Is Tether’s New York Lawsuit to blame for the crypto market meltdown?

With the announcement of the latest United States Consumer Price Index (CPI), which touched a four-decade high, market pundits have warned of a probable impending recession. Many are blaming the new class-action lawsuit filed in New York on Monday against controversial stablecoin issuer Tether (USDT).

On Monday, the cryptocurrency market reverted to the bearish zone, with the bulk of the biggest cryptocurrencies losing in double digits. Bitcoin (BTC) failed to break through the $50,000 barrier, falling to a daily low of $45,894 and now hovering around $47,000. Ether (ETH) has also dropped to a daily low of $3,680 before regaining its footing above $3,750. Other than these, all significant altcoins, such as XRP, Solana (SOL), and Cardano (ADA), has been bleeding heavily.

The plaintiff claimed fraud in Tether and its subsidiaries iFinex and Bitfinex in a class-action lawsuit filed in the Southern District of New York. The exact details behind the lawsuit are still unknown. This will not be the first class-action lawsuit brought against the stablecoin issuer; it has faced two similar accusations in the past too. 

Tether has been accused of mismanaging its funds and lying about its USDT reserves on numerous occasions. A class-action lawsuit recently called Tether the “largest bubble in human history.” On the other hand, Myanmar’s parallel government this Monday opted for USDT as its official currency.

Tether amid Fed’s meeting news increased fear

Every circulation supply of USDT must be backed by an analogous stable asset, preferably the US Dollar. Tether, on the other hand, has previously been discovered backing its reserves with a variety of assets, including Bitcoin.

Another factor contributing to the fear in the crypto market is the Fed’s upcoming meetings on Wednesday, which will contain discussions on the inflation data. The United States is considering bringing a structured set of regulations for stablecoin issuers, and Japan recently indicated to follow the same steps.

Crypto traders were hoping for a positive fourth quarter after a fantastically green October, but November and December have proven to be negative once again. Crypto analysts, on the other hand, remain optimistic, believing that the bull run will extend to 2022 and that any crypto drop of up to 20% is not a cause for concern.