- Bitfinex tweeted the deposit pause did not affect withdrawals of cryptocurrency or fiat
- The update came in the wake of Tether’s drastic plunge in value over the last 24 hours
- Concerns over “processing complications” drove down USDT’s price significantly
On Thursday, October 11, Bitfinex temporarily paused fiat deposits (USD, EUR, JPY, GBP) for some customer accounts due to processing complications. While certain users experienced some inconvenience, Bitfinex made the following clear:
- All cryptocurrency and fiat withdrawals are, and have been, processing as usual without the slightest interference;
- All fiat (USD, GBP, JPY, EUR) withdrawals are processing, and have been, as usual;
- Fiat deposits have been temporarily paused for certain user groups.
Bitfinex is currently working to implement a new and more robust fiat deposit system. The new system should allow the smooth and efficient processing of fiat deposits.
Largest ‘Stablecoin’ is Not So Stable After All
Supposedly, the largest stablecoin based on market cap, Tether (USDT), is pegged to the U.S. dollar and is always worth $1. However, if there’s one thing that’s constant in the cryptocurrency space, it’s the fact that things won’t always go according to plan. This is something Tether clearly exhibited when it took a drastic plunge in value over the last 24 hours.
For a short period, the stablecoin traded below $.87 on the exchange Bittrex. As of this writing, it has climbed back to $.98—which is still pretty worrisome, because in theory that’s 2% free money for anyone to claim. The instability of USDT has been deemed a red flag not just for those who are HODLing onto the coin but also for pretty much anyone that’s banking on cryptocurrency. In addition, a University of Texas study conducted in June of 2018 indicated that it is likely Tether has not only been used to provide price support but also to manipulate cryptocurrency prices.
Some critics have claimed Tether is nothing more than a scam—an assertion bolstered by its inability (or refusal) to release an audit—designed to artificially inflate bitcoin’s price. Even if this claim is preposterous at best, a crumbling of the stablecoin (a staggering $2.5 billion worth in circulation) can surely spook cryptocurrency investors in particular and the market at large in general.
Crisis in Confidence and the Future of Tether
On Monday, October 15, 2018, Bitfinex issued a statement declaring it would pause fiat deposits temporarily for certain customer accounts in the wake of processing complications. Bloomberg suggests that processing complications concerns has lead to a confidence crisis for Tether as well as a corresponding sell-off. The sell-off resulted to a drastic drop in USDT’s price. Simultaneously, it drove up bitcoin’s price as traders opted to dump Tether for BTC.
This development has also encouraged some traders to consider other stablecoins aside from Tether. TrueUSD, a stablecoin that’s also pegged to a U.S. dollar experienced a surge to $1.07 while Tether was dumping. In other words, investors willingly paid a 7 percent premium just to get ahold of something that’s not Tether.
How these developments are going to impact Tether’s future and that of stablecoins in general is not clear yet. However, for today, many investors now view the word “stable” as a suggestion as opposed to an accurate description.