Ever wished that you have cashed out when Bitcoin was at its all-time high near $20,000? Now, it seems that there is a likelihood that Bitcoin could still fall in price in the coming months. And this time around, this could be the worst.
First, let’s take a closer look at Tether. Tether is owned by Bitfinex, which is a trading company that has been under scrutiny lately. A blogger that has identified themselves as Bitfinex’d detailed that Tether has been plucked out of thin air in order to boost the value of Bitcoin. Now, there are many investors who worry about what this could do to Bitcoin’s price in the future.
In fact, if true, this could mean that the value has been artificially bumped up. And as a result, this could send Bitcoin’s current price crashing.
In order to prove to investors that there is nothing to worry about, Bitfinex promised to audit its finances in order to disprove the circulating rumors regarding tether. Unfortunately, they have failed to meet this promise. But instead, they have parted ways with their auditor Friedman LLP that even added market doubts.
In a statement, they’ve mentioned that “We confirm that the relationship with Friedman is dissolved”. They have mentioned that the reason why they’ve cut ties with Friedman is due to Friedman’s failure to deliver the audit on the given time frame.
They’ve added that “As tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success”.
How Can This Affect Bitcoin’s Price?
Nicholas Weaver who is a professor at UC Berkeley ‘s International Computer Science Institute mentioned that a “bloodbath” would ensue if tether fails to hold its value and if investors aren’t reassured with an audit. He tweeted that “At current prices, net new Bitcoin requires $18 million of net new dollars flowing in to maintain the price”. Unfortunately, he further added that there is a net “$100 million a day of fake dollars in the form of Tethers”.
There was an anonymous report that was entitled “Quantifying the Effect of Tether”. It mentioned that tether is unlikely growing via organic business means. This means that “they are printing in response to market conditions”.
It was mentioned that “Bitfinex withdrawal/deposit statistics are unusual and would give rise to further scrutiny in a typical accounting environment. If there is a questionable activity, the author believes a 30 to 80 percent reduction in Bitcoin could be forecast”
Author David Gerard said that Bitfinex should calm the market by releasing the audit. However, he further mentioned that the public aren’t going to see a Tether audit and a crash is going to happen. In fact, it is even predicted to be worse than Mt. Gox.
In reaction to the negative press that Bitfinex is getting, they’ve decided to assert all of its legal rights to clear its name.
Do you have every reason to be worried about your Bitcoin investment? Could it turn out to be a crash? If critics of Tether are correct, then it safe to speculate that everyone should prepare for the worst.