Following the attack on the UST stablecoin algorithm dollar peg and its total destruction, can the Tether USDT dollar peg be empowered?
In the early 2000s, one of the most notorious collapses occurred on Wall Street. EnronLovers in the 1990s went bankrupt after their illegal accounting practices were exposed, shareholders lost $74 billion and employees lost billions of dollars in pension benefits.
Since then there have been several more larger collapses, including Leyman Brothers and General Motors. But for now, especially in the crypto market, the depegging of UST and the subsequent drop in Luna can be compared to a drop from $87 to virtually zero in just one week.
The rest of the cryptocurrency market is not particularly encouraging. The Fed is still on its way to raising interest rates and shrinking its massive balance sheet.
Yes, the stock market is going down. The tech-focused Nasdaq is down about 22% in just over three weeks. But at the same time, thanks to the catastrophic collapse of the Terra Luna ecosystem, the combined crypto market cap has lost nearly double this amount.
So what’s the next potential domino? Some say it could be the new algorithmic stablecoin USDD on the Tron blockchain that went live a week ago, while others say it could be the Tether USDT stablecoin that has been in the cloud for quite some time.
The cloud of suspicion surrounding Tether is mostly backing It consists of cash equivalents, short-term deposits, and commercial papers.
So when the USDT stablecoin left the peg earlier today and fell to around 94 cents (according to Coinbase), there was a lot of concern across the crypto space.
In defending Tether, the company’s CTO, Paolo Ardoino, tweeted that Tether has reduced its exposure to commercial paper over the past six months and has bought more U.S. Treasury bonds, which it claims is the majority of Tether’s holdings.
Nevertheless, some traders have decided to sell USDT and exchange it for the relatively perceived safety of USDC and other stablecoins. USDC surged 0.2 above the peg as it received additional liquidity from USDT.
At the time of reporting, USDT appears to have returned to the peg, and although it has left a few times in the past, it has always been able to get it back. Worry over?
Disclaimer: This article is provided for informational purposes only. It is not given or used as legal, tax, investment, financial or other advice.