The price of bitcoin spiked more than 10% on Monday morning. Ethereum, XRP and bitcoin cash also exploded to double-digit gains before settling later in the day.
Bitcoin Price Teases $7,000
According to CoinMarketCap, bitcoin’s price spike hit $6,965 before dropping back to $6,660. However, Bitfinex – a cryptocurrency exchange in Hong Kong – charted bitcoin at $7,788 at its highest point.
So, what accounted for this rapid price rise?
Huge Sell-off in Tether
Bitcoin’s surge was triggered by traders selling tether – a “stablecoin” which is pegged to the US dollar.
Tether is typically used to trade cryptocurrencies against the dollar without having to use fiat currency itself. Tether is also used to keep money “on the sidelines” before entering a particular trade. Since it’s pegged to the US dollar, it is a relatively stable asset.
A reported 20% of all crypto trades are made using tether.
What Caused the Tether Sell-off?
According to Bloomberg, the implosion appears to have been caused by renewed rumors of insolvency at crypto exchange Bitfinex. Bitfinex has been plagued by speculation over its financial health and banking relationships.
That’s a problem for tether because Bitfinex and tether share a CEO.
The nerves about Bitfinex’s financial health appear to have spilled over into concerns over tether.
In an attempt to downplay concerns, Bitfinex was quick to point out that “all cryptocurrency and fiat withdrawals are, and have been, processing as usual without the slightest interference.”
FALSE RUMOR: Binance is Delisting Tether
One rumor circulating Twitter on Monday morning hinted that Binance – the world’s largest crypto-to-crypto exchange – was set to delist tether. It was fueled by an image that reportedly showed an email from Binance announcing the forthcoming delisting.
Binance CEO, however, confirmed it was a faked Photoshop image. While this may have initially caused a panic sell-off in tether, it should have no further impact on the price.
For now, the price of bitcoin has dropped from its spike to a stable $6,640.