Bitcoin’s price touched just below the $7,000 price mark on Monday after cryptocurrency traders sold off tether, a digital currency tied to the valuation of the U.S. dollar, before settling to its current price of $6,648.66 as of 12:15 p.m. ET.
Per an article in Fortune, the sell-off in tether came as “Some have long suspected that the Tether operation is being used to buy a load of Bitcoins for nothing, effectively propping up the value of Bitcoin. It so happens that Tether and a major cryptocurrency exchange called Bitfinex share the same CEO, and Tether sends all its freshly minted tokens to Bitfinex. When they get there, the price of Bitcoin tends to go up, suggesting Tether tokens are being used to buy Bitcoins.”
Furthermore, the sell-off was sparked by rumors that cryptocurrency exchange company Bitfinex, which shares a chief executive officer with Tether’s issuer, could be insolvent. Additionally, news swirled that its banking relationships were in jeopardy as brick and mortar financial institutions are still wary of the security issues surrounding digital currencies.
“If traders start to flee Tether, it’s a potentially precarious situation,” said Vijay Ayyar, head of business development at Luno, a cryptocurrency exchange. “It basically implies a lot of volatility ahead.”
The price spike in Bitcoin came as the leading digital currency has been languishing in the low $6,000 range the past month. Bitcoin’s price rose 5% within the last 24 hours.
“Faith in Bitfinex’s financial situation and ability to fully back Tether has been a recurring question,” said Jehan Chu, managing partner at blockchain investment and advisory company Kenetic Capital. “Tether’s stablecoin dominance will only persist if they can settle community criticisms about their lack of transparency once and for all.”
Related: The Key to The First Bitcoin ETF
Bitcoin ETFs Open for Comments
The Securities and Exchange Commission (SEC) set Friday, Oct. 26, 2018 as the deadline for public comments on nine applications from various issuers looking to launch bitcoin exchange-traded funds (ETFs). Thus far, nine have tried and nine have failed with respect to bringing in a cryptocurrency-related ETF to the capital markets.
Per an article in Forbes, ” investor focus over recent months has shifted to the possibility of a Bitcoin ETF being approved by the SEC–something that will boost mainstream adoption of the cryptocurrency at a much more rapid pace than full-fledged trading support by investment banks. Although there has been little news on this front over recent weeks, the SEC’s recent decision to invite comments from investors supporting or opposing Bitcoin ETFs should renew interest in the industry over coming months.”
Earlier in the year, the SEC’s Division of Trading and Markets rejected applications from investment firms ProShares, Direxion and GraniteShares, but the latest decision by the SEC to invite more comments could be a positive sign that the SEC is willing to look at the data more closely as opposed to making a snap decision. Like a referee overturning a challenged call in professional sports, the SEC appears to be taking their time in the replay booth–a possible signal that the call could go in favor of cryptocurrency-related ETFs when that time arrives.
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