The past few days have been dominated by the complete collapse of Terra (LUNA) and its stablecoin UST. UST lost the peg with the US dollar and as a result LUNA’s exchange rate collapsed by more than 99%. Immediately people started to worry about others stablecoins† To the shock of many crypto investors, the value of Tether (USDT) was also below 1 dollar today.
Tether under $1
The collapse of LUNA and UST had a major impact on the crypto market. Yesterday was a bright red day and most cryptocurrencies fell by double digits. Even bitcoin (BTC) failed to hold, dropping below $29,000. A similar debacle for by far the largest stablecoin, Tether, could add quite a bit of fuel to the fire.
At the time of writing, Tether trades on most major exchanges, such as Binance, for less than $1. Although crypto investors are of course not looking forward to this after yesterday, it is too early to say that something is really going on. Tether is now trading at around $0.98, with a bottom of $0.956 on FTX. That’s not $1, of course, but it can’t be said yet that Tether has substantially lost the peg with the US dollar.
“Everything is normal”
Tether’s CTO, Paolo Ardoino, has shared the rationale for Tether’s current value on Twitter. According to him, there is nothing wrong and Tether is simply processing “USDT redemptions”. If we can believe Ardoino, the panic about Tether is nothing more than fear, uncertainty & doubt (FUD).
Reminder that tether is honoring USDt redemptions at 1$ via https://t.co/fB12xESSvB †
>300M redeemed in last 24h without a sweat drop.
— Paolo Ardoino (@paoloardoino) May 12, 2022
Ardoino also showed The Block Research know that there is nothing going on right now that investors should be concerned about:
“Tether continues to process redemptions normally amid some expected market panic after yesterday’s market. Despite that, Tether has not refused and will not refuse refunds to its verified customers, which has always been its practice. In the last 24 hours alone, Tether has honored more than USD 300 million in redemptions and has processed an additional $1 billion to date without any issues.”