Based on historical data, we see a correlation that whenever there is a FUD rumor about stablecoins, there is a tendency to mark the local bottom of Bitcoin at that time. This suggests that in the crypto market, FUD on stablecoins can have a negative impact on investor sentiment and lead to a drop in the price of Bitcoin.
The crypto market, especially the stablecoin segment, is often rife with unfounded FUD rumors. These news often negatively affect investor sentiment and lead to panic, causing unnecessary losses. However, one user on Twitter discovered that every time there is a FUD rumor about stablecoins, there is usually a local bottom in Bitcoin at that point.
The graph mentioned by this Twitter user shows that at least three times this correlation occurs. Despite the FUD of stablecoins, their market continues to grow and their capitalization steadily increases, surpassing $129 billion out of $1,110 billion.
1st time, June 2022
Recently, hedge funds have focused on Tether, shorting the stablecoin after Terra/LUNA crashed. Some have compared Tether to Terra and argue that Tether is also facing similar risks. The usual approach is still to spread the information much discussed earlier, like the fact that Tether is not 100% backed by collateral, and that Tether is a creditor of Evergrande… However, the reality is hedge funds simply used Terra’s demise as an excuse to create FUD for this stablecoin for the purpose of shorting USDT. And they failed in this.
What we are interested in here is that the price of Bitcoin recorded a decline that week and went down to the local price zone around $18,500. Fortunately, historical data shows that the Bitcoin price recovered and returned to the $25,000 price zone after a few weeks.
Second time, November 2022
Once again, Tether is facing the next FUD. Tracking platform Lunar Crush has recorded a 6-month high FUD for Tether. As usual, the Bitcoin price once again took a hit and hit a bottom.
This time, the Bitcoin price has dropped to the $15,000 region, the lowest this season. Presumably, the combination with Terra’s demise was the main cause of such a drastic drop in price. The sell-off is widespread, investors are more worried and fleeing than interested in on-chain indicators or technical analysis. However, the price recovered impressively after that, back to the $25,000 region as if nothing had happened.
3rd time, March 2023
This time, FUD poured into stablecoin USDC. With the chaos in the banking industry in the US, USDC was “stuck” more than $3.3 billion in Silicon Valley Bank, resulting in a drop of more than $6 billion in capitalization. It was expected that USDC would face a major drawdown following this incident, but fortunately Coinbase borrowed $3.3 billion from Circle to restore the value of USDC and all was back to normal.
Reacting to this news, the price of Bitcoin dropped slightly from the high of $25,000 and confirmed a local bottom in the $22,500 region. The price remained at this level for several days before continuing to rise and establishing a new local top.
Recently, Tether once again encountered FUD. The media is focusing on and investigating Tether’s past failures. The veracity of these matters aside, based on historical data, we can consider whether this is the fourth time that the current Bitcoin price is at a local bottom.