USDT-backed cryptocurrency might be in the market bubble. As the price of USDT continues to rise, other currencies are slowly losing their value against it. This has some people worried that tether may not actually hold dollars as promised
The Tether team is now looking into ways to strengthen its platform in order to prevent damage from such fluctuations
Following the depegging of Terra (LUNA) ecosystem’s stablecoin UST, cryptocurrency markets have continued to suffer significant losses, generating inconsistencies between stablecoin pegs and the value of Bitcoin (BTC).
Tether (USDT), a stablecoin, exhibited symptoms of stress when USDT/USD traded below Stablecoin Tether (USDT) showed signs of stress as USDT/USD traded under $0.99 on major exchanges. Tether and Bitfinex CTO Paulo Ordoino took to Twitter to assure USDT holders that over 300 million UDST tokens had been redeemed at their $1 peg over the past 24 hours..99 on key platforms. Paulo Ordoino, CTO of Tether and Bitfinex, came to Twitter to reassure USDT holders that over 300 million UDST tokens have been redeemed at their $1 peg in the previous 24 hours.
GM Reminder that tether is honouring USDt redemptions at 1$ via https://t.co/fB12xESSvB . >300M redeemed in last 24h without a sweat drop.
May 12, 2022 — Paolo Ardoino (@paoloardoino)
In light of recent occurrences, Cointelegraph reached out to Tether CTO Paolo Ardoino to see whether there is reason to be concerned about USDT’s capacity to retain its $1 peg. Ardoino emphasized that the USDT has never denied redemptions despite many black swan occurrences and very turbulent market circumstances.
“Despite some predicted market panic after yesterday’s market, Tether continues to process redemptions properly.” Despite this, Tether has never refused redemptions to any of its clients and will not do so in the future.”
Given the technological disparities between USDT and algorithmic stablecoins, Ardoino gave perspective with anxiety, worry, and doubt at levels reminiscent of the 2018 Bitcoin market crash:
“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 current LUNA/UST scenario may have harmed trust in stablecoins and platforms’ capacity to fulfill token swaps for their $1 peg. Despite this, Ardoino thinks stablecoins will remain an important gear in the cryptocurrency wheel. “I do not think that centralized stablecoin consumers’ confidence was ever lost,” he stated, adding, “There will always be a market for stablecoins as they provide traders with an option to connect with the greater crypto ecosystem.”
The pair USDT/USD TradingView (source)
The price of BTC/USDT was also out of whack when compared to other famous stablecoins, with the difference in value ranging from $500 to $1,000 across multiple platforms.
Bitcoin drops below $27,000 to December 2020 lows when the Tether stablecoin peg goes below 99 cents.
The market has been rocked by the collapse of Terra’s LUNA and its algorithmic stablecoin Terra USD. Users could swap one dollar of LUNA for one dollar of UST, and vice versa.
When the price of UST went below $1, the system collapsed, resulting in enormous arbitrage trading, with traders burning UST for $1 worth of Luna, which was then sold for a profit. The continuing sale of Luna, however, caused its value to plunge, eliminating the arbitrage opportunity and increasing the quantity of Luna in circulation as the price continued to fall.
The rest, as they say, is history, with Terra’s top brass now attempting to salvage a hopeless position. The Bitcoin Fear and Greed indicator is now in the Extreme Fear area, indicating that investor sentiment has plummeted.
Stablecoins have long been a source of stability for cryptocurrency markets throughout the globe, but the rocky ride of 2022, along with the LUNA/UST fiasco, has had a rippling effect on other notable dollar-pegged coins.
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