Economists are worried about Tether, a cryptocurrency that might be the industry’s “Black Swan.”
Tether, the world’s third-largest cryptocurrency, has drawn the ire of economists, with some seeing it as a potential financial stability concern.
Senior economists have made a number of alarming claims, claiming that a loss of faith in Tether might be crypto’s “Black Swan.” This is a term used to describe an unforeseen incident that could have a significant influence on the market. New cryptocurrencies may also be affected, with some analysts believing that markets other than digital currencies may suffer as well.
Tether is comparable to Bitcoin in that they both belong to the cryptocurrency category. There is, however, one significant difference.
Tether is a stablecoin as well as a cryptocurrency.
Unlike Bitcoin, stablecoins are linked to real-world assets in order to maintain a consistent value.
The US dollar is an example of a real-world asset.
“These stablecoins are getting more popular,” Boston Fed President Eric Rosengren said.
“A future crisis may easily be caused as cryptocurrencies become a more major sector of the financial world unless we start regulating them and ensuring that what’s being promoted to the general public as a stablecoin truly has a lot more stable stability.”
“Coins that are entirely backed by safe, highly liquid assets offer fewer risks,” according to the US credit rating agency, though regulators may be concerned if the footprint is potentially global or systemic.
“On the other hand, stablecoins that use fractional reserves or use higher-risk asset allocation may have a higher run risk.”
While JPMorgan analysts have previously warned of a “severe liquidity shock to the broader cryptocurrency market” if Tether’s value is eroded.
The majority of cryptocurrencies are volatile, which means their value fluctuates a lot.
In April, the value of Bitcoin, for example, reached an all-time high of about $65,000. It has nearly halved since then.
Tether, which is pegged to the US dollar, should theoretically maintain its value at all times. And that price should be the same as a dollar.
However, this isn’t always the case, which has some investors and economists concerned.
Cryptocurrencies are sometimes known as digital or virtual currencies.
One of the key advantages of digital money is that counterfeiting and double-spending are nearly impossible.
After experiencing massive volatility early this year, Bitcoin has since had a period of stability.
Between Tuesday and Wednesday, the price moved by less than half a percent.
It’s “Brinkwire Summary News” this morning.