Cryptocurrency bloodbath: Asset-backed coins in, Tether out
As the drop continues, cryptocurrency speculators are putting more money and faith in stablecoins, but not Tether.
Prices are red across the board, in a continuation of the cryptocurrency market drop that ran throughout the tail end of January.
Bitcoin and Ethereum are both down a near-identical 14.15% and 14.7% respectively over the last 24 hours, according to CoinMarketCap, and are sitting at about $8,800 and $970 at the time of writing.
Most coins appear to have been heading towards a slump over the last two to three days, with mild upturns quickly being overtaken by the downward slide.
Looking at the stablecoins
It's impossible to say what's causing the slump with 100% certainty, but one of the most telling signs is that only one coin has seen a price increase in the last 24 hours. That coin is DigixDAO (DGD), up 3% in the last 24 hours according to CoinMarketCap, and generally skewing upwards at the same time the rest of the market has dropped.
DGD is the counterpart to the gold-backed ERC20 DGX coin. It's seen a steady increase in trade volume, and a corresponding price increase, as the market slumps.
The Dai stablecoin prices (pegged to the US dollar) also seem to be pushing upwards rather than downwards. Its corresponding MKR system coin, meanwhile, seems to have incrementally absorbed the market drops and stepped downwards in price as it liquidates ETH due to falling values. In the case of this particular system, it's a sign of everything working as it should.
Stablecoins like these see a lot of use during market drops because people want to protect the value of their holdings by keeping it in a hopefully price-stable form while the more volatile coins fall.
But not this time. In recent days its prices have been straining downwards even as the rest of the market drops. Whatever might be causing the bloodbath, it's clear that users have lost their faith in Tether and don't trust it to hold value.
This fact, in combination with the allegations of Tether artificially propping up the cryptocurrency market, suggests that the Tether uncertainty is tied to the current fall, and that it might indeed have been propping up prices.
But the extent to which the Tether troubles are impacting the rest of the market probably can't be properly determined until it reaches a conclusion, one way or another.