Stablecoin Tether (USDT) showing signs of stress As USDT/USD trades below $0.99 on major exchanges. Tether and Bitfinex CTO Paulo Ordoino assured USDT holders on Twitter that over 300 million UDST tokens have been redeemed for $1 in the past 24 hours.
Remind Tether to redeem USDt for 1 USD https://t.co/fB12xESSvB .
Converted >300M in the past 24 hours without a single drop of sweat.
– Paul Ardoino (@paoloardoino) May 12, 2022
Cointelegraph reached out to Paolo Ardoino, CTO of Tether, to determine if there is reason to worry about USDT’s ability to maintain its $1 peg based on recent events. Ardoino emphasized that USDT has remained stable through multiple black swan events and highly volatile market conditions, and has never refused to redeem.
“Following some of the expected market panic following yesterday’s market, Tether continues to process redemptions as normal. Nonetheless, Tether has not and will not deny redemptions from any customer, as it has always done.”
Considering the technical differences between USDT and algorithmic stablecoins, Ardoino offers levels of fear, uncertainty and doubt reminiscent of the 2018 Bitcoin market crash:
“Unlike these algorithmic stablecoins, Tether has a strong, conservative and liquid portfolio that includes cash and cash equivalents such as Treasury bills, money market funds, and commercial paper held by issuers rated A-2 and above. “
The ongoing LUNA/UST situation is likely to undermine confidence in stablecoins and the ability of the respective platforms to redeem token swaps at a $1 peg. Nonetheless, Ardoino believes stablecoins will continue to be an important part of the cryptocurrency space. “I don’t believe users of centralized stablecoins have ever lost trust,” he said, adding: “There will always be a market for stablecoins because they offer traders the opportunity to interact with the larger crypto ecosystem.”
The price of BTC/USDT is also different compared to other well-known stablecoins – between $500 and $1,000 in value compared to other stablecoin trading pairs on different exchanges.
The collapse of Terra’s LUNA and its algorithmic stablecoin Terra USD has sent shockwaves through the market. The relationship between the two is fairly simple, users can exchange $1 worth of LUNA for 1 UST and vice versa.
this system failure When the price of UST fell below the $1 peg, it led to heavy carry trades, with traders burning UST for $1 worth of Luna, which they then sold at a profit. However, Luna’s continued sell-off caused its value to plummet, not only offsetting arbitrage opportunities, but also increasing Luna’s liquidity as prices continued to plummet.
Stablecoins have long been a source of stability in the global cryptocurrency market, but the bump in 2022 coupled with the LUNA/UST debacle has a knock-on effect on other prominent dollar-pegged coins.