Tether Freezes FTX USDT as Dollar Peg Wobbles
Tether froze USDT belonging to FTX as speculation spread over whether its sister organization was shorting the stablecoin
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Crypto markets are stressed from the ongoing FTX scandal, causing the dollar peg of top stablecoin tether (USDT) to wobble on major platforms, including Binance.
And just as USDT regained footing after falling as low as $0.9381 on Kraken, Tether moved to freeze $46 million USDT held by FTX following a request from law enforcement.
The move comes one day after the U.S. Securities and Exchange Commission and Justice Department began investigating FTX over its liquidity crisis.
FTX’s frozen USDT exists on the Tron blockchain, which handles more than half of all USDT in existence. The move was first reported by CoinDesk.
Tether regularly freezes USDT and blacklists addresses for various reasons, including on request from law enforcement following hacks and other illicit activities.
While traders and other market watchers eyed tether’s peg carefully, Justin Sun, Tron’s controversial founder, said his team were supposedly “working around the clock to avert further deterioration” of the crypto market.
Like other stablecoins, tether’s peg is not exactly constant. It shifts up and down — usually very slightly — depending on the liquidity of its markets. If traders en masse sell their USDT for another asset, say when there’s been a big dip in the price of bitcoin, tethers can temporarily fall below their intended dollar value.
And so, part of Sun’s supposed plan hinged on the so-called TRON DAO Reserve. He pledged to first purchase $1 billion worth of USDT followed by an additional $300 million USDT on the open market. The reason being to “safeguard the overall blockchain industry and crypto market.”
It’s unclear whether any of those buys actually happened, but USDT has now reclaimed its peg on major markets. The stablecoin’s market dominance, which measures its size compared to the entire digital asset space, has also shot up in recent days.
Meanwhile, speculation ran rampant that Alameda Research may be shorting USDT via decentralized finance protocols Aave and Curve.
Blockworks has reached out to analytics units to confirm whether that’s the case, while embattled FTX CEO Sam Bankman-Fried this morning effectively denied that he’s involved in the shorts on Twitter.
Nevertheless, Paolo Ardoino, Tether chief technology officer, tweeted that there are “no issues” and that “we keep going.”
Ardoino said Tether has processed $700 million in USDT redemptions for cash over the past 24 hours — a disclosure no doubt aimed at shoring up market confidence in the stablecoin’s dollar-value moving forward.
David Canellis contributed reporting.
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