Reports suggest that the U.S. government has initiated a new probe into Tether [USDT], a move that some are interpreting as the latest tactic to spread fear, uncertainty, and doubt (FUD).
The timing of this investigation has raised suspicions, with speculations arising that it might be a deliberate effort to instill fear and unsettle the market just before a potential breakout for Bitcoin [BTC].
Given that more than 70% of crypto trades involve USDT pairs, analysts at CryptoCrypto are warning about the risks associated with the centralization of Tether.
Any disruption to USDT could have a ripple effect across the entire market, especially as BTC enters the final phase of the “Uptober” frenzy.
USDT’s Dominance Hits Record Highs, But with a Twist
Over the past week, the dominance of USDT has seen a continuous uptrend, with daily gains exceeding 2%. Historically, an increase in USDT dominance often aligns with BTC nearing market peaks.
This scenario is reminiscent of the time when BTC was close to hitting $70K.
Nevertheless, the surge in demand for USDT fueled by escalating panic has exerted significant downward pressure on BTC, which is currently priced at $67K.
This highlights the escalating influence of USDT on the price dynamics of Bitcoin, underscoring the importance of closely monitoring the impact of the recent scrutiny surrounding Tether.
Interestingly, when the news started circulating during late trading hours, there was a significant surge in USDT inflows into exchanges, reaching a two-month high of over $2.3 billion.
Despite this sudden increase, USDT dominance remained robust, registering a daily gain of nearly 3%. This indicates that many traders perceived the news as exaggerated or misleading and decided to retain their net imports.
However, there is a considerable possibility that in the upcoming days, USDT deposits into exchanges might outpace net outflows.
If the current price of BTC proves to be the market’s bottom, it could attract substantial liquidity, potentially propelling its value upwards.
Conversely, stakeholders might shift their investments into other high-cap altcoins or memecoins, taking advantage of the situation to exchange USDT for more affordable alternatives.
The final week of October might witness heightened activity in the cryptocurrency market, with several coins poised for a potential surge.
Likelihood of Capital Transitioning into BTC
Presently, USDT finds itself at a critical juncture. News of the investigation has triggered investor anxiety and significant selling pressure. However, the daily chart reflects a bullish MACD crossover for USDT dominance.
The increased market volatility, prompted by BTC’s dip towards $67K, has sparked discussions about a potential pullback to $64K, where the next support level could be established.
Moreover, despite 12 hours passing since the news surfaced, which typically leads investors to shift from USDT to BTC, traders have yet to take action and sell off USDT.
This scenario reinforces the possibility of a retracement, making the current price less attractive as an entry point.
The upcoming week bears significant importance for BTC, as its trajectory depends on how the market responds to USDT. Currently, the probability of investors preparing for a parabolic rally seems limited.
This situation could diminish the chances of the crypto market concluding October on a bullish note.