Thursday, October 5, 2023

Tether’s Redemption Triggered by Stock Superbug


The current crypto market crash is intensifying investor fear, this follows by layoffs at Coinbase and other major sector participants. Tether, the developer of the most prominent stablecoin, is already showing new symptoms of anxiety.

As per currency tracker CoinGecko, investors are withdrawing nearly $1.6 billion in 48 hours from Tether’s dollar-pegged USDT stablecoin. Thus, they are dropping its floating supply to $70.8 billion, the weakest since around October 2021.

Tether’s USDT is not the same as the Terra blockchain’s UST algorithmic stablecoin that crashes last month. However, USDT always lets its investors suffer regarding the assets supporting it. Moreover, they will also be fulfilling their redemptions in the event of an overflowing catastrophe.

Cryptocurrency confidence stays relatively low. As a result, some investors are apprehensive that Tether may meet the same destiny as Terra’s UST stablecoin. According to Edward Moya, senior market strategist at Oanda, just so many corporate crypto investors are losing a lot of money. In a sense, they are fearful that if one aspect of the crypto ecosystem fails, Tether would also fail.

Fear reigns supreme in the cryptocurrency business as cryptocurrency prices plummet and some major industry leaders face financial troubles. Celsius, a cryptocurrency lender with over $10 billion in customer assets stops their withdrawals and operations. Accordingly, this is to avoid a run on its deposits and hires attorneys to restructure its obligations. Three Arrows Capital, another one of the major crypto hedge funds, is also in question.

The Tether Reserve’s Structure

Tether’s chief technical officer, Paolo Ardoino, states that the company is unloading its Celsius stake. This happens without a cost and has no commitment to Three Arrows Capital.

Tether’s reserve to support the value of USDT has long been the focus of anxiety in the cryptocurrency industry. It also has some uncertainties regarding the vague commercial paper ownership as well as digital asset holdings. Tether’s website states that the reserve has around $71 billion in assets.

Tether ends up losing $10 billion in market value in May. This is when the Terra environment disintegrates and the third-largest stablecoin, terraUSD, crashes to practically zero from its dollar peg. All of these shake investors’ faith in the reliability of stablecoins.

According to Moya, some of that money ends up in Circle’s USD currency. Furthermore, they are perceiving the second biggest stablecoin as a more secure option. As a result of chronically high inflation and economic worries, the entire market price of crypto dips below $1 trillion for the very first time ever since January 2021.

Tron’s $700 million USDD stablecoin sheds its peg to the USD during the turbulence. They still did not restore it since then despite Tron creator Justin Sun’s commitment to invest $2 billion in assets to maintain its security.

The value of USDT has indeed been keeping its peg to the US dollar. Moreover, the trades just below $1 on crypto platforms are signaling that selling pressure is pulling it down. The USDT was trading at 99.8 cents at the time of publication.

Rainy Naidoo
Rainy Naidoo
Rainy Naidoo is a writer for Cryptoconstellation. She has her Degree in Journalism and communications. Rainy Likes to spend her free time reading and exploring new places.

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