There are many techniques price analysts use to try and predict which way the BTC price will go, but one metric that is largely overlooked, but has been spot on in the past should be alerting investors and traders alike.
Market cap valuation in USDT Tether has been highly reflective of BTC price movements, and we have seen immediate spikes in its market cap has coincided with short-term bull runs.
What Price Analysis Can We Really Trust?
Traditional market analysis is all too often wrong. Of course they shout from the rooftops when they’re right, but the truth is many different techniques regularly contradict others, so what should we trust? I’m not saying market analysis is useless, but it is wrong too often.
Many look to things like Google searches to try and match price action, but the fact is it doesn’t correlate accurately with actual market movement. Sure, there was a huge increase in Google searches for ‘Bitcoin’ in 2017, but it’s been relatively flat ever since.
From the bottom in 2018 to the top in 2019 Bitcoin did a 345% price increase without a big uptick in Google searches, and the rise in searches this year has been minimal, even though the price has more than doubled since crashing in March.
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USDT Gives Us The Most Predictable Market Metric for BTC
Probably the most important metric, which many overlook is Tether. Many in the crypto space like to dismiss the idea of Tether, claiming it’s a scam and that they’re just printing USDT without any backing.
Whether that’s true, I don’t know, but the fact is it is now the fourth biggest crypto asset with more than $8 billion market cap, and it will soon dislodge Ripple (XRP) and move into the number three slot.
How Does Tether Affect the BTC Price?
USDT Tether is a hedge against the volatility of BTC, and allows traders remain in the space, waiting on the sidelines as it were. But Tether isn’t an investment, and it won’t be a hodl for anyone long term.
And the USDT market cap movement reflects that of the BTC macro chart, but what’s even more compelling is that when there is an immediate price spike in the Tether market cap BTC usually reacts afterwards.
The idea was introduced to me by Crypto Daily, and it is pretty cogent. If we look at Tether’s history year to date, we can see how the spikes preceded a big run up in BTC’s price.
You can see on the chart above the spike in the market cap of Tether, back on March 31. Within the space of just a few hours the Tether market cap rose from $4.64B to $6.15B. That’s big money entering the space, or more printing some might argue.
Either way, the price of BTC has risen more than 50% since the start of April. No doubt the price had started to rise before Tether’s spike, but this is no coincidence.
Back on January 5, there was another injection of Tether into the USDT economy. This time it was about 10% of the total market carp, and that also coincided with a BTC run. Again, the bull run was already in motion, but it run from about $7,300 on that day, up to over $10,300 by February 13.
On May 14, there was yet another spike in the Tether market cap. This time a 40% pump has seen the USDT market cap shoot up from $6.35B to $8.7B.
What would a 40% ingest of Tether do to the BTC price? Well, it’s impossible to determine, but if 10% more USDT spiked the price about 30% before the coronavirus crash, and then a 30% injection coincided with a +50% rise in BTC, we can assume a 40% rise could at least match that.
That would take us to around $15,000 for a BTC by the end of June.
While there can be no accurate price analysis, USDT does give us another angle to look at possible price movement.
Nobody foresaw the crash in March, and something like that could happen again while coronavirus lingers over us, but the spike in Tether has coincided with two short-term bullruns this year, and if it’s right again, it could take us to around $15,000.
Author: Tommy Limpitlaw
A Bitcoiner since 2017 and a Bitcoin Maximalist since 2018, Tommy is our main writer and editor at Bitcoin Maximalist. Other than researching and writing about Bitcoin, Tommy loves spending time with his family and supporting his beloved Leeds United.