Tether, Going Opposite the Market

-By Jay Jung (Lead Economist)

The cryptocurrency market, which continuously declined due to continued decrease in the financial market caused from the impact of the US interest rate increase and the decline in the bid rate of the US Treasury Bond has rebounded today. Bitcoin rose 4.26%, and Ethereum also climbed 4.66%.
There are many reasons for this rebound, but the most likely cause seems to be the favorable news that Nasdaq is building a platform for the disclosure and trading of security tokens issued by blockchain start-ups. Until now, tokens listed through ICOs were only traded via private exchanges. However, it is announced that Nasdaq is negotiating with a start-up “Simbiont” to build a platform to trade those tokens, which is thought to be the reason for the rebound of the crypto prices.

However, we can observe an unusual phenomenon: Tether price fell 2.38% amid rising Coin Market Cap’s top ten cryptocurrencies. Tether is a coin that is pegged at 1:1 with US dollars. According to Tether’s terms of sale, you could find that the Tether Foundation does not guarantee Tether’s conversion to the dollar. Despite this limitation, Tether was able to maintain its stable value without a sudden change in price thanks to the pegging of the dollar. However, the characteristics of the Tether as a safe asset as the dollar pegging was reversed in this upswing. In other words, if the stock market rises, the investors reduce the portion of the bonds in the portfolio and increase the shares of the risky assets. Likewise, crypto investors have also reduced the proportion of Tether holdings, which is a relatively stable asset. It is thought that this phenomenon caused the price drop of Tether.