Analysis

Tether Volumes Are Hitting All-Time Highs

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The cryptocurrency industry experienced some record-breaking volume this week, with an all-time high of $89 billion traded on April 3rd. This is notably 3 times larger than trading volumes were at the last peak in December 2017.

Volume is an indicator of the total value of all the transactions that occur in a market during any given period. Simply put, high volume is generally an indicator of high interest. So if we are hitting an all-time high in terms of cryptocurrency volume, then it is natural to think that this represents an increasing level of interest in cryptocurrencies.

With everyone waiting for a “crypto spring”, this shift can easily play upon the hopes of the masses, which is probably why we’ve seen so many more Google searches for Bitcoin in the past week.

Tether’s Volumes

Over the last year, Tether has gone through significant controversy regarding the reserves kept on hand and how funds were being managed. However, this doesn’t seem to have affected the level of interest in Tether, as its volumes have increased up to over $18 billion.

Investors are constantly looking for assets that remain stable, and Tether remains the best option, even with its transparency issues. However, some users believe that the high volume on Tether in recent weeks is actually the sign of a sell off. For a long time, there have been rumors regarding the insufficiency of reserves.

One analyst on Twitter, Emperor_YZ, believes this to be “similar to bank run as their usd peg is not enough to keep usdt at 1:1.” There is no proof of whether this sell-off actually exists, but based on the bullish run in Bitcoin right now, it is more than likely that users are selling off their Tether for BTC.

In a way, this could be a good proving ground for Tether. If it is able to survive this shift in market dynamics, then it will have proven that the reserves are at least mostly sufficient. Recent statements that other assets besides pure USD would be used as reserves have had users worried, but it is possible they are fully capitalized.

The Fake Volume Issue

The past few months have been filled with accusations of fake volume in the industry, as cryptocurrency analytics firm Messari identified that only 10 exchanges could truly be relied upon to provide accurate data. This shortcoming in accuracy means that volumes have been grossly misstated over the years, and Messari’s CEO, Ryan Selkis, claims that volume was overstated by up to 20-50x in some cases.

This volume issue could be a factor in Tether having $1 million greater volume than Bitcoin right now, or it could be nothing. The problem is that we don’t get to see price movements play out in Tether until there is true collapse. This is similar to how the Chinese pegged rates end up needing to be adjusted because it is too expensive to maintain a particular rate. One thing is for sure, Tether is proving to be a big player in the game, and now it has several trials to go through before we can be sure this is a good thing.

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