Tether Peg Hiccups Are Nothing New

The slight de-peg in Tether caused widespread concern Wednesday, but this is not the first time that USDT prices have dipped

article-image

Source: Shutterstock

share

The price of stablecoin Tether (USDT) briefly fell to 97 cents on Thursday, according to data compiled by Blockworks — and as low as $0.938 on the Kraken exchange — raising fears regarding the stability of its peg to the US dollar.

A downtrend in cryptoasset markets — this week spurred by the solvency crisis of FTX and Alameda Research — leads traders to seek safe haven in stablecoins.

The sudden price drop of Tether this morning led put traders on alert. However, during periods of heightened market volatility, temporary price wobbles are not uncommon.

USDT is considered the backbone to the cryptoasset ecosystem, making up almost 9% of the entire digital asset market capitalization. The coin is supposedly backed 1:1 by US dollars and highly liquid assets — which maintains its “peg” to the greenback — although Tether’s track record when it comes to transparency has been criticized in the past.

“During periods of market volatility, the trading price for USDT that is quoted on exchanges may fluctuate,” the company said in a statement. 

In fact, in May, after the implosion of the Terra ecosystem and its UST stablecoin, the price of USDT also dipped. 

“This happens because there is more demand for liquidity than exists on that exchange’s order books and has nothing to do with Tether’s ability to hold its peg nor the value or makeup of its reserves,” the company said. 

Adding that, “industry critics and skeptics alike have done themselves an injustice by remaining uninformed and jumping to conclusions.”

Tether’s price is also reflected in on-chain liquidity, chiefly via the Curve 3Pool on Ethereum — which holds a significant amount of liquidity on the three largest stablecoin assets, DAI, USDC and USDT — where changes to supply and demand can influence the price of Tether.

Early Thursday, Curve’s 3Pool became unbalanced, a sign that some industry participants began shorting Tether.

Loading Tweet..

A higher percentage of USDT in the pool reflects a drop in the relative value of USDT compared to USDC and DAI.

Generally, the ability for large market participants to redeem USDT for dollars makes such de-pegs short lived.

Indeed, chief technology officer of Tether, Paolo Ardoino, tweeted that the company had “processed ~700M redemptions in [the] last 24h. No issues. We keep going,” he said.

The company further confirmed that it had extended no credit towards FTX or Alameda Research — and that its tokens were 100% backed by reserves which exceed the liabilities. 

As of writing, the proportion of USDT in the Curve pool has dropped back to 67%, with about $670 million in liquidity available.

“Trust is built over years, but can be lost in moments. It’s easy to wonder who else could fail if large and trusted players suddenly go under,” Tether said. “Tether will continue to dispel fears and speak to the concerns of the community.”

Since the dip earlier this morning, the price of Tether has rebounded to $1.01.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report cover graphics (1).jpg

Research

Wormhole is a suite of open-source, permissionless protocols used to move assets and queries across blockchains.  Despite being a common misconception, Wormhole is not just a token bridge. Nevertheless, protocols can build token bridges on top of Wormhole by leveraging the cross-chain messaging provided.

article-image

Ether is a commodity just up until the point it is not, or, ether is not a commodity just up until the point it is — whichever you prefer

article-image

The bull-market conference was filled with good feelings but little clarity on where the crypto industry is headed next

article-image

The Friday ruling was issued as a default judgment because Sameer Ramani “appears to have fled the country”

article-image

Bitcoin’s previous record high against the Euro was set in September 2021

article-image

As bitcoin ETFs grow larger and more liquid, due diligence teams at wirehouses and other investment firms are more likely to clear them, Bitwise researcher says

article-image

Sponsored

The TRON DAO team attended ETH Denver, one of the leading events in the blockchain space