By Yassine Elmandjra, Analyst
This week Tether, a dollar-pegged crypto token which is a source of liquidity for over-the-counter (OTC) trading desks and off-shore cryptocurrency exchanges, became a source of controversy. An article published by “Crypto Anonymous” asserted that Tether has been responsible for serious bitcoin price manipulation that could cripple both the Bitcoin network and bitcoin.
Bitcoin is no stranger to this kind of “Fear, Uncertainty, and Doubt” (FUD). In 2018, critics launched nearly identical arguments focused on Tether’s potential impact on bitcoin.
ARK believes that the latest article relies on misleading data and exposes a significant misunderstanding of Tether’s mechanics. While Tether operations are somewhat opaque, the scrutiny it has faced since 2018 would suggest a low probability of outright fraud.
That said, in our view even if Tether were to fail, its impact on the Bitcoin network and bitcoin’s price would be short-term and perhaps di minimis. While in the short term, Tether’s potential failure could cause chaotic price action and a loss in confidence in the crypto space, ultimately we believe its failure could benefit bitcoin, highlighting its differentiation as a liability free asset.
Catherine Wood, ARK Invest CEO, is a shareholder of 24/7 Wall St. LLC.