Bloomberg — Tether, the largest stablecoin used in cryptocurrency markets to facilitate trading, briefly fell to its lowest level since December 2020 as fallout from the TerraUSD token crash continues to reverberate across the equity landscape. digital assets.
The price slipped as low as $94.55 cents from its intended 1-to-1 peg to the dollar on Thursday morning in London, before recovering to just above 98 cents, data compiled by Bloomberg. Paolo Ardoino, chief technology officer of tether, said in a tweet that investors can continue to redeem the tokens at a value of one to one with the dollar through his platform.
With a market value of about $84 billion, Tether is an essential gear for the set of crypto operations taking place in the market at any given time. Investors turn to stablecoins as a way to preserve value without leaving the digital asset ecosystem, acting as a safe haven against volatile currencies or even simply as a means of digital payment. It is the most traded cryptocurrency by far, with more than double the volume of second-place bitcoin in the last 24 hours at $178 billion.
Tether’s price crash came as a cryptocurrency sell-off wiped out more than $200 billion in value from the market in 24 hours. Tether works differently than TerraUSD, or UST, which was designed to use a complex combination of code, trader incentives, and trades with its sister token Luna to maintain its peg. Its drop highlights the general risk-averse mood that is sweeping through cryptocurrency markets, according to analysts.
“Tether’s untying seems more driven by market sentiment than actual concern about its reserves, which shows how important centralized markets are in maintaining the parity of a stable currencyClara Medalie, director of research at Kaiko, said in an email.
Ardoino appeared to try to allay any concerns about the stability of tether, saying in his tweet that he had redeemed more than $300 million worth of tokens in the last 24 hours “without breaking a sweat.”
As of Thursday morning in London, the broader stablecoin market had experienced bouts of volatility but largely avoided the same dramatic crash as Terra’s UST. Other major tokens, such as Circle Internet Financial Ltd.’s USDC, Binance Holdings Ltd.’s Binance USD and Maker’s DAI, were trading at their benchmark levels on Thursday, according to price data from CoinGecko.
“There may be some contagion to other stablecoins after UST, however Tether continues to honor the 1:1 redemption ratio on its platform.Fadi Aboualfa, head of research at crypto custodian Copper, said in an email. “Anyone who was around 2017-2019 and saw massive drops in tether, and it was really an opportunity to buy at a discount.”
Tether’s pricing activity hasn’t been limited to just traders who want to trade it directly for fiat currency, either.
Data from Dune Analytics, which tracks the distribution of forex reserves in a pool where traders can trade one stablecoin for another, showed a sharp increase in tether’s share of the total liquidity pool on Thursday. . On May 7, tether USDT made up 42.6% of the total reserves in the Curve 3pool, a figure that rose to 92.6% by mid-morning Thursday. Tether’s value against that pool’s other stablecoins, DAI and USDC, has fallen as a result.
“I think that given the situation with the UST and the volatility of the market, retail traders are motivated to exchange their stablecoins for real dollars, and the imbalance in the Curve pool is the result of that fluctuating demand rather than a full bank runsaid Andrew Thurman, who is in charge of content at blockchain data firm Nansen.
“Quite a few people lack confidence in all stablecoins right now. I wouldn’t be surprised if many USDT holders saw what happened to Terra and are now switching to cheap Bitcoin,” said Mati Greenspan, founder of crypto research outfit Quantum Economics.
More than $1.8 billion worth of tether was withdrawn from the market between Wednesday and Thursday as the market value of tether fell to $82.2 billion from 84.2 billionaccording to data from CoinGecko.