USDT-dollar peg shakes as markets continue to struggle: Tether CTO takes the weight.


The cryptocurrency market continues to suffer large losses following the defegging of the stablecoin UST in the Terra (LUNA) ecosystem, resulting in a discrepancy between the peg of the stablecoin and the value of Bitcoin (BTC).

The stablecoin Tether (USDT) showed signs of stress as USDT/USD traded below $0.99 on major exchanges. Tether and Bitfinex CTO Paulo Ordoino confirmed via Twitter that over 300 million USDT tokens have been redeemed for $1 peg in the last 24 hours to USDT holders.

Cointelegraph has reached out to Tether CTO Paolo Ardoino to determine if there is reason to be concerned about USDT’s ability to hold its $1 peg in light of recent events. Ardoino emphasized that USDT has maintained stability through multiple black swan events and highly volatile market conditions and has never declined to repay.

“Tether continues to process buybacks as normal amid some expected market panic following yesterday’s market. Nevertheless, Tether has not, and will not, refuse to repay customers, which has always been the practice.”

With a level of fear, uncertainty and doubt reminiscent of the Bitcoin market crash of 2018, Ardoino offers a perspective given the technical differences between USDT and algorithmic stablecoins.

“Unlike these algorithmic stablecoins, Tether has a strong, conservative and liquid portfolio of cash and cash equivalents, such as short-term Treasury bills, money market funds, and commercial paper holdings of issuers rated A-2 or higher.”

The ongoing LUNA/UST situation may have undermined confidence in each platform’s ability to redeem stablecoins and $1 peg token swaps. Nevertheless, Ardoino believes that stablecoins will continue to be an important cog in the cryptocurrency space. “I don’t think trust in centralized stablecoin users has ever gone away,” he added.

USDT/USD pair. Source: TradingView

The price of BTC/USDT was incomparably high compared to other notable stablecoins. The difference in value with other stablecoin trading pairs is between $500-$1000 on different exchanges.

Relevant: As the Tether stablecoin peg slides below 99 cents, Bitcoin plunges below $27,000 to its December 2020 low.

The collapse of Terra’s LUNA and its algorithmic stablecoin, Terra USD, shocked the market. The relationship between the two is very simple, allowing users to exchange 1 dollar worth of LUNA for 1 UST and vice versa.

When the price of UST fell below $1 peg, the system failed, leading to massive arbitrage where traders burned UST for $1 worth of Luna and sold for profit. However, the continued selling of Luna not only canceled the arbitrage opportunity but also increased the amount of Luna in circulation, leading to a plunge in value as the price continued to plummet.

The rest is history. Now Terra’s chief executives are trying to solve a grim situation. Investor sentiment took a hit and Bitcoin fears and greed index It’s in the Extreme Fear range.

Stablecoins have long been a source of stability for crypto markets around the world, but the turbulent journey of 2022 along with the LUNA/UST crisis has had a ripple effect on other prominent dollar pegged coins.



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