The tether deal with New York State brings a quick reversal of the crypto market sell-off

Bitcoin (BTC) and other cryptocurrencies partially rebounded from their biggest sell-off in a month after the New York attorney general announced it was settling a dispute with the stablecoin tether (USDT) that had shaken market confidence in recent weeks.

Bitcoin, the largest cryptocurrency by market value, soared to $ 49,000 after the announcement, after hitting lows below $ 45,000 on Tuesday. As recently as Sunday, Bitcoin had reached a new record of over 58,000 US dollars.

“After 2.5 years and 2.5 million pages of information, we are admitting we didn’t do anything wrong and are paying $ 18.5 million to resolve this issue,” Bitfinex tweeted, adding that none Finding states that Tether ever published anything [the stablecoin] with no backing or impact on crypto prices.

According to trader and analyst Alex Kruger, the settlement news for Bitcoin, Decentralized Finance (DeFi) and Bitfinex’s LEO token is bullish.

JPMorgan analysts warned last week that a sudden loss of confidence in Tether – a stable coin often used to fund cryptocurrency purchases – would pose a risk to the stability of the crypto market.

In April 2019, New York prosecutors accused Bitfinex of using Tether’s funds to cover the loss of $ 850 million in customer and corporate funds from a payment processor.

The previous Tuesday, Bitcoin price had fallen to a 12-day low, extending Monday’s double-digit decline from record highs.

Despite the increased use of Bitcoin by major investors as a hedge against inflation, many analysts in both the crypto markets and Wall Street say that the cryptocurrency is still traded like a risky asset. Hence, it is vulnerable when the mood in traditional markets darkens.

And that’s exactly what happened on Monday, when stock markets came under pressure on Monday and the 10-year US Treasury note yield hit a 10-month high of 1.39%, which extended year-to-date earnings to over 35 basis points, or 0 , 35 percentage points.

Risk aversion likely helped pull Bitcoin down.

According to CNBC, rising yields could signal investor expectations of reflation – an expansion in an economy’s production levels through fiscal or monetary policy measures, or both, with a corresponding rise in the price of assets and consumer goods and services. The US Federal Reserve has been trying to get the economy going again since the March 2020 crash, pumping trillions of dollars into the system to help achieve that goal.

Analysts expect the Fed chairman Jerome Powell to tell Congress later Tuesday that the central bank is determined to keep interest rates down. The US Federal Reserve is likely to continue its liquidity-enhancing bond-buying program despite the recent rise in inflation expectations and improving growth prospects. This will likely lower bond yields and undercut both stocks and Bitcoin.

“The recent surge in yields has dampened some risk sentiment, which is inevitable. But I suspect Powell will play it safe and the returns will be lower on his semi-annual testimonial. “Denis Vinokourov, head of research at London-based prime brokerage Bequant, told CoinDesk. “In return, [we’re] We assume that the risk flows at BTC and thus also for the rest of the market will recover and support the upward trend. “

Margaret Yang, a strategist at DailyFX, says investors expect a big $ 1.9 trillion US economic forecast that could improve the reflation theme and inflation outlook.

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