Tether Drama: A Behavioral Analysis
At this point, I think it’s safe to call stablecoins the Bitcoin of 2018. There’s been so much buzz around these projects lately, you almost forget we’re still in the middle of a bear market. And you know the field is ripe when even the Winklevoss bros want a piece of the pie.
The Untethering
That’s why it was so alarming when Tether (USDT), the stablecoin movement’s poster child, lost its peg to the dollar on October 15th, ‘plunging’ to ~$0.96 in a matter of hours.
The crash rippled through the crypto market, (possibly) causing Bitcoin to mushroom to ~$7,700 depending on the exchange, and other major stablecoins (DAI, USDC, and TrueUSD) to begin trading at premiums. In all, it was an eventful Monday.
I won’t go into possible reasons for the Tether-USD decoupling, as it warrants an article of its own. Eventually, USDT bounced back, and the initial crash did little to derail the stablecoin hype train.
It did, however, provide some interesting market insights. Let’s talk about them.
Through the Grapevine
In case you missed it, we recently launched a new tool called Social Trends. It lets you type in any term or phrase, and track how often it’s mentioned on crypto-specific social media. It does this by scraping hundreds of Telegram groups, subreddits, discord channels and private trader chats, many of them hidden from Google search.
For example, here’s what happens if you search for ‘Gemini’, the Winklevoss stablecoin:
You can see the first notable spike in social chatter (on September 10th) correspond perfectly with the official announcement of the Gemini coin, with sporadic social activity since. The results are plotted against the price of BTC.
In backtesting the new tool, I wanted to see if there’s any behavioral insights that we can gauge from the recent Tether drama. To cover all bases, I searched for combined mentions of all major stablecoins (gusd, usdc, tusd, pax, dai, usdt) as well as the term ‘stablecoin’ itself.
I then plotted the social results over the price of Tether, and voila:
As you can see, the chatter surrounding stablecoins was fairly…stable (heh) leading up to October 15th. And then, on D-day, a giant spike, reflecting a jump of more than 8000% compared to October 13th.
It was a seismic shift in social chatter best illustrated by colorful reddit threads, including ‘Is Tether dying for real this time?’, ‘Why Tether could collapse’, and my personal favorite — ‘What the hell is going on?’
The spike aligns perfectly with Tether’s first bottom, somewhere around ~$0.96. But that’s only half the story: there was in fact another bottom just two days later, following Tether’s limp attempt to stabilize.
Except this time, the crypto community didn’t even blink.
There was no follow-up panic, no end-of-the-world threads, and actually very little coverage compared to what we’ve seen just two days ago. After all that initial FUD, the market was officially exhausted.
This is a great example of market saturation: while the second bottom was (potentially) equally relevant, the crowd was still recovering from the full-blown sensory overload they experienced earlier in the week. Tether finally began stabilizing after the second bottom, and is currently trading at a downright boring $0.995.
Trendsetting
Whenever a market event triggers a huge uptick in crowd attention, attention is warranted and there’s typically a trading opportunity around the corner. Common sense and empirical analysis say that if you want to know where crypto markets are headed, you need to listen to what the community is saying. And now you can.
The future of stablecoins remains unclear, and whether you think Tether’s a scam or not, these types of behavioral analysis were straight unavailable before Social Trends.
Thanks to our new tool, we plan to publish various social insights on our blog from now on. If you have a particular token/topic you’d like us to tackle, let us know in the comments.
Santiment is a crypto market intelligence platform, building smart tools and a vibrant community aimed at bringing clarity to crypto trading and investing. To learn more, visit our website at https://santiment.net, sign up for our newsletter at http://eepurl.com/cfgl3n, and join the conversation on our Discord channels.
Originally published at santiment.net on October 30, 2018.
