JPMorgan: “loss of confidence in USDT will affect BTC rate”
Should investors lose faith in stablecoin, Tether, bitcoin could face new risks, including a sharp drop in price, according to a report by JPMorgan Bank.
According to JPMorgan analysts, the BTC market could face a major liquidity shock if traders lose faith in USDT, Tether’s stablecoin widely used to fund cryptocurrency trading.
“If issues arise that could affect the willingness or ability of both US and foreign investors to use USDT, the most likely outcome will be a severe liquidity shock to the broader cryptocurrency market, which could be exacerbated by its disproportionate impact on strategy makers. high-frequency trading that dominate cash flow, ”JPMorgan analysts write in an 86-page report.
The market capitalization of USDT has grown from $ 4 billion to over $ 34 billion over the past year, indicating its growing use. Since 2019, around 50% -60% of BTC has been traded for USDT, according to data compiled by NYDIG and quoted by JPMorgan analysts.
Consequently, a sudden loss of confidence in USDT could contribute to the destabilization of exchanges and a panic drop in the price of BTC. Tether has not yet conducted an independent audit, analysts said, and concerns over its reserves and finances persist, posing additional risk to the BTC market.
Tether, the issuer of USDT, has long been criticized for its lack of transparency in reserves and ensuring that new coins are issued. However, the cryptocurrency market hasn’t paid much attention to this until now. This may in part be due to the fact that during the price increase over the past year, USD-based deals were on average larger than USDT deals, according to Kaiko Research. Thus, the risk of a major price collapse due to a potential loss of confidence in Tether seemed low.
According to JPMorgan analysts, bitcoin will compete with gold as an “alternative currency”:
“The competition between bitcoin and gold as an alternative currency is likely to continue as millennials become a more important component of the investment market and favor digital gold over traditional gold.”
In conclusion, analysts added that achieving BTC’s long-term target of $ 146,000 will depend on the high volatility of its price and will take many years. Recall that recently JPMorgan Chase co-chairman Daniel Pinto said that sooner or later the bank will have to work with bitcoin due to the growing interest in this asset.