Tether is the biggest threat to the cryptocurrency industry in 2021, according to a report by Messari’s founder Ryan Selkins.
The 134-page thesis ventured into the emergence of the stablecoin as a proxy for the US dollar, which helps crypto traders to quickly get in and out of their positions on exchanges. It also focused on the controversy that Tether is pursuing following the New York District Attorney’s class action lawsuit against its founders and a sister cryptocurrency exchange BitFinex.
Boom versus darkness
Attorneys Vel Freedman and Kyle Roche claimed in their October 2019 filing that Tether had defrauded its investors, manipulated the cryptocurrency markets, and hid illegal earnings. They added that Tether was printing billions of dollars worth of USDT stablecoins to artificially raise the price of Bitcoin, Ethereum and other cryptocurrencies.
However, the market largely ignored the warnings. Tether’s market capitalization jumped from $ 4 billion in October 2019 to $ 20.9 billion in December 2020. Mr Selkins noted that the exchanges significantly increased Tether’s popularity in the absence of another large-scale alternative. However, the situation could change in 2020.
Tether market capitalization. Source: USDT on TradingView.comTether market capitalization. Source: USDT on TradingView.com
The research analyst discussed the worst-case scenario for Tether and BitFinex, citing the “double lawsuits” filed by the Commodity Futures Trading Commission and the Department of Justice against BitMEX. He stated that an active investigation into the exchange of crypto-derivatives resulted in its users migrating to alternative platforms.
Fearing that the same thing could happen to Tether, Mr Selkins presented an opposite Tether outlook for 2021 – a do-or-die situation as market capitalization continues to grow amid an ongoing rally in the cryptocurrency market led by Bitcoin.
“Tether will either face an existential crisis or double its offering again in 2021,” he wrote. “There doesn’t seem to be a middle ground.”
SEC investigation rumor
Following the Securities and Exchange lawsuit against Ripple and the grossly negative impact on the company’s native token, XRP, many agree that the Tether’s USDT could suffer a similar fate. To do this, the US Treasury Department has to classify stable coins as securities.
And that seems to be coming true. A Twitter user @RealWillyBot shared details of a DoJ order that classified stablecoins as securities. He shared a screenshot that read:
“Depending on its design and other factors, the stablecoin may represent a security, commodity, or derivative that is subject to US federal securities, commodity, and / or derivatives laws.”
When the proposal becomes law, USDT becomes a security token. This could shock the cryptocurrency markets as a whole as they are overly dependent on the stablecoin, which spits out a transaction volume averaging $ 77 billion every day.