It\u2019s been a nightmare few months for cryptocurrency investors, with billions being wiped off the market in a matter of weeks, but it\u2019s about to get a whole lot worse.<\/p>\n<\/div>\n
A US financial expert has pointed to one thing that could bring down the entire cryptocurrency market for good, and it might be about to happen.<\/p>\n
\u201cTether is really the lifeblood of the crypto ecosystem,\u201d Hilary Allen, a finance expert at American University, told The New York Times<\/i>. \u201cIf it imploded, then the entire facade falls down.\u201d<\/p>\n
Tether is a so-called stablecoin, a newer type of cryptocurrency that aim to insulate themselves from the extreme volatility of the rest of the crypto market by keeping prices stable, usually by pegging them to the price of a traditional currency. In Tether\u2019s case, its value is tied to the value of the US dollar, though it also issues tokens pegged to the euro, the yuan and gold.<\/p>\n
It\u2019s the third-largest cryptocurrency after bitcoin and ethereum, with a market capitalisation of nearly US$83 billion (A$119.4 billion).<\/p>\n
It was launched as RealCoin in July 2014, rebranded as Tether that November, and began trading in February of the following year.<\/p>\n
Stay up to date with the latest in crypto currency on Flash. 25+ news channels in 1 place. New to Flash? Try 1 month free. Offer ends 31 October, 2022 ><\/a><\/b><\/i><\/p>\n But Tether is now in trouble, facing supercharged pressure from regulators and investors. It was last year fined US$18.5 million (A$26.6 million) by the New York Attorney-General for lying about its financial reserves and recent plunges in the crypto market possibly showed a taste of what could be to come.<\/p>\n As prices plunged in recent weeks, investors rushed to cash out their Tether, forcing the company to fork out US$10 billion (A$14.3 billion). They were able to meet the demand, with executives saying their weathered the crisis \u201cflawlessly\u201d but experts say the coin might not be so lucky next time.<\/p>\n If Tether collapses, the shockwaves could devastate the entire crypto sector, which is already in dire straits.<\/p>\n The crypto winter has now turned into a \u201cpolar vortex\u201d, a senior executive at one of the world\u2019s largest banks said in a blunt admission this week. <\/p>\n For the entire year, cryptocurrency has been enduring a bear run. <\/p>\n However, last weekend things took a turn for the worse as investors panicked following the US central bank hiking the interest rate by 75 basis points. <\/p>\n It prompted fears a global recession and crypto investors quickly retreated, casing a mass sell off and a drastic drop in price for some of the world\u2019s top-ranked blockchains. <\/p>\n At its lowest, the number one cryptocurrency, bitcoin, fell to $US17,601.58 (A$25,300) on Sunday morning although at time of writing, it had recovered slightly, sitting on around US$20,000. <\/p>\n That\u2019s a massive drop when you consider that at the start of last month, bitcoin was trading at US$36,141.33 (A$52,000), according to CoinMarketCap.<\/p>\n In fact, its lowest price over the last few weeks represents a whopping 74 per cent dip in value since BTC\u2019s all-time high in November when it nearly hit US$69,000 (A$99,000) per coin.<\/p>\n In fact, all bitcoin\u2019s gains over the last two years of the pandemic have pretty much been wiped \u2013 BTC hasn\u2019t been this low since October 2020.<\/p>\n Although cryptocurrencies has weathered several winters and fluctuations in price, the banking pro says this one was the most extreme given how widely used blockchain now is. <\/p>\n