The image of falling dominoes is the most effective way to describe the current state of the cryptocurrency market. The algorithmic stablecoin TerraUSD [UST] collapsed first, creating instability in the larger market. Then, the older cousin Tether [USDT] swayed from the peg, raising questions about its reputation as a haven during turbulent times. No one feels secure, even though things seem to be calming down for the time being. Tether in particular most definitely isn’t.
Get ready for a bumpy ride
The largest stablecoin in the world, Tether, fell below its $1 peg as the cryptocurrency market went into meltdown. The stablecoin was at the $0.999 level even as of the time of publication.
Growing doubts exist regarding Tether’s ability to support its planned $1 peg with sufficient assets. The same-named company Tether previously asserted that all of its tokens continued to be backed one-to-one by dollars kept in a reserve.
Tether, however, was found to be dependent on a number of other assets after a settlement with the New York Attorney General. To back its token, this included commercial paper, a type of momentary, unsecured debt. Since then, Tether has decreased the amount of commercial paper in its reserves and has stated that it intends to gradually reduce its holdings.
Did it succeed? No, since the token is far away from it.
In terms of supply held, addresses holding $100k to $10 million in cryptocurrency’s largest stablecoin approached three-year lows. In fact, the amount of Tether held by whales is at its lowest level since August 2019.
Is there a chance that this situation could alter? Okay, sure. In a tweet from July 7, Santiment added:
The brief time frame, however, paints a bleak picture for the leading stablecoin. One explanation is that Circle’s USD Coin (USDC), Tether’s main rival, may be the one getting the most attention.
With a share of 51.6 percent in terms of volume transferred, USDC is the most popular stablecoin overall.
Only 23.8 percent and 12.9 percent of DAI and Tether are collectively owned.
In fact, by the number of daily transactions on the Ethereum blockchain, the USDC stablecoin surpassed Tether’s USDT two weeks ago.
Is it getting worse and worse?
Even countries started cracking down on the network just as things weren’t looking good for Tether. For instance, the Chaoyang District People’s Court in Beijing has ruled that stablecoins like USDT cannot be used for salary payments, according to a 6 July report from the local news source Beijing Daily.