The world’s largest and most controversial stablecoin, Tether (USDT), showed signs of stress as USDT/USD traded under $0.99 on major exchanges. With a massive scare in the market as a result of the depegging of UST, the programmable stablecoin of the Terra blockchain, Tether and Bitfinex CTO, Paulo Ardoino took to Twitter to assure USDT holders, explaining that over 300 million USDT tokens had been redeemed at their $1 peg over the past 24 hours.
The cryptocurrency market continues to suffer major losses following the depegging of Terra (LUNA) ecosystem’s stablecoin UST, causing discrepancies between stablecoin pegs and the value of Bitcoin (BTC). Because of this, Bitcoin has traded as low as $26,350.49, as panic selling becomes the order of the day.
Although USDT snapped to 97 cents in Asian hours, losing its parity with U.S. dollars at writing time, it slumped to as low as 96 cents on Coinbase. Ardoino stressed that USDT has maintained its stability through multiple black swan events and highly volatile market conditions and has never refused redemptions.
What you should know
- Traders sold USDT for U.S. dollars amid poor sentiment for stablecoins in crypto communities. This was due to the shock occurrence on the Terra blockchain, its native token and programmable stablecoin.
- Ardoino stated, “Tether continues to process redemptions normally amid some expected market panic following yesterday’s market. In spite of that, Tether has not and will not refuse redemptions to any of its customers, which has always been its practice.”
- With FUD (fear, uncertainty and doubt) at levels reminiscent of the 2018 Bitcoin market crash, Ardoino offered perspective given the technical differences between USDT and algorithmic stablecoins.
- He explained, “Unlike these algorithmic stablecoins, 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 ongoing LUNA/UST situation may well have dented confidence in stablecoins and respective platforms’ ability to redeem token swaps for their $1 peg.
- Despite that fact, Ardoino believes that stablecoins will continue to be a vital cog in the cryptocurrency space. He added, “I do not believe that trust was ever lost for centralized stablecoin users. There will always be a market for stablecoins as they present an opportunity for traders to interact with the larger crypto ecosystem.”
- The price of BTC/USDT was also out of sorts in comparison to other notable stablecoins – with the difference in value compared to other stablecoin trading pairs ranging between $500-$1000 across different exchanges.
- The collapse of Terra’s LUNA and its algorithmic stablecoin Terra USD has sent shockwaves through the markets. The relationship between the two was fairly straightforward, users could exchange 1 dollar worth of LUNA for 1 UST or vice versa.
Stablecoins have long been a source of stability for cryptocurrency markets around the world but 2022’s bumpy ride coupled with the LUNA/UST debacle has had a ripple effect on other prominent dollar-pegged coins. Waves’ USDN showed signs of weakness in the early hours of the Asian session.