Author: Paul Vigna
Sudden flood of digital coins spooked market and drove down price of bitcoin by about 12%
Investors got a reminder this weekend that the market infrastructure for trading cryptocurrency is still under construction.
On Saturday, the company behind Tether mistakenly created more than $5 billion worth of the digital coins in an instant—more than doubling the amount in circulation. The sudden flood spooked the market and drove down the price of bitcoin, the most actively traded cryptocurrency, by about 12%.
Tether is designed to operate digitally like bitcoin but is pegged to the U.S. dollar so the price doesn’t fluctuate wildly. There is currently about $3.9 billion of Tether in circulation. About 60% of all bitcoin trading is done with Tether.
The error shows how easy it is to muck up the cryptocurrency market, a decade after bitcoin’s birth. It is the latest black mark for Tether Ltd., the company behind Tether. In April, the New York attorney general said the company used Tether’s dollar reserves to cover up $850 million in missing funds.
Saturday’s problem came about because cryptocurrency exchange Poloniex needed to move $50 million worth of Tether from a blockchain network called Omni to another called Tron.
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