Expansively utilized stablecoin, USDT, was seen to be discharging from the wallets of crypto traders in great numbers on Thursday. The event manifested on two significant exchanges for stablecoins: Curve Finance and UniSwap; these exchanges became epicenters of a massive imbalance. The disconcerting fact is, USDT’s price stooped below its standard $1 peg, meandering as low as 99.76 cents.
It’s quite common to see such exchanges used by traders who need to swap one stablecoin for another swiftly. Typically, tokens are in a state of balance within the pools. However, on the given day, the scales tipped unfavorably. Data revealed a surge in the USDT balance up to 62% in Curve’s 3pool, which also houses USDC and DAI stablecoins, whereas these counterparts only comprised 19% each of the pool’s totality.
Further imbalances were recorded in the USDT-USDC trading pool on UniSwap. This pool is one of the platform’s most liquid pairs. Versus a staggering $105.4 million USDT balance, the USDC could only muster a modest $6.5 million.
These unusual dynamics brought an implication to light – investors may harbor a preference for holding onto DAI or USDC rather than USDT under specific circumstances. The selling fervor has had a telling impact, with USDT’s price trading below its $1 peg throughout the day as per CoinDesk and CoinMarketCap data.
Significant imbalances such as these are not a novelty in the crypto market. Similar occurrences were reported during the implosion of Terra in May 2022. An echo of this event was sensed this March as the USDC issuer Circle found itself embroiled in a crisis scenario with the Silicon Valley Bank.
However, at this juncture, it is yet uncertain as to what precisely triggered this large-scale sell-off of USDT. An explanation would be critical to comprehend the future course the crypto market might take. This instance serves as a subtle reminder of the sensitivity and unpredictability of crypto markets which, in spite of their promise, invite scrutiny and foster wariness among stakeholders. It also underlines the importance of understanding the dynamism of this financial era’s digital economy.
Source: Coindesk
