As the crypto market is hit between Terra and the UST crash, Tether, the third-largest cryptocurrency and one of the world’s most responsible stablecoins, has sparked fear among investors due to its price drop of 5%.
The global cryptocurrency market is under extreme consolidation for a week now, with total market capitalization dropping to $1.20 trillion after a downfall of 15.75% in the past 24hrs.
For now, Tether (USDT) has plunged 1.57% in the past 24 hours to $0.9843, the lowest level since the 2017 crypto crash.
This price action is highly unusual as the Tether (USDT) is required to maintain its peg of 1:1 against the US dollar. After TerraUDS (UST) crashed losing its dollar peg, the investors have become too cautious about de-pegging of tokens.
Reason for the USDT de-peg?
USDT is one of the stablecoins that traders sell for dollars to reduce their exposure to the crypto market. In the current crypto market, investors are withdrawing their positions from the crypto market.
It’s just not USDT, traders have also leaned towards Binance USD (BUSD) and USD Coin (USDC) suggesting a backup for USDT. Now, in the past 24hrs BUSD and USDC have surged by 1.10% and 0.63% respectively.
As investors began to turn away from USDT, founder Paolo Ardoino claimed that the token had seen $300 million USD redemptions in the past 24 hours and that had happened without a single drop. of price.
Bitfinex Inability To Back USDT, The Reason For Depegging
The exchange that operated USDT, Bitfinex, has now stated that it is backing the USDT value with a massive reserve pool. According to Bitfinex data, nearly 84% of this pool is formed by cash and cash equivalents.
However, the organization is doomed for not being transparent about its reserves and this pulldown could have happened due to Bitfinex’s uncertainty of not effectively backing the token.
The investors faith in stablecoins has definitely given a second thought due to USDT’s depegging. But many are still optimistic with stablecoins.
