Bitcoin Price Growth To Slow Down Because Of New Tether, Chainalysis Reveals

The recent Bitcoin bull run might be weakened by new issuance of the dollar-pegged Tether (USDT), says Philip Gradwell, chief economist at analytics firm Chainalysis.

Bitcoin has retreated from $12,000 and is currently trading at $11,800. The sustained breakout out of the ascending triangle formation did not materialize. While analysts pointed to exhaustion from bulls, Gradwell thinks the activity on the world’s third largest cryptocurrency is affecting Bitcoin.

The analyst said the inflow of new Tether coming to exchanges has increased. Additionally, while the Bitcoin supply on exchanges has decreased, all Tether within exchanges can be used to buy the existing supply, he argued.

Because Tether represents the stablecoin version of the U.S. dollar, it follows that fiat still affects the price of the benchmark cryptocurrency. "At present, data suggest that the current price increase is driven by fiat demand," Gradwell wrote in a newsletter, Cointelegraph reported. While the analyst thinks fiat would be the one driving Bitcoin if Tether is not creating new coins, it’s also possible that other dollar-pegged stablecoins, like Binance USD (BUSD) and USD Coin (USDC), would be used to purchase the benchmark cryptocurrency.

If Bitcoin’s price upsurge is to slow down, analysts think this will trigger a consolidation period on the current levels. Now that selling pressure has declined, consolidation would provide Bitcoin with the strength to go past $12,000 stronger just like when it plowed past $10,000 to reach $11,000 on July 27, which was made possible by a two-month consolidation in the $9,000 level.

Tether is still the largest stablecoin cryptocurrency, with a current market cap of $14 billion. It took only four months to reach this market cap when it was standing at $5 billion just this March. While more U.S. dollar-pegged stablecoins have entered the market, it will take time for Tether's competitors to catch up. USDC, the stablecoin by Circle and Coinbase, has a market cap of $2 billion while DAI is at the distant third with $483 million.

Tether Inc, the company behind the stablecoin, also announced it has integrated USDT on the OmiseGO (OMG) network. The most popular version of USDT is USDT-ERC20, which is Tether on the Ethereum blockchain. USDT also has versions on the Bitcoin network and Tron blockchain. Tether Inc hopes to entice users to consider using USDT on OMG to help save on rising transaction fees, a growing concern on the Ethereum blockchain.