Tether (USDT) losses dollar peg after the recent stablecoin drama with Terra’s UST

By: Charles Thuo
Charles Thuo
Charles loves traveling, reading, and sharing his knowledge about blockchain technology. read more.
on May 12, 2022
  • TerraUSD debacle has sent shockwaves across the stablecoins market.
  • Tether (USDT) has lost its dollar parity and slid to a low of about $0.96 today before recovering above $0.99.
  • Mian reason for Tether losing its Dollar peg is the negative stablecoins sentiment caused by TerraUSD’s saga.

Tether (USDT) has become the next stablecoin to suffer from the ongoing stablecoin fiasco that started with TerraUST de-pegging from the US Dollar.

USDT traders were treated to a scare after the price of USDT lost its dollar parity and slid below $1 to trade as low as $0.97 before recovering to trade above $0.99 at the time of writing according to CoinMarketCap.

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The instability of USDT has sent the entire crypto market into a frenzy mode since it is the most traded stablecoin.

Why did USDT lose its dollar parity?

Since USDT is the most traded stablecoins, it is one of the cryptocurrencies that is being sold off by traders following the recent UST stablecoin meltdown. Traders are selling their USDT coins to reduce their crypto exposure as the general crypto market plunge.

Interestingly, traders have leaned towards the USD Coin (USDC) and Binance USD (BUSD) causing the two stablecoins to surge.

Tether’s founder said that Tether has seen USDT to US Dollar conversions worth over $300 million in the past 24 hours as traders shift their focus away from the USDT and as they take caution following the UST meltdown.

As a result, Bitfinex, which is the exchange that operates USDT, has said that it is backing the USDT value with a massive reserve pool majority of which contains cash and cash equivalents.

Nonetheless, there are concerns about Tether not being transparent with its reserves with some investors saying that the recent USDT price dip could have been caused by Bitfinex’s inability to effectively back the stablecoin.

Tether has however said that it shall begin a chain swap for its token to move them from the Tron blockchain to Ethereum and Avalanche blockchains. One billion USDT tokens will be moved to Ethereum while 20 million USDT tokens will be moved to Avalanche.

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