With the markets showing a little strength today, I got to thinking about the ever controversial Tether situation and whether or not it may already be priced into the market at this point.
The price of BTC dropped from $19K to just below $6K in just a few weeks. During that time we had lots of negative news that may have contributed to that fall. Regulations, China seemingly banning and not banning crypto on a day to day basis, as well as some hacks thrown in there for good measure. But the biggest issue and the one that got the most attention from investors was Tethers.
So the whole Tether situation went from something that was sort of on the periphery and ended up becoming mainstream enough that Forbes, Bloomberg, and even the New York Times wrote about it. And all of this leads me to ask myself whether I feel a Tether implosion has been priced in at this point. And the answer I come up with is…..well, it’s complicated.
I actually do believe a portion of the Tether scam is already priced into the market at this point. However, it is not fully priced in. Just based on price, I would say about $3K of the current price is still susceptible to bad news coming out regarding Tether. However, that doesn’t tell the whole story, as Tethers are being used across all markets for all kinds of trading. So an implosion of Tethers will effect more than just Bitcoin and it will effect it more than just news of a software glitch or fork complication.
So this is where it gets complicated. I believe that although the Tether situation is partially priced into BTC already, if there is a Tether implosion, the price of BTC will fall more than just $2K and the market will probably fall 35% or more. However, because of the partial amount that is already priced in and the knowledge that this was coming all along, I think the fall will not be prolonged. In fact, I believe an implosion will bring about a sense of relief among many investors that finally we have a true price of Bitcoin. I don’t believe this will cause a “nuclear winter” as we have seen after other large crashes like Mt. Gox. I would suspect this bear market after a Tether implosion could last as little as 30 days.
This would also include if any exchanges ended up going under. The losses would be big, but because of the attention that Tethers have received, nobody will be surprised. It will be more like a “I told you so” type of market situation. And as I stated above, I think many people will breath a sigh of relief that we can finally move past this whole scam and get back to normal.
Now don’t get me wrong, the losses will be big for some. But I do not feel such a situation will put crypto into a year long bear market.