Tether Briefly Loses Its Peg Amidst Market Panic But Recovers

Tether Briefly Loses Its Peg Amidst Market Panic But Recovers

Created 1yr ago, last updated 1yr ago

Another stablecoin was under attack during the Asian trading sessions, as Tether briefly dipped below $0.95.

Tether Briefly Loses Its Peg Amidst Market Panic But Recovers
With crypto markets on a knife's edge, Tether (USDT) was the next stablecoin to come under attack.

During Asian daytime trading hours, the biggest stablecoin on the market saw a significant dip. Its price spiked down to $0.95, a 5% discount on the dollar in what is usually seen as one of the market's go-to safe-havens.

USDT has mostly recovered since but continues to trade below its peg at $0.99.

Traders also rushed for the exit door in the Curve 3pool, the biggest decentralized stablecoin liquidity pool on the market. The liquidity pool continues to be markedly overweight Tether, with 85% of the DAI-USDC-USDT liquidity in Tether. This indicates, traders are happy to swap their USDT for DAI or USDC, even if they have to pay a slight premium for usually equal stablecoins.

Although Tether is not an algorithmic stablecoin like TerraUSD, it has repeatedly been criticized for not being transparent enough with the collateral backing its USDT in circulation. According to the company's reserves, 83.74% of Tether's backing is in cash and cash equivalents, but only 6.36% in cash and bank deposits.

Paolo Ardoino, CTO of Tether, chipped in during the market panic and assured market participants that Tether is honoring its commitments without any issues:

According to Cointelegraph, Adroino maintained that Tether is completely different from UST and has never refused redemptions of its stablecoin. Ardoino said that Tether holds "a strong, conservative and liquid portfolio that consists of cash & cash equivalents, such as short-term treasury bills, money market funds and commercial paper holdings from A-2 and above rated issuers.”

The market panic caused unusual arbitrage opportunities on different crypto exchanges. During the brief de-peg, traders were able to buy USDT on several exchanges below its peg and sell it on Bitfinex, where Tether continued to trade close to $1.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
20 people liked this article