Bitcoin's price has tumbled over 30 percent since mid-October, dropping from a record $US126,000 to below $US90,000. This decline coincides with stablecoins like Tether overtaking Bitcoin as the preferred tool for illicit activities such as money laundering. The shift is partly linked to unintended effects from US President Donald Trump's crypto legislation.
Bitcoin, the world's most popular cryptocurrency conceived nearly 18 years ago by the mysterious Satoshi Nakamoto, has long struggled to fulfill its original goals of replacing the global financial system or serving as a stable store of wealth. Recently, it has hit significant turbulence, exacerbated by Trump's 'Genius Act' passed in July, which aimed to shield the crypto sector from regulation but instead boosted alternatives like stablecoins.
Stablecoins, particularly Tether, have emerged as faster and cheaper options for cross-border transfers, evading global banking rules while pegged to the US dollar. Tether's backers claim it is backed by $US135 billion in short-dated US government bonds, making it the 17th largest holder worldwide, ahead of South Korea. This stability has made it attractive for nefarious uses. Research firm Chainalysis reported that $US41 billion in crypto linked to illegal activities was exchanged via stablecoins last year, cutting costs and avoiding scrutiny.
A wide-ranging investigation by The Economist described Tether as 'the financial equivalent of being able to turn up at the airport, open a secret door and go straight on to the plane, without any X-rays, passport inspections, customs controls or intrusive questions,' according to author Oliver Bullough. He added, 'There aren't many other products that are as useful to criminals, and as much of a threat to the financial system, that have been allowed to flourish with so little regulation.'
The Bitcoin rout intensified on October 10, when Trump announced 100 percent tariffs on China, though he reversed it days later. This triggered leveraged positions to unwind, with platforms like Hyperliquid forcing sales. Around 160,000 traders lost holdings, including a single trader dropping $US96.5 million and Andrew Tate losing $US700,000 worth.
Bitcoin's volatility has aligned it closely with the Nasdaq index, reaching an 80 percent correlation recently, positioning it as a high-risk asset rather than a safe haven. Unlike gold, which has practical uses and relative stability, Bitcoin produces no income and faces questions about its future drivers.