The value of Bitcoin (BTC) jumped by almost 9% at one point earlier today, as investors fled the so-called stablecoin Tether (USDT) en masse.
In Tuesday afternoon trading, a single bitcoin was up 0.88% and was changing hands at US$6,677.90 on the Einstein Exchange.
At press time, the other major digital currencies were all in the green or down marginally.
CLICK BELOW FOR LIVE CRYPTOCURRENCY PRICE INDEXES:
What is Tether?
It’s an issuer of a cryptocurrency with a definite twist.
Unlike Bitcoin, whose value fluctuates wildly from day to day, Tether’s tokens are designed for stability. Prices for the coins have historically stayed near US $1 because Tether tokens are allegedly tied to the U.S. dollar, with the eponymous company behind them claiming that it has a dollar in its accounts for each token it issues. There is no conclusive evidence to support this claim, but the token is still often used as a dollar substitute for trading purposes, as they are more easily transferred between exchanges than dollars are.
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 BTC. It so happens that Tether and a major cryptocurrency exchange called Bitfinex share the same CEO, and Tether forwards 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.
On Monday, the value of the Tether token, which had been worth around 99 cents, suddenly plunged as low as 93 cents, before recovering to around 97 cents.
According to Bloomberg, the reason for Tether’s recoil from the US$1 mark lay in renewed rumors around Bitfinex’s financial health.
BTC wasn’t the only winner from the Tether upset. Alt coins such as Gemini Dollar and TrueUSD are also up, as traders pulled back from Tether.
