Cryptocurrencies markets continue 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).
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 $1 peg over the past 24 hours.
GM
— Paolo Ardoino (@paoloardoino) May 12, 2022
Reminder that tether is honouring USDt redemptions at 1$ via https://t.co/fB12xESSvB .
>300M redeemed in last 24h without a sweat drop.
Cointelegraph reached out to the Tether CTO Paolo Ardoino to ascertain if there is cause for concern in USDT’s ability to maintain its $1 peg in light of recent events. Ardoino stressed that USDT has maintained its stability through multiple black swan events and highly volatile market conditions and has never refused redemptions.
“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 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:
“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 the fact, Ardoino believes that stablecoins will continue to be a vital cog in the cryptocurrency space. "I do not believe that trust was ever lost for centralized stablecoin users," he said, adding: "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.
Related: Bitcoin falls below $27K to December 2020 lows as Tether stablecoin peg slips under 99 cents
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.
The system failed when the price of UST fell below its $1 peg, leading to a massive amount of arbitrage trading with traders burning UST for $1 worth of Luna which was then sold for a profit. However, the continued selling of Luna led to its value plummeting, not only canceling out the arbitrage opportunity but increasing the amount of Luna in circulation while the price continued to crash.
The rest is history - with Terra’s top brass now trying to remedy a bleak situation. Investor sentiment has taken a big knock and the Bitcoin Fear and Greed index sits in the Extreme Fear range.
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.
Tether's request for an additional 1 billion USDT signals anticipation of an upcoming bull run. The stablecoin's continuous growth and impact on the cryptocurrency markets, especially in relation to recent suspicious movements, raise questions about potential insider knowledge. Investors remain vigilant as Tether's influence on market dynamics persists.
Cheng YuanTether Treasury has minted an additional 1 billion USDT, significantly expanding its circulating supply on the Ethereum network.
ZoeyTether enhances market stability, minting 1 billion USDT on Ethereum, with CEO Paolo Ardoino ensuring transparency and earmarking funds for future demand.
Hui XinAs of June 30, Tether's consolidated total assets stood at $86.5 billion, with liabilities at $83.2 billion, of which $83.17 billion relates to digital tokens issued.
CaptainXThe increase comes as BUSD issuer Paxos faces increasing regulatory scrutiny.
CoindeskTether has also recently clarified that its cash reserves for issuing USDT to Alameda were not on Alameda's balance sheet.
BeincryptoTether's market capitalization has reversed a three-month downtrend while USDC sees a drop in value after the U.S. imposed sanctions against Tornado Cash.
CointelegraphThe uncertainty around stablecoins had begun with the UST crash and inevitably spilled unto others such as USDT. This uncertainty ...
BitcoinistWhat the central bank directly adjusts is the policy interest rate (such as the interest rate of MLF), which indirectly affects rather than directly determines the market interest rate (such as LPR). It should be avoided to say that the increase or decrease of LPR is "the central bank raises or lowers the benchmark lending rate".
FtftxOne billion USDT will be transferred to the Ethereum blockchain, while another 20 million USDT will go to Avalanche.
Cointelegraph