The Tether Saga, illustrated timeline

Summary of every occasion tethers (USDT) deviated considerably from the US dollar since 2017. Also valuable as a timeline of every major bitcoin market event.

Summary

USDT generally trades at a discount to USD when traders perceive Tether/Bitfinex are having issues potentially affecting their solvency and/or the USDT liquidity (i.e. banking issues, see here). During tether driven panics, bitcoin prices twice crashed, and twice spiked.

USDT generally trades at a premium to USD when bitcoin prices are crashing due to factors not related to tether (or during times of peak bitcoin euphoria, as shown by what transpired during December 2017).

Bitfinex is a fiat exchange. Given its position as tethers’ gateway, usually when USDT trades at a premium over USD, Bitfinex trades as a fiat-tether hybrid exchange (e.g. BTCUSD Coinbase > BTCUSD Bitfinex > BTCUSDT Binance). In parallel, when USDT trades at a discount over USD, Bitfinex trades as a tether exchange (e.g. BTCUSD Coinbase < BTCUSD Bitfinex = BTCUSDT Binance).

Timeline

(Note: “equal to” symbols indicate “approximately equal to”)

#1: Apr/14/17 to May/24/17: Bitfinex banking issues

• USDT < USD
• Max spread -11%.
• BTCUSD Bitfinex = BTCUSDT Poloniex
• BTCUSD Bitfinex > BTCUSD Coinbase

Bitfinex-Wells Fargo problems become public on Apr/6/2017 and pick steam progressively in the following ten days. Problems with international wires to Bitfinex’s Taiwanese bank start on Apr/18/17. Bitfinex communicates actively regarding the matter (see here, here, and here)

This series of events coincides precisely with a bitcoin bull run. BTCUSD popped 6% on Apr/6, then went on an uninterrupted 126% upwards move from Apr/14 to precisely May/25, when it begins a three day crash.

Bullish events behind such run were Japan recognizing bitcoin as a legal payment option (Apr/1), and talks about Russia looking to recognize and regulate bitcoin (Apr/10).

This is for some a controversial time in the history of Tether, given how tethers in circulation increased sharply even while Tether was having banking issues, and how precisely the bull run coincides with Tether’s banking problems. However, having banking problems is not the same as being unbanked. Furthermore, even though one can theorize tethers were printed without dollar backing to buy bitcoin and pump bitcoin (as many do), one can equally theorize USDT issuance responded to increased demand driven by the bitcoin bull run, and in the absence of banking problems, USDT issuance would have been even greater, while USDT would have traded at a premium rather than at a discount.

#2: May/25/17 to Jun/8/17: bitcoin crash

• USDT > USD
• Max spread +7%
• BTCUSD Bitfinex > BTCUSDT Poloniex (May/25-May/28)
• BTCUSD Bitfinex < BTCUSD Coinbase

Bitcoin prices crash on May/25, for a 33% three day correction, then the upwards move continues raging on.

#3: Jun/13/17 to Jun/16/17: bitcoin crash

• USDT > USD
• Max spread +7%
• BTCUSD Bitfinex > BTCUSDT Bittrex (not so Poloniex)
• BTCUSD Bitfinex < BTCUSD Coinbase

Bitcoin prices crash on 32% between Jun/12 and Jun/15. Bitmain announced the bitcoin cash hard fork on Jun/14.

#4: Sep/1/17 to Sep/18/17: China ban triggers bitcoin crash

• USDT > USD
• Max spread +7%
• BTCUSD Bitfinex > BTCUSDT Poloniex
• BTCUSD Bitfinex < BTCUSD Coinbase

China announces ICO ban on Sep/4 and exchange ban on Sep/14. Bitcoin prices crashed. Chinese funds flow into USDT.

#5: Nov/20/17 to Nov/21/17: Tether hack

• USDT < USD
• Max spread -10%
• BTCUSD Bitfinex = BTCUSDT Poloniex
• BTCUSD Bitfinex = BTCUSD Coinbase

Tether got hacked and USDT 31 million got moved from the Tether treasury wallet to an unauthorized address. The event hit the news the day after, on Nov/20. Bitcoin prices crashed and quickly recovered.

#6: December 2017: peak bitcoin bubble

• USDT > USD
• Max spread +8%
• BTCUSD Bitfinex > BTCUSDT Poloniex
• BTCUSD Bitfinex < BTCUSD Coinbase

#7: Jan/16/18 to Jan/19/18: Korea considering closing exchanges

(Note: using Binance hereon as it surpassed Poloniex in volume)

• USDT > USD
• Max spread +8%
• BTCUSD Bitfinex > BTCUSDT Binance
• BTCUSD Bitfinex < BTCUSD Coinbase

South Korean authorities said shutting down crypto exchanges under consideration. Bitcoin prices crashed.

#8: Jan/28/18 to Feb/6/18: CFTC subpoena

• USDT < USD
• Max spread -6%
• BTCUSD Bitfinex = BTCUSDT Binance
• BTCUSD Bitfinex > BTCUSD Coinbase

CFTC sent subpoenas to Tether & Bitfinex in December 2017, which mas made known to the public by the media on Jan/30. Bitcoin prices crashed.

#9: Sep/30/18 to Present (Oct/23/18): Bitfinex banking issues & Stable Coin Wars

• USDT < USD
• Max spread -15%
• BTCUSD Bitfinex = BTCUSDT Binance
• BTCUSD Bitfinex > BTCUSD Coinbase

Tether experienced banking issues right after the debut of a series of competing stable coins. Bitcoin prices spiked. Covered in detail here.

Other important bitcoin events where the USDTUSD spread did not deviate considerably:

• Jul/17/17: Miners signal SegWit support, ending a 34 day 41% pullback, and starting the next bull run.
• Aug/1/17: Bitcoin cash hard forks.
• Nov/8/17: SegWit2x backers withdraw hard fork support.
• Nov/31/17: CME announces bitcoin futures.
• Jan/27/18: Tether confirms relationship with auditor dissolved.
• Mar/7/18: SEC publishes statement on potentially unlawful exchanges, triggers second wave of the bear market.
• Apr/12/18: Bitcoin prices break upwards, +16.5% in 45 minutes.
• Aug/7/18: SEC delays decision on Van Eck ETF.
• Aug/22/18: Bitmex maintenance pump.
• Sep/5/18: Bitcoin prices crash.

Other important bitcoin events for which USDTUSD data not readily available

(Note: not readily available as USDTUSD started trading on Kraken on Mar/29/17, and before then one needs to look at a synthetic USDTUSD by looking at spreads with Poloniex or Bittrex)

• Feb/9/17: Chinese exchanges block withdrawals.
• Mar/10/17: SEC rejects Winklevoss ETF.

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