In the past 24 hours, influenced by news of the U.S. federal government's investigation into cryptocurrency company Tether, cryptocurrency prices have fluctuated violently, with Bitcoin at one point plunging more than $3,000, hitting a low of $65,644, a decline of nearly 4%. Ethereum, Solana, Dogecoin, and others also saw significant drops. As of the time of publication by the brokerage China reporter, the price declines of the aforementioned cryptocurrencies have narrowed.
In the past 24 hours, the number of liquidations in the cryptocurrency market reached nearly 140,000, with liquidation amounts close to $400 million, most of which were long positions.
On Friday, in the U.S. stock market, cryptocurrency concept stocks saw widespread declines, with MARA Holdings down over 6%, Riot Platforms down over 5%, and Canaan down 4.79%.
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Nearly 140,000 liquidations
The cryptocurrency, which was originally stable, suddenly experienced a sharp decline in the past few hours, with Bitcoin dropping from a high of $68,756 to $65,644; Ethereum fell from $2,564 to $2,387. Other cryptocurrencies also followed suit. Within 24 hours, Bitcoin's price dropped nearly 4%, and Ethereum fell nearly 5%, with Solana, Dogecoin, BNB, Toncoin, and Ada also experiencing declines.
As of the time of publication, Bitcoin is down over 1.5%, Ethereum down over 2.5%, Solana down over 6%, Dogecoin down over 5%, and Ada down nearly 4%. Coinglass data shows that in the last 24 hours, the number of liquidations in the cryptocurrency market reached nearly 140,000, with a total liquidation amount of $389 million, of which $322 million were long liquidations and $66.78 million were short liquidations.
The news of the U.S. federal government's investigation into cryptocurrency company Tether is one of the main triggers for this wave of declines. (The Wall Street Journal) reported that insiders revealed the U.S. federal government is investigating Tether for possible violations of sanctions and anti-money laundering regulations. The criminal investigation is being led by prosecutors from the Manhattan U.S. Attorney's Office, looking into whether the cryptocurrency was used by third parties to fund illegal activities such as drug trafficking, terrorism, and hacking, or to launder proceeds from these illegal activities. Meanwhile, the U.S. Treasury has been considering sanctions against Tether, stating that Tether's cryptocurrency 'is widely used by individuals and groups sanctioned by the U.S., including Hamas and Russian arms dealers.'
Fairlead Strategies senior analyst Will Tamplin stated: 'Today seems partly to be a news-driven sell-off, as prices were already dropping when the news broke.' Arca's chief investment officer Jeff Dorman stated: 'We won't really know until next week whether this will have a long-term impact on the market, but given that the market has become immune to regulatory 'landmines', I think its long-term impact is minimal.'
A spokesperson for Tether stated in a declaration: 'Although Tether confirms it is unaware of any such investigation into the company, these stories are purely based on ranking speculation. This article also inadvertently obscures the extensive documented dealings Tether has had with law enforcement to combat bad actors attempting to misuse Tether and other cryptocurrencies.' Tether CEO Paolo Ardoino referred to the aforementioned media reports as 'old noise' on the X social media platform.
How significant will the impact be?
Tether and its cryptocurrency USDT (Tether coin) have been increasingly scrutinized by U.S. federal regulators and law enforcement agencies. Unlike more volatile cryptocurrencies, Tether's value is pegged to the U.S. dollar, making it an ideal alternative in regions where U.S. regulators prohibit the use of dollars.
Tether's USDT is designed to be a digital alternative to the U.S. dollar, with a market capitalization of approximately $120 billion. By value, it is the third-largest cryptocurrency and the token with the highest daily trading volume, acting as a substitute for the dollar in markets where traders cannot use traditional currencies.
Hillary Allen, a law professor researching digital assets at a U.S. university, stated in an interview on Thursday: 'I truly believe that Tether is too big to fail for the cryptocurrency industry.'
Tether is still a prominent player in the U.S. debt market. Bloomberg reported in October that this stablecoin issuer is exploring lending a portion of its billions in profits to commodity trading companies, a move that could shake up an industry typically reliant on traditional bank credit. In another push into the commodity market, Tether has also been promoting the use of blockchain technology to create digital tokens representing borate minerals to Turkish government officials, as borate minerals are primarily used in the production of ceramics, detergents, fertilizers, and glass.
John Paul Koning, author of the Moneyness blog, wrote on X: If the U.S. Treasury's Office of Foreign Assets Control adds Tether to its list of specially designated nationals and blocked persons, that 'would be devastating'. Its impact would extend beyond the digital asset market to one of Wall Street's most famous firms: Cantor Fitzgerald LP, which accepted Tether as a client last year to handle nearly $100 billion in U.S. Treasury bonds it claims to own, in support of the value of its stablecoin.
Koning wrote: 'Given that Cantor Fitzgerald will have to stop Tether's billions in Treasury securities, it's hard to imagine how the redemption mechanism will continue to operate, and how the peg will be maintained.'
Bitcoin's upward momentum has cooled.
The Liang Zhonghua team at Haitong Macro recently pointed out that Trump has actively supported the development of Bitcoin and cryptocurrencies in the realm of virtual currency policy. Trump stated at the Bitcoin 2024 conference that he would maintain the current U.S. government's Bitcoin holdings and develop the U.S. into the 'cryptocurrency capital' and 'Bitcoin superpower'. He claimed that the Biden administration's crackdown on cryptocurrencies and Bitcoin is misguided. Harris also encourages cryptocurrency development but is more focused on regulation. Harris emphasized supporting a regulatory framework for cryptocurrencies and other digital assets to protect investors and those holding these assets.
Bitcoin has been classified as the so-called 'Trump Trade'. From June to early October, cryptocurrencies led by Bitcoin saw a nice surge. However, since late October, Bitcoin's upward momentum has cooled. Over the past 7 days, Bitcoin's price has cumulatively dropped nearly 3%.
Due to Republican candidate Trump's lead over Harris in prediction markets, bond yields and the dollar have recently surged. One view is that investors are curbing bets on loose monetary policy. With a relatively tightening financial environment, Bitcoin and U.S. stocks have also experienced volatility, putting the token at risk of its first loss in three years.
Bloomberg noted that Trump embraced the digital asset industry during his campaign, boosting sentiment around cryptocurrencies, but the question is whether the impact of his broader priorities will temper this optimism. Tony Sycamore, a market analyst at IG Australia Pty, stated: 'Certainly, stock sell-offs, a stronger dollar, and rising yields all mean financial conditions are tightening. In extreme cases, cryptocurrencies don't fare well. Some will point out that financial conditions were initially very loose, but the speed of implementation of tightening policies is more important.'
Caroline Mauron, co-founder of digital asset derivatives trading liquidity provider Orbit Markets, stated that if Trump wins, it could lead to higher yields and ultimately 'negatively impact risk assets'. Nonetheless, 'the expectation of regulatory easing from the Trump administration regarding the cryptocurrency industry should still be a more important factor,' she said.
