The Bitcoin Rally Stands Between Tether’s ‘Investigation’ and the Middle East Crisis

Bitcoin and other major cryptocurrencies have experienced significant price volatility following a controversial report on Tether amid rising tensions in the Middle East.

These events resulted in significant losses for traders holding heavily leveraged positions, with daily liquidity rising to $380 million.

Tether's ban failed to ease the market when looking at cryptocurrencies such as Bitcoin and Altcoins

On October 25, the Wall Street Journal published an article suggesting that the US Attorney's Office was investigating Tether. According to the report, the allegations are that the Tether platform could be used by third parties to carry out illegal activities.

Teaser strongly denied the allegations, calling the article “reckless” and based on “unsubstantiated claims.” Teter emphasized in his official statement that there was no official confirmation from any authority and criticized that the article was based on unverified sources. Tether USDT is the largest stablecoin in the industry, with a market capitalization of around $120 billion.

“At Tether, we regularly and directly communicate with law enforcement officials to help prevent rogue countries, terrorists and criminals from abusing USDt. We know the article is being investigated as false. Based on this, we can confirm that the allegations in the article are unequivocally false,” Tether CEO Paolo Arduino said.

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The news halted Bitcoin's attempt to breach $70,000 — a level it hadn't seen in three months. According to BeenCrypto, the price of Bitcoin has fallen sharply, hitting a daily low of $66,500 before recovering slightly to $66,932 at press time.

Other major digital assets also saw declines. Solana, Ethereum, Avalanche and Binance's BNB each lost more than 4 percent.

Meanwhile, investor confidence took a further hit as escalating Middle East tensions hurt appetite. Israel has announced a direct attack on Iran in response to a recent missile attack, raising concerns that the ongoing war could escalate into a wider regional conflict.

Combined, these factors pushed daily outflows to $380 million, with most of the losses falling on price increases among long traders. Long traders lost $310 million, while short traders saw a loss of $68.19 million.

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According to Coinglass data, altcoins were the most affected, with more than 90 million dollars in liquidation. Bitcoin and Ethereum followed with $65 million and $58 million in outflows.