USDT tokens are now fully backed by Tether’s reserves, the stablecoin issuer said Thursday.
Tether published a response to what it described as “a flawed paper” written by John Griffin, a professor of finance at the University of Texas at Austin, and Amin Shams, an instructor the Ohio State University which claimed a single address on the Bitfinex exchange was responsible for manipulating the bitcoin market in late 2017, sparking the bull market. The paper was an update to a version first published in the summer of 2018.
Tether pushed back on this claim, saying in Thursday’s statement that “the revised paper is a watered-down and embarrassing walk-back” of the first version.
Perhaps more intriguing, however, was the claim that “All Tether tokens are fully backed by reserves.”
Whether or not USDT is fully-backed has long been a point of contention. The company has promised an audit of its stablecoin reserves (though it has not delivered one, and has since dissolved its relationship with its auditor), produced a third-party report saying it likely had more funds than outstanding tokens, and had a bank write a letter vouching for its holdings. (The latter two reports both acted as snapshots, only assuring the crypto community that on specific days, Tether’s obligations did not exceed its assets.)
Tether’s backing is even the subject of an inquiry by the New York State Attorney General’s office.
Nevertheless, Tether maintained that its tokens were fully backed until April 2019, when general counsel Stuart Hoegner wrote in an affidavit that USDT was backed by “cash and cash equivalents … representing approximately 74 percent of the current outstanding tethers.”
At the time, Tether held $2.1 billion in assets, with 2.8 billion USDT tokens issued on the Omni blockchain. According to a block explorer, this number has fallen since then to 1.775 billion. However, a further 2 billion USDT is in circulation as an ERC-20 token.
Tether’s “Transparency” page says the company currently holds more than $4.6 billion in total assets, including $4.56 billion in U.S. dollars, $44 million in euros and $3.3 million in Chinese renminbi (amounts are converted).
In an email to CoinDesk, Hoegner said the outstanding tokens are currently backed by reserves, adding:
“According to the website and our terms of service, our reserves include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether tothird parties. The 74% figure refers to particular assets at that point in time, not the aggregate reserves.”
He declined to detail the breakdown between Tether’s actual cash holdings and the cash equivalents, saying “we generally do not share the asset mix.”
‘Lack of understanding’
As for the actual paper that Griffin and Shams hope to see published in the Journal of Finance, Tether’s statement Thursday said “the authors demonstrate a fundamental lack of understanding of the cryptocurrency marketplace and the demand that drives Tether token purchases.”
The paper itself said its analysis “for the single largest player on Bitfinex” found that “the 1 percent, 5 percent and 10 percent of hours with the highest lagged flow of Tether by this one player are associated with 55 percent, 67.2 percent and 79.2 percent of bitcoin’s price increase over our March 1, 2017 to March 31, 2018 sample period.”
The paper went on to say:
“This pattern is not present for the flows to any other Tether exchanges, and simulations show that these patterns are highly unlikely to be due to chance; this one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in the aggregate flows from other smaller traders.”
However, the paper suffers from having incomplete data, including insufficient data on capital flow or transaction timing, Tether said Thursday. As a result, the paper cannot “establish a valid sequence of events” for the claimed manipulation.
“Furthermore, the authors now admit that the patterns of trading they observed could be consistent with the market purchase of Tethers, as opposed to the issuance of unbacked Tethers. Importantly, the authors do not possess or reference any data disputing that Tether has sufficient reserves to back up Tether token issuances in circulation,” the statement said.
While the paper notes that “some in the blogosphere and press” have expressed doubts on whether Tether is fully backed, it adds that “the cryptocurrency exchanges largely reject such concerns.” However, it later says its model and results “are generally consistent with Tether being printed unbacked and pushed out onto the market.”
The paper has received skepticism and pushback from the crypto industry, with Tether skeptic Bennett Tomlin calling it “inconclusive.”
Into the Ether: 90% of All ETH Wallets Now ‘Out-of-the-Money’
Ether is down significantly from record highs and the majority of its holders are losing money on their investments.
The second-largest cryptocurrency, which powers ethereum’s blockchain, is currently trading at $131, representing a 90 percent drop from the all-time high of $1,431 reached in early January 2018, according to CoinDesk’s ether price index.
The relentless price slide has pushed 90 percent or 31.31 million ether addresses “out-of-the-money,” according to blockchain intelligence firm IntoTheBlock.
An address is said to be out-of-the-money if the current price of ether is lower than the average price at which the coins were acquired or sent to an address.
So, the 31.31 million ether addresses have acquired coins at an average price higher than the ether’s current value of $131.
A major chunk of out-of-the-money addresses purchased coins in the range of $211 to $530. Notably, the biggest cluster, some 4.77 million addresses, is in an average cost range of $262 to $352.
About 3.58 million addresses have purchased coins in the range of $745 to $1,340. Since it was launched, ether has so far traded above $747 only for six months, from the meteoric rally of October-December 2017 until its price slide in the first quarter of 2018.
Meanwhile, a mere 8 percent or 2.79 million addresses are “in-the-money” – the cost of acquisition is lower than the current price of ether – and 1.78 percent addresses are “at-the-money,” with an average purchase purchase price almost equal to the current spot price.
The majority of the in-the-money addresses have acquired coins in the range of $0 to $130, while 4,120 addresses have an average cost of $0. These could be early buyers who bought ether in the period between August 2015 and December 2015, when the cryptocurrency was trading in cents.
While the number of addresses in-the-money is small, the volume of ether these addresses are holding is quite significant.
Only 8 percent of addresses are in-the-money, but hold 31.24 percent of the total ether held in all addresses. That amounts to 34.05 million
Out-of-the-money addresses are holding 73.13 million ethers. Clusters of addresses with an average price in the range of $144-$170, $212-$262, or $262-$352 are holding a total of 36.24 million ethers.
Brutal second half
The number of addresses in-the-money may have been higher at the end of the second quarter of this year, when ether was trading near $360.
The cryptocurrency rallied more than 120 percent in the first six months of 2019 only to drop by 54 percent in the second half.
Indeed, ether is not the only cryptocurrency to have faced intense selling pressure in recent times. The broader market has taken a beating, courtesy of bitcoin’s drop from June highs above $13,800 to recent lows near $6,400.
However, bitcoin, the top cryptocurrency, is still up 103 percent on a year-to-date basis. Ether, on the other hand, is reporting a marginal year-to-date loss at press time.
A few observers believe ethereum’s persistent scalability issues likely dented investor confidence, leading to a price drop.
“Ethereum has consistently missed deadlines for protocol upgrades,” said Connor Abendschein, research analyst at Digital Assets Data, to CoinDesk. “Ethereum 2.0 was supposed to have already gone into effect earlier this year, and it still hasn’t gone through.”
Ethereum 2.0 is a major network upgrade that will shift the blockchain’s current proof-of-work consensus algorithm to proof-of-stake and transfer validation function from miners to special network validators.
Under proof-of-work, miners compete with each other to solve a difficult puzzle (algorithm) to add each block to the chain. Under proof-of-stake, there is no competition as the block creator is selected based on the user’s stake in the project – in other words, ether holdings.
The market is expecting the first upgrade to be rolled out in January 2020. Ryan Selkis, CEO of Messari, however, thinks the transition won’t happen until 2022.
Apart from the missed deadlines, selling by an early HODLer likely pushed the cryptocurrency lower.
As noted by Alex Svanevik, data scientist in Crypto Land and co-founder of data science firm D 5, an address dating back to 2015 has moved more than 300,000 ethers to exchanges in the past four months.
Ethereum Price Analysis: ETH Trading Above Key Supports
- Ethereum price is struggling to surpass the $192 and $194 resistance levels against the US Dollar.
- ETH price is somehow holding the key $182 and $180 support levels.
- There is a major bullish trend line forming with support near the $184 level on the 4-hours chart (data feed from Coinbase).
- The price could start a sharp decline if it fails to stay above the $182 and $180 support levels.
Ethereum price is showing a few bearish signs below $192 against the US Dollar. However, ETH price is still trading above the main $180 support area.
Ethereum Price Analysis
Recently, Ethereum price made another attempt to surpass the $192 and $194 resistance levels against the US Dollar. The bulls struggled to gain strength and ETH price formed a high near the $192 level.
Later, there was a bearish wave below the $190 and $188 levels. Moreover, there was a break below $185 and the 55 simple moving average (4-hours). Similarly, there were strong bearish moves in bitcoin, but ETH remained supported above the $182 level.
A low was formed near $183.78 and the price is currently correcting higher. An immediate resistance is near the $186 level. It coincides with
The first key resistance seems to be near the $188 level. It represents the 50% Fib retracement level of the recent decline from the $192 high to $183 low. Besides, the main resistance for Ethereum price is still near the $192 and $194 levels.
Therefore, a successful close above $194 is needed for a strong upward move towards the $200 and $210 levels. On the downside, there are many supports near the $182 and $180 levels.
More importantly, there is a major bullish trend line forming with support near the $184 level on the 4-hours chart. If ETH fails to stay above the trend line, the next key support is near $180. Any further losses may perhaps start a major decline towards the $175 and $170 levels.
Looking at the chart, Ethereum price is clearly trading above key supports near $182 despite the recent decline. If the price fails to stay above $182 and $180, there could be a sharp decline. Conversely, a clear break above $194 could start a strong increase in the coming days. The next resistances are near $200 and $208.
4 hours MACD – The MACD for ETH/USD is slowly moving in the bullish zone.
4 hours RSI (Relative Strength Index) – The RSI for ETH/USD is currently rising towards the 50 level.
Key Support Levels – $184, followed by the $180 zone.
Key Resistance Levels – $188 and $192.
dYdX Protocol Registers All-Time High for Its ETH Lockup while DAI Lockup Amount Falls by 43%
Decentralized Finances (De-Fi) are one of the emerging use cases of blockchain technology which has registered significant market exposure in last year. De-Fi is an Ethereum based protocol that allows users to hold up their Ether using smart contracts and earn interest rates in the form of DAI, a decentralized stable coin that is not backed by any entity.
dydx protocol is a decentralized margin trading and derivatives platform that allows users to lock up their Ether in smart contracts and uses can earn interest on it or draw DAI based on the locked amount. As per a recent study conducted by DeFi Pulse, a Twitter handle which tracks the major happenings in the defi space reported that dydx protocol has registered a 16.6% increase in the amount of Either locked in the smart contracts pushing the
However, the analysis also showed that there has been a significant decline in the DAI holdings which dropped to 43% dropping from 3.4 million to 1.2 million in just 48 hours.
While Bitcoin cultivated the idea of decentralized currency and peer-to-peer financial networks, the management of transactions and all trading happens via centralized exchanges with tons of surveillance tools. All the exchanges are heavily centralized which has been the cause of many mishaps in the past, even the so-called decentralized exchanges have started to ask for KYC details under a government crackdown.
Thus, De-fi promise to create a truly decentralized and trustees network where human interference would be minimal and every aspect would be governed by pre-set protocols and codes.