Tether and bitcoin have always had an interesting relationship. Tether’s growing market cap could be a precursor to bitcoin’s next rally. | Image: shutterstock.com
- It’s common knowledge in the cryptocurrency world that bitcoin dictates the trend.
- New information suggests that bitcoin might be following the lead of a stablecoin.
- The correlation between BTC and USDT has been growing over the last 18 months and it shows no signs of slowing down.
In the cryptocurrency world, it’s no secret that almost every coin follows bitcoin’s lead. Wherever the top cryptocurrency goes, nearly all coins follow. I found it surprising that a stablecoin, Tether (USDT), may be dragging the king of cryptocurrencies out of bear territory.
Charles Edwards, head of digital investment firm Capriole, spotted an interesting correlation developing between Tether and bitcoin. It seems that in the last year and a half, the top cryptocurrency is following the lead of the stablecoin’s market cap.
Big Changes in Tether’s Market Cap Appear to Have a Significant Impact on Bitcoin’s Price
The correlation between the market cap of Tether and bitcoin has been in a strong uptrend. It bottomed out in July 2018. Since then, the correlation between the two digital assets has been in a steep rise.
Bitcoin and Tether are beginning to move as a tandem. | Source: CoinMetrics
Charles Edwards noticed that bitcoin started following Tether’s lead in July 2018. A significant drop in the market cap of Tether preceded a bitcoin correction. This happened again in November 2018 when Tether’s market cap plunged from $2.6 billion to $1.6 billion. Bitcoin followed Tether’s lead as it broke $6,000 support and nosedived all the way down to the $3,000 range.
Bitcoin and Tether moving together since July 2018, | Source: Twitter
Based on Edwards’ chart, Tether’s sharp rise in May 2019 foreshadowed bitcoin’s monumental rally from $3,000 to $14,000. Today, we are seeing a significant growth in the stablecoin’s market cap. If bitcoin’s recent price action is any indication, then we might see the top cryptocurrency follow USDT’s lead once again.
USDT’s Ascent Predates Bitcoin’s Bottom
The correlation between the two digital assets takes an interesting turn. According to Edwards, Tether’s market cap started to surge on December 16, 2019. Two days later, bitcoin bottomed out at $6,430.
Tether is shaping to be a reliable indicator of bitcoin’s price action. | Source: Twitter
While the relationship between the two coins look compelling, it’s important to note that correlation is not equivalent to causation. An uptick in the market cap of Tether doesn’t guarantee that bitcoin will follow suit.
Nevertheless, the correlation between USDT and BTC appears to be relatively strong. If this relationship holds true, then strap in. Bitcoin might be on the verge of pulling off one of those jaw-dropping rallies.
Disclaimer: The above should not be considered trading advice from CCN. The writer owns bitcoin and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading.
This article was edited by Sam Bourgi.
The post appeared first on CCN
