dollar

Circle’s USDC on track to topple Tether USDT as the top stablecoin in 2022

The USDT-to-USDC market cap ratio fell to its lowest ever in July 2022.

The growth of Circle’s native stablecoin USD Coin (USDC) in the last two months compared to its $66-billion rival giant Tether (USDT) is nothing short of spectacular.

USDT, USDC market cap ratio hits the lowest on record

Notably, USDC’s market capitalization has grown by 8.27% since May, reaching its highest level of $55.9 billion on July 2. In contrast, USDT has suffered an over 19% drop in its market valuation, currently treading around $66.14 billion.

USDT circulating market cap. Source: Messari

This is the closest USDC has come to challenging USDT’s supremacy in the stablecoin sector based on the diminishing gap between their market caps.

In detail, the USDT to USDC market cap ratio was above “9” in August 2020. However, in July, it dropped to 1.20, the lowest on record, as shown in the chart below.

USDT to USDC market cap ratio. Source: TradingView

At the current rate — and with less than $10 billion now separating the two stablecoins — USDC can surpass USDT by market capitalization in a few months, if not weeks. 

Interestingly, USDC has already flipped USDT regarding “real volume” atop the Ethereum blockchain.

USDT sails through doubts

Crypto investors have turned cautious since the collapse of Terra’s $40 billion “algorithmic stablecoin” project in May, fearing that the same could happen to USDT. That is primarily due to speculations that Tether’s USDT tokens are not 100% backed by cash and other traditional assets as it claims.

As a result, short-sellers have boosted their bets on the possibility that USDT would soon fall below its $1-peg, with the Wall Street Journal reporting that these bearish positions could be worth “hundreds of millions” of dollars.

Related: Tether is an ‘instrument of freedom’ and ‘Bitcoin onramp,’ says Tether CTO

These bets anticipate that Tether would not be able to redeem all its USDT for a dollar in a “bank run” like scenario. As a result, people would start selling their stablecoin at a discount, breaking the peg.

USDT has a history of going below or above its $1-peg during extreme market volatility, though this was more pronounced in its earlier days.

For instance, in October 2018, the token’s value dropped to as low as $0.85 (on Kraken) amid rumors that one of its sister companies (crypto exchange Bitfinex) is insolvent.

USDT price chart since 2015. Source: CoinMarketCap

The same happened after the Terra collapse in May, with USDT’s value briefly plummeting to as low as $0.97. Nonetheless, the stablecoin recovered its dollar peg every time.

In contrast, USD Coin has slipped below the usual $0.99-1 only twice since its launch in 2018. It dropped to $0.97 during the “COVID-19 crash” in March 2020, only to recover to $1 and fall again to $0.98 in the same month.

USDC price chart since 2019. Source: CoinMarketCap

Crypto investors have strengthened their trust in USDC primarily due to Circle functioning as a money service business, registered with FinCEN and other 46 state regulators in the United States. As a result, the firm reports its reserves to the authorities in line with money transmission laws.

Also, Circle is audited by Grant Thornton, a leading global accounting firm.

Related: USD stablecoin premiums surge in Argentina following economy minister’s resignation

Paolo Ardoino, the chief technical officer at Tether, committed in June that they would have their reserves fully audited by one of the top 12 accounting firms. For now, accounting company MHA provides quarterly attestations of Tether reserves.

Until that happens, USDC is on track to close the gap with USDT for a potential flippening event, particularly as stablecoin demand remains high amid global economic turmoil.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

‘Wild ride’ lower for BTC? 5 things to know in Bitcoin this week

The holiday weekend is making everyone nervous as BTC price action hovers at $19,000.

Bitcoin (BTC) starts a new week still in holiday mode with United States financial markets off for Independence Day.

The largest cryptocurrency, stuck below the increasingly daunting $20,000 mark, continues to feel the pressure from the macro environment as talk of lower levels remains omnipresent.

After a quiet weekend, hodlers find themselves stuck in a narrow range while the prospect of a breakout to the upside appears increasingly hard to believe.

As one trader and analyst singles out July 4 as the site of a “wild run to the downside” for crypto markets, the countdown is on for Bitcoin to weather the aftermath of the latest Federal Reserve rate hike.

What else could the coming week have in store? Cointelegraph takes a look at the potential market-moving factors for the days ahead.

BTC price bides its time over long weekend

Bitcoin emerged from the weekend unscathed, but the classic pitfalls of off-peak trading remain.

The United States will not return to trading desks until July 5, providing ample opportunity for some classic weekend price action in the meantime.

So far, the market has held off when it comes to volatility — with the exception of a brief spike to $18,800, BTC/USD has circled the area between $19,000 and $19,500 for several days.

Even the weekly close provided no real trend change, as data from Cointelegraph Markets Pro and TradingView showed, with the psychologically significant $20,000 unchallenged.

BTC/USD 1-week candle chart (Bitstamp). Source: TradingView

“While below the range low we can expect a drop down to $18,000,” popular trading account Crypto Tony reiterated to Twitter followers as part of a fresh update on July 4:

“Been a very boring few days in the markets, and this is classic for a mid range.”

In terms of targets to the downside, others continued to eye the area around $16,000.

With no meaningful Bitcoin futures gap and flat performance on Asian markets, meanwhile, there was little to be had in terms of short-term price goals for short-timeframe traders.

The U.S. dollar, meanwhile, continued to hold near twenty-year highs after returning from its latest retracement defiant.

The U.S. dollar index (DXY) stood above 105 at the time of writing.

U.S. dollar index (DXY) 1-hour candle chart. Source: TradingView

Gold nears “blast off” against U.S. equities

With Wall Street closed for Independence Day, U.S. equities can take a breather on July 4.

For one popular chartist, however, attention is focusing on the strength of stocks versus gold (XAU) in the current environment.

In a Twitter thread, gold monitor Patrick Karim specifically flagged the precious metal as being about to hit a historical “blast off” zone against the S&P 500 (SPX).

After bottoming out at the end of 2021, the ratio of gold to the S&P has recovered throughout this year and is now about to cross a boundary, which has historically led to significant upside afterward.

“Gold closing in on ‘blast off zone’ versus US equities. Previous take-offs have unleashed important gains for Silver & Miners,” Karim commented.

The situation cannot be said to be the same in U.S. dollar terms, with USD strength keeping XAU/USD firmly in its place below $2,000 since March.

Nonetheless, for silver fans, the implications are that even a modest push-through for the XAU/SPX ratio will bring significant returns.

The forecast again calls into question the extent of Bitcoin’s ability to break with macro trends. A breakout against BTC for gold would be the natural knock-on effect should Karim’s scenario play out, thanks to the ongoing correlation with equities.

“After escaping the sideways pattern that had formed for a 1.5 year period, the correlation coefficient increased sharply to 86% vs S&P 500,” popular trader and analyst CRYPTOBIRB summarized over the weekend:

“Now, at 0.78 ratio it remains strongly positive.”

Fellow analyst Venturefounder noted that Bitcoin also remains tied to moves in the Nasdaq.

Against the dollar, Cointelegraph, meanwhile, reported that Bitcoin’s inverse correlation is now at 17-month highs.

Crunch time for Hayes’ “wild ride to the downside”

July 4, apart from being Independence Day, is being watched by one market player in particular as a public holiday like no other — at least for Bitcoin.

With markets closed and BTC price action already teetering on the edge of support, Arthur Hayes, former CEO of derivatives platform BitMEX, has singled out this long weekend as one long day of reckoning for crypto markets.

The reasoning seems logical. The end of June saw the Federal Reserve raise key rates by 75 basis points, providing fertile ground for an adverse reaction from risk assets. Low-liquidity “out-of-hours” holiday trading increases the potential for volatile price moves up or down. Combined, the cocktail, Hayes warned last month, could be potent.

“By June 30 (second quarter end), the Fed will have enacted a 75bps rate hike and begun shrinking its balance sheet. July 4 falls on a Monday, and is a federal and banking holiday,” he wrote in a blog post:

“This is the perfect setup for yet another mega crypto dump.”

So far, however, signs of what Hayes says will be a “wild ride to the downside” have not materialized. BTC/USD has stayed practically static since late last week.

The deadline should be July 5, as the return of traders and their capital could provide the liquidity needed to steady the markets as well as buy up any coins going cheap in the event of a last-minute downturn.

Hayes added that his prior forecasts of BTC/USD bottoming at $27,000 and Ether (ETH)/USD at $1,800 already “lay in tatters” in June.

Mining difficulty is still rising

Despite considerable concern over miners’ ability to withstand the current BTC price downturn, Bitcoin’s network fundamentals remain calm.

An impressive testament to miners’ resolve to stay on the network, the difficulty is not planning to reduce at the upcoming readjustment this week.

After decreasing by a modest 2.35% two weeks ago, difficulty, which automatically rises and falls to take into account fluctuations in miner participation, will hardly change at all this time around.

According to estimates from on-chain monitoring resource BTC.com, difficulty will even rise should current prices stay the same, adding 0.5% to what is a metric still near all-time highs.

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

When it comes to miners themselves, opinions consider that it is the less efficient players — possibly newcomers with higher cost basis — who have been forced to exit.

Data uploaded to social media by CEO of asset manager Capriole Charles Edwards last week put the production cost for miners en masse at around $26,000. Of that, $16,000 is electricity, meaning that miner overheads directly influence their ability to limit losses in the current environment.

“We traded below Electrical Cost in June, however the floor has since dropped as inefficient miners capitulate,” Edwards noted.

Bitcoin miner production cost chart. Source: Charles Edwards/ Twitter

A sea of lows

Bitcoin on-chain metrics pointing to record overselling is nothing new this year and in recent weeks especially.

Related: Top 5 cryptocurrencies to watch this week: BTC, SHIB, MATIC, ATOM, APE

The trend continues in July, as the network returns to scenarios not seen since the aftermath of the March 2020 cross-market crash.

According to on-chain analytics firm Glassnode, the number of coins being spent at a loss is now the highest since July 2020. Glassnode analyzed the weekly moving average of unspent transaction outputs (UTXOs) in a loss.

Bitcoin UTXOs in loss chart (7-day moving average). Source: Glassnode

Similarly, the percentage of UTXOs in profit hit a two-year low of just over 72% on July 3.

Bitcoin % UTXOs in profit chart (7-day moving average). Source: Glassnode

Bear markets can produce some welcome, if rare, silver linings. Bitcoin transaction fees, once painfully high during bullish periods of intense network activity, are now also at their lowest since July 2020. The median fee, Glassnode reveals, is $1.15.

Bitcoin median transaction fee chart. Source: Glassnode

As Cointelegraph reported, the same is true for Ethereum network gas fees.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin nears worst monthly losses since 2011 with BTC price at $19K

Bitcoin price action will seal monthly losses over 40% for the first time in 11 years if it closes at $19,000.

Bitcoin (BTC) drifted further downhill into the June 30 Wall Street open as United States equities opened with a whimper.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

U.S. dollar returns to multi-decade highs

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it abandoned $19,000 to hit its lowest in over ten days.

Bulls failed to preserve either $20,000 or $19,000 at the hands of limp U.S. stock market moves, the S&P 500 and Nasdaq Composite Index down 1.8% and 2.6%, respectively, at the time of writing.

At the same time, the U.S. dollar once again staged a comeback to fix a trajectory toward twenty-year highs seen this quarter.

The U.S. dollar index (DXY) was above 105.1 on the day, coming within just 0.2 points of its highest levels since 2002.

U.S. dollar index (DXY) 1-day candle chart. Source: TradingView

“The US dollar (DXY) looks set to test highs last seen in December 2002 as the short-term downtrend is broken convincingly amid risk markets’ continued crumble,” researcher and trader Faisal Khan summarized on Twitter.

Data on inflation, meanwhile, once more suggested the worst could be behind the market.

As Cointelegraph reported, however, central banks began to acknowledge that the low rates seen before COVID-19 may never return.

Bulls’ worst month in 11 years

With the majority of on-chain metrics now at historic lows, price data hinted how far BTC could theoretically go in a bear market increasingly unlike the rest.

Related: No flexing for Bitcoin Cash users as BCH loses 98% against Bitcoin

Should it close at current levels of $19,000, BTC/USD would seal monthly losses of over 40% for June 2022.

That would make it the worst June ever and the heaviest monthly losses since September 2011, data from TradingView and on-chain monitoring resource Coinglass confirms. 

Even March 2020 and the 2018 and 2014 bear markets were less severe on monthly timeframes. Forty percent drops were last seen when BTC/USD traded at $8.

BTC/USD monthly returns chart. Source: Coinglass

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Tether aims to decrease commercial paper backing of USDT to zero

Tether expects to reduce USDT’s commercial paper backing to $8.4 billion by the end of June 2022 and eventually completely remove it.

The major stablecoin company Tether is looking to eventually get rid of commercial paper backing for its United States dollar-based stablecoin Tether (USDT).

Tether issued an official statement on Wednesday to deny reports alleging that Tether’s commercial paper portfolio is 85% backed by Chinese or Asian commercial papers and is being traded at a 30% discount.

The stablecoin firm called such allegations “completely false,” reiterating that more than 47% of total USDT reserves are now the “United States Treasuries.” In its latest assurance opinion issued in May, Tether reported that commercial paper makes up less than 25% of USDT’s backing, amounting to around $21 billion as of March 31.

USDT’s backing asset breakdown. Source: Tether’s assurance opinion released in May 2022

According to the latest statement, Tether has continued to reduce its current portfolio of commercial paper, decreasing its volumes to $11 billion. The firm expects to further reduce it to $8.4 billion by the end of June 2022, eventually aiming to clear out its commercial paper backing, the statement reads:

“This will gradually decrease to zero without any incurrences of losses. All commercial papers are expiring and will be rolled into U.S. Treasuries with a short maturity.”

Tether also once again mentioned the recent crisis of the Celsius lending platform, noting that Celsius position has been liquidated with no losses to Tether. “Tether has currently zero exposure to Celsius apart from a small investment made out of Tether equity in the company,” the firm said.

Related: Su Zhu’s cryptic statement as rumors swirl of 3AC liquidations and insolvency

Tether also argued that reports suggesting that Tether has lending exposure to the crypto venture capital firm Three Arrows Capital are also “categorically false.”

5 reasons why Bitcoin could be a better long-term investment than gold

Crypto advocates often refer to Bitcoin as “digital gold,” but how does BTC stack up against gold as a long-term investment?

The emergence of forty-year high inflation readings and the increasingly dire-looking global economy has prompted many financial analysts to recommend investing in gold to protect against volatility and a possible decline in the value of the United States dollar. 

For years, crypto traders have referred to Bitcoin (BTC) as “digital gold,” but is it actually a better investment than gold? Let’s take a look at some of the conventional arguments investors cite when praising gold as an investment and why Bitcoin might be an even better long-term option.

Value retention

One of the most common reasons to buy both gold and Bitcoin is that they have a history of holding their value through times of economic uncertainty.

This fact has been well documented, and there’s no denying that gold has offered some of the best wealth protection historically, but it doesn’t always maintain value. The chart below shows that gold traders have also been subject to long bouts of price declines.

Gold price. Source: TradingView

For example, a person who bought gold in September of 2011 would have had to wait until July 2020 to get back in the green, and if they continued to hold, they would once again be near even or underwater.

In the history of Bitcoin, it has never taken more than three to four years for its price to regain and surpass its all-time high, suggesting that on a long-term timeline, BTC could be a better store of value.

Could Bitcoin be a better inflation hedge?

Gold has historically been seen as a good hedge against inflation because its price tended to rise alongside increases in the cost of living.

But, a closer look at the chart for gold compared with Bitcoin shows that while gold has seen a modest gain of 21.84% over the past two years, the price of Bitcoin has increased 311%.

Gold vs. BTC/USDT 1-day chart. Source: TradingView

In a world where the overall cost of living is rising faster than most people can handle, holding an asset that can outpace the rising inflation actually helps increase wealth rather than maintain it.

While the volatility and price declines in 2022 have been painful, Bitcoin has still provided significantly more upside to investors with a multi-year time horizon.

Bitcoin could mirror gold during geopolitical uncertainty

Often called the “crisis commodity,” gold is well-known to hold its value during times of geopolitical uncertainty as people have been known to invest in gold when world tensions rise.

Unfortunately for people located in conflict zones or other areas subject to instability, carrying valuable objects is a risky proposition, with people being subject to asset seizures and theft.

Bitcoin offers a more secure option for people in this situation because they can memorize a seed phrase and travel without fear of losing their funds. Once they reach their destination, they can reconstitute their wallet and have access to their wealth.

The digital nature of Bitcoin and the availability of multiple decentralized marketplaces and peer-to-peer exchanges like LocalBitcoins provides a greater opportunity to acquire Bitcoin.

The dollar keeps losing value

The U.S. dollar has been strong in recent months, but that is not always the case. During periods where the dollar’s value falls against other currencies, investors have been known to flock to gold and Bitcoin.

If various countries continue to move away from being U.S. dollar centric in favor of a more multipolar approach, there could be a significant amount of flight out of the dollar but those funds won’t go into weaker currencies.

While gold has been the go-to asset for millennia, it’s not widely used or accepted in our modern digital society and most people in younger generations have never even seen a gold coin in person.

For these cohorts, Bitcoin represents a more familiar option that can integrate into people’s digitally-infused lifestyles, and it doesn’t require extra security or physical storage.

Related: Argentines turn to Bitcoin amid inflation worries: Report

Bitcoin is scare and deflationary

Many investors and financial experts point to scarcity and supply constraints for gold following years of declining production as a reason gold is a good investment.

It can take five to ten years for a new mine to reach production, meaning rapid increases in supply are unlikely and central banks significantly slowed their rate of selling gold in 2008.

That being said, it is estimated that there is still more than 50,000 metric tons of gold in the ground, which miners would happily focus on extracting in the event of a significant price increase.

On the other hand, Bitcoin has a fixed supply of 21 million BTC that will ever be produced, and its issuance is happening at a known rate. The public nature of the Bitcoin blockchain allows for the location of every Bitcoin to be known and verified.

There’s no way to ever really locate and validate all of the gold stores on this planet, meaning its true supply will never really be known. Because of this, Bitcoin wins the scarcity debate, hands down, and it is the hardest form of money created by humankind to date.

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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.