In an intriguing ripple through the world of cryptocurrency, Tether (USDT), the USD-pegged stablecoin, tumbled slightly under its 1:1 peg against the US dollar. The incident occurred on the decentralized exchange (DEX) Curve Finance, sending the DEX’s primary stablecoin liquidity pool into an imbalance. Strikingly, USDT sank as low as 0.998 against its fellow USD-pegged stablecoin USDC and against the algorithmic stablecoin DAI. This led to a steep upsurge in USDT’s weight in the pool, reaching as high as 59% (over $135 million). This compares to 21% for USDC (just under $50 million) and 20% for DAI (just under $46 million).
Despite the phenomenon leaving market analysts in a puzzle, it wouldn’t be the first time concerns have been raised about the transparency surrounding Tether’s reserves backing its stablecoin issuance. Regardless, Tether has taken steps to allay these anxieties in recent years, and the value of its reserves is published daily on its website. As it stands on August 3rd, 2023, Tether boasts total assets of $87.2 billion and liabilities of $83.9 billion, carving out a $3.3 billion shareholder capital cushion.
In more bullish news for the company, Tether divulged an additional $45 million investment into Bitcoin for Q2 2023, bolstering its holdings to over 54,000 BTC. Reflecting further on Tether’s strategy, it announced in May to apportion 15% of all profits into Bitcoin.
While the USDT sell pressure from Thursday remains a head-scratcher, investors continue to pose confidence that Tether’s USDT stablecoin will remain at least 1:1 backed by USD or liquid-equivalent reserves. Considering the fairly recent events, traders still have memories of USDC falling to as low as $0.77 against the US dollar triggered by the defunct Silicon Valley Bank. This occurrence instigated fears that the bank’s failure may have cost the reserve backing the USDC stablecoin.
Illustrating yet again how the volatile sphere of cryptocurrency can tip on the edge of a dime, these incidents underline the exigency for vigilance, transparency, and adaptability in this ground-breaking market. Ultimately, the sustainability of these digital assets, even those pegged on stable resources, is dependent on reinforcing confidence among investors and strategic foresight by the issuers.
Source: Cryptonews
