- Tether suffered its biggest drop in a year as the stablecoin broke its peg and plunged to $0.945.
- The crypto market panicked on Thursday after the stablecoin TerraUSD reached as low as $0.30 and its sister token, Luna, plunged 98%.
- Tether is the largest stablecoin in the world and widely used by cryptocurrency traders. This means that a loss of trust can cause a shock wave.
Tether, the world’s largest stablecoin, fell to $0.94 on Thursday as fears spread across the cryptocurrency market after the sharp plunge in TerraUSD and the Luna token.
The stablecoin fell to $0.9455 on Thursday morning and then rebounded to $0.983 as of 4:48 a.m. ET.
This is Tether’s sharpest decline since March 2021, with a market cap of around $80 billion, raising concerns about an asset critical to the functioning of the crypto market.
The second-largest stablecoin, the USD coin, held on to $1 on Wednesday.
stablecoin A cryptocurrency that should always be worth $1. They are widely used by crypto traders as a stable and less volatile place to store their cash.
However, on Wednesday, the third-largest stablecoin, TerraUSD, plunged to $0.30, causing shudders across the cryptocurrency market.
The free float, TerraUSD’s sister cryptocurrency, luna, has plummeted about 98% in the past two days.
“In the past, investors preferred to deposit their funds in a stable currency,” said Alex Kuptsikevich, senior market analyst at trading platform FxPro.
“The entire crypto market is collapsing like a house of cards,” Kuptsikevich said, with Bitcoin dropping about 10% and Ethereum and Binance Coin about 19%.
Tether is a stablecoin backed by liquid assets, and you should be able to hold on to $1 at all times.
However, critics long question Whether the stablecoin has enough assets to handle large withdrawals from investors.
Analysts have said that implementation on Tether could be catastrophic for the crypto sector, given the importance of the transaction. The mass sale of Tether’s liquid assets, including corporate bonds, could cause problems in other markets as well.
Tether’s management revealed in October that “all Tether tokens are fully backed.”
Tether’s chief technology officer, Paolo Ardoino, said the token celebrates the redemption of $1 per token and that $300 million has been redeemed “without a sweat” in the last 24 hours.