Leading stablecoin Tether (USDT) is the latest cryptocurrency to lose its dollar parity, following a week of mayhem for the network. The price of USDT dipped as low as $0.97 but has since recovered to around $0.98 on exchange giants Coinbase.
On top of that, we’ve seen widespread issues within the crypto industry, with Tera (LUNA) plummeting at unprecedented speeds. The price of Bitcoin (BTC) dipped to $26,000 today, as the market forecast looks increasingly torrid.
The Cause Of Tether’s Troubles
Broadly speaking, there is a global economic crisis that has affected almost all markets, notably the cryptocurrency market, which has seen sweeping collapses of around 40-50% for altcoins and Bitcoin hitting the lows of 2020.
But, the main reason we attribute the drops in the value of USDT is that there is a lack of trust between stable coins and the community. Watching the collapse of TerraUSD (UST) has scared investors, pushing them to look for safer places to hold their funds.
It’s no surprise to see that the redemptions for stablecoins have skyrocketed in recent weeks. As customers redeem Tether a dollar is sent from the reserves to the user, which has resulted in the dollar-pegged USDT losing its $1.00 position.
How Has Tether Reacted?
Given the current volatility and uncertainty surrounding stablecoins and crypto, the CTO of Tether and Bitfinex tweeted to confirm that 300 million of the stablecoin tokens had been redeemed at their $1 peg over the past 24 hours.
In response to concern from the Tether community, the company announced that it had begun a chain swap for its tokens, adding support to the underlying reserves the company has. The company stated that it will convert one billion USDT from Tron’s blockchain to Ethereum’s, as well as move 20 million USDT from Tron to Avalanche.
We mentioned some other coins that have suffered this week. But, another stablecoin is now under the cosh, as Neutrino USD (USDN), of the Waves blockchain system, has shown signs of drifting away from the USD. The coin plummeted as low as $0.23 on Wednesday.
The coins suffering the most are algorithmic stablecoins. With a lack of trust in the fundamentals, we are likely to see the issues Terra and Tether have faced, continue to spread throughout the crypto industry.