In the opinion of JPMorgan analysts, “sudden loss of trust” in Tether (USDT) stablecoin could pose a serious risk to Bitcoin.
The biggest cause of the risk against USDT is due to the fact that Bitcoin trading is carried out through USDT.
Led by Joyce Chang, head of global market research, JPMorgan analysts also mentioned USDT in an 86-page general report published on Thursday, and stated that USDT could significantly affect the Bitcoin (BTC) price in the event of any adverse event.
According to analysts:
“Loss of trust in USDT can cause a significant liquidity problem in BTC markets, and in this case, it may cause a decrease in demand and a serious price loss in BTC.”
According to the report received by NYDIG asset management, JPMorgan analysts show that approximately 50-60 percent of BTC trading has been done with USDT since 2019.
USDT is fixed at a 1: 1 ratio to the US dollar. But USDT poses a major risk to Bitcoin, as USDT is not subject to the same strict controls and governance as traditional commercial banks and “has no insurance like deposit insurance”, analysts say.
Queue Risk Factor
Analysts describe this risk as a “tail risk”. Queue risk is the possibility of an unexpected event occurring and causing a significant loss of value to an asset. The risk factor is a portfolio risk that arises when the normal distribution risk of an investment moves more than the mean and standard deviation.
Also, analysts aren’t sure whether crypto assets can provide diversity benefits against assets like stocks.