Recently, the news about a possible new investigation into Tether caused a market crash. Both Bitcoin (BTC) and Ethereum (ETH), two of the biggest cryptocurrencies, saw their prices fall. Many other cryptocurrencies also dropped in value. Tether (USDT), which is a stablecoin, moved slightly down to $0.99. This small movement is normal for USDT because its value stays close to $1 most of the time.
Wall Street Journal Report Causes Fear
The Wall Street Journal (WSJ) shared that Tether might be in trouble. The report says that Tether is being investigated for breaking rules related to money laundering and sanctions. U.S. officials are trying to find out if Tether has been used to support criminal activities. These activities could include terrorism, drug trafficking, and hacking.
Possible Sanctions on Tether
The U.S. Treasury Department may even introduce sanctions on Tether. Sanctions are restrictions placed on certain people, businesses, or countries. The report claims that Tether has been used by groups targeted by U.S. sanctions, including Hamas and Russian weapons dealers. If these sanctions are approved, it could become difficult for Americans to use Tether.
Tether CEO Paolo Ardoino Responds
Paolo Ardoino, the CEO of Tether, responded to the Wall Street Journal’s claims. He said that these reports are just another attempt to spread “FUD.” FUD stands for Fear, Uncertainty, and Doubt. In simple words, FUD is when people share bad news to cause fear and make others panic.
Ardoino explained that Tether has faced legal trouble before. For example, the New York Attorney General’s office had previously investigated the company. But despite all this, Tether continued to operate normally. The company has tried to follow the rules and has worked with investigators to stop fraud and other crimes.
How Tether Tries to Follow Rules
Even though Tether makes sure user accounts are real, people can still trade USDT without revealing their identities. Tether’s tokens can be moved across many networks, and this makes it harder to keep track of every transaction. However, Tether claims that it has cooperated with authorities whenever needed to fight illegal activities.
A few years ago, the U.S. Justice Department started investigating the people behind Tether for suspected bank fraud. Since then, Tether has made many changes to its system to fight illegal activities. It now works with companies like Chainalysis and TRM Labs. These companies are experts in tracking suspicious transactions. Tether has also hired a new team member from PayPal to improve its work with regulators.
Market Impact of the Tether News
The news about the investigation caused a big drop in the cryptocurrency market. Bitcoin fell below $67,000. Tether (USDT) and USD Coin (USDC), two popular stablecoins, dropped slightly to $0.99, but these small changes are normal for stablecoins. Many smaller cryptocurrencies, known as altcoins, also lost value, falling between 5% to 10%.
However, some cryptocurrencies quickly recovered from the initial drop. For example, Bitcoin dropped to $66,000 but soon bounced back to nearly $66,700 within minutes. Ethereum (ETH) also dropped to $2,461 but started moving upward again.
Liquidations and Losses
The sudden drop in Bitcoin’s price caused many traders to lose their positions. When the market falls quickly, some traders are forced to sell their holdings to avoid further losses. This is called liquidation. In the last 24 hours, over 133,000 traders had to liquidate their positions, with losses totaling $375.85 million. Out of these losses, long trades—bets that the price would go up—accounted for $308.93 million.
What Analysts Think
Some analysts believe that the bad news about Tether was shared on purpose to stop Bitcoin’s rally. A rally is when prices are rising quickly, and people expect them to keep going up. They think the Tether news was released to scare investors and cause them to sell their holdings.
However, not everyone thinks the Tether news will have a long-lasting effect. Many traders see it as just another temporary scare. They believe that once the panic settles, the market will recover, and Bitcoin might even start a new rally soon.
Final Thoughts
Tether has been in the cryptocurrency market for more than 10 years. Despite many challenges and only a few times when its price dropped below $1, it has stayed stable. While the news about the investigation caused fear, many traders believe it is not a serious issue. Some think this is just another attempt to shake up the market before prices start rising again.
In the end, while the Tether investigation caused a temporary crash, experienced traders seem confident that the market will recover soon. Tether’s role in the cryptocurrency world remains important, and the company continues to make efforts to follow the rules and cooperate with authorities.