The Tether drama has entered a decisive new phase, with key market indicators showing a substantial slide in buyer confidence in the so-called “stablecoin.” If this continues, this weakening will have major—and strangely counterintuitive—impacts on the crypto market.

Tether, as we’ve reported, is a ‘stablecoin,’ a cryptocurrency worth exactly $1 because each is supposedly backed by a U.S. dollar in a bank account. But Tether Limited, the organization that issues Tether, has had serious banking issues, because banks have legal concerns about the possible use of Tether in money laundering. This has apparently made it impossible for Tether to conduct a full audit that would prove it has sufficient reserves to back all Tethers, and made it difficult to redeem Tethers for dollars. That, in turn, has fueled speculation that Tether is being ‘printed’ without backing reserves.

Over the weekend, markets seem to have truly begun taking these concerns seriously. The price aggregator at CoinMarketCap shows a shocking 96-cent average Tether price across tracked exchanges at press time, or a 4% discount against Tether’s one-dollar peg. One simple way of interpreting that discount is that traders think there’s a 4% chance the stablecoin could actually collapse to zero.

Simultaneously, the price of bitcoin has surged on exchanges that deal extensively in Tether. Overnight Sunday, bitcoin reached as high as $7,456, nearly $1,000 above the market average, on Bitfinex, the exchange that is most closely tied to Tether. According to analysts at BitMEX Research, that premium reflects pressure created by anxiety about Bitfinex’s own apparent banking problems and a wave of traders selling off their Tether for bitcoin. After pausing fiat deposits briefly, Bitfinex this morning promised that all banking functions will resume tomorrow—but a dollar on Bitfinex is still, apparently, worth less than a dollar in your pocket. And a bitcoin on Bitfinex is still worth more than a bitcoin on an un-Tethered exchange.

Ironically, this flight to bitcoin appears to have fueled a spike in the index price of both bitcoin and other digital assets. But that dynamic will likely be short-lived, and the next stage of Tether’s collapse (if it comes) will be much darker. There are two possible ways it could play out. Regulators or banks, according to BitMEX Research, may decide to freeze Tether’s dollar accounts and initiate a regulated redemption process requiring Tether holders to submit to standard anti-money laundering procedures before they can swap their Tether for dollars. That process could take months, and such a move would immediately push Tether’s price substantially further down.

An alternate scenario would involve not regulators, but a further erosion of market faith in Tether. The current four-percent haircut is the result of speculation and uncertainty that has mounted gradually over months. If Tether doesn’t take steps to improve redemption or verify its bank holdings, we could see something like a classic bank run. An inflection flashpoint could ignite smoldering skepticism into a mass-panic fire sale, as holders of the $2.4 billion worth of Tether scramble to cash out. That could present short-term wins for speculators who risk selling inflated bitcoin on troubled exchanges, and actually manage to get dollars out.

But over the longer term, it would be a major blow for overall faith in crypto markets, and even blockchain technology itself. Because Tether acts as ‘rails’ for many other crypto trades, overall volumes could decline. Further, some of Tether’s harshest critics have accused its issuers of using it to prop up the price of bitcoin. It’s an idea that some experts dismiss, but which might have enough traction to undermine the price of bitcoin itself if Tether keeps sliding.

In short, strap in. It’s gonna be a bumpy ride.