amidst the black swan event such as coronavirus but the digital asset may find its footing further down the road. The bitcoin network has been holding strong with the hash rate keeping steady above 100 exhashes.
Despite the continued rise in hash rate and difficulty adjustment while the prices continue to drop, there is no mining capitulation. However, if this continues along with shipping delay of 7-nanometer chips from Taiwan-based manufacturer TSMC, some miners could be forced out of the business and sell their BTC.
Bitcoin’s fall in line with the US stocks is seen by some as a testament of the crypto asset becoming a part of the global financial markets. Moreover, during the crisis, investors sell even gold which is a typical safe asset and switch to cash.
Pumping Money into the Market
In the meantime, central banks have taken to pump cash into the distressed markets and cut down interest rates, taxes and a lot more.
Much like the financial markets, Tether is pumping USDT into the crypto market amidst this volatility.
💵 💵 💵 💵 💵 💵 60,000,000 #USDT (59,732,218 USD) minted at Tether Treasury
— Whale Alert (@whale_alert) March 11, 2020
“Inventory replenish. Note this is an authorized but not issued transaction, meaning that this amount will be used as inventory for next period issuance requests.”
Before this, on Monday, 60 million USDT and before that on March 5th another 60 million USDT were minted for inventory replenish. In total, 180 million USDT has been printed so far this month.
Printing money out of thin air
Crypto enthusiasts might feel excited about the new USDT being in circulation but in March, BTC price still lost nearly 10% of its value. In the past Tether has been accused of manipulating the price of bitcoin but the company maintains that it does not.
The controversial and popular stablecoin has also been in the limelight for only being 74% backed by cash.
“So this means Tether can ACTUALLY print money out of thin air without the actual deposit or collateral in place,” commented Dovey Wan, founding partner of Primitive Crypto on the latest round of new USDT.
“Well, at least it's better than the central banker ie. we are able to have on-chain transparency whenever Tether prints.”
As per Tether website, every USDT is 100% backed by reserves which include “traditional currency and cash equivalents and, from time to time, which may include other assets and receivables from loans made by Tether to third parties” as well.