Tether, the largest stablecoin in the world, lost its association with the dollar for a short time today. The USDT exchange rate fell by 5% and reached the level of 0.95 USD.
According to CoinMarketCap data, the stablecoin has recovered somewhat, but is still trading at $0.99. Its market capitalization is over $81 billion. Paolo Ardoino, CTO of Tether and Bitfinex, stated that volatility was the result of “pure market dynamics”.
On Bitfinex, the Tether link is much greater than $1, while on Kraken it is slightly lower than $1. This caused arbitragers to buy USDT cheaply on Kraken and sell it on Bitfinex at a profit. Other market makers bought USDT for less than $1 on Kraken and directly bought it back for $1, still enjoying a profit. But all this is pure market dynamics and has absolutely nothing to do with the value of Tether, which still maintains its linkage.
The “deviation” from the dollar is taking place in a turbulent week for the industry. Just a few days ago, the stablecoin of the Terra ecosystem – UST – implosed. Moreover, bitcoin has lost almost 30% of its value over the past week and has fallen to its lowest level since 2020.
USDT and UST, however, are two different types of stablecoins. UST is an algorithmic token controlled by smart contracts, and USDT is backed by Tether’s reserves.
How is Tether secured?
One USDT is spent for the equivalent of one dollar in assets deposited into Tether and vice versa. According to the transparency report of the company behind the stablecoin, these assets include cash, corporate bonds, commercial paper, and more.
PROVISIONS supporting USDT include 83.74% cash and cash equivalent, 4.61% corporate bonds and precious metals, 5.27% secured loans and 6.38% of other investments, including digital tokens. According to the company, of these 83.74%, only 6.36% are cash and bank deposits.
Nevertheless, as the CEO assured, users can always resell their USDT in a 1:1 to dollar ratio using the tether.to website.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.