- The world’s largest stablecoin fell for a few minutes below the dollar, down to 95 cents.
- The cryptocurrency stands out for being stable and having a 1:1 parity with the US dollar.
- The drop came after the stablecoin, Terra USD, plummeted as low as 30 cents.
- Now Tether is at 0.993 USD, only 0.3% less than reaching the dollar.
Tether, the world’s largest stablecoin, broke its 1-to-1 peg to the US dollar and fell as low as 95 cents for a few minutes early Thursday.
This came after another stablecoin, terraUSD, crashed to as low as 30 cents last Wednesday, leading to doubts about the strength of this class of cryptocurrencies.
Vijay Ayyar, international director of cryptocurrency exchange Luno, commented that Tether’s move was likely a “speculative-driven fear” as a result of the fallout from the UST crash.
“The environment is ripe for such news events to cause ripples in the markets, as we can see,” the Luno CEO added.
Stablecoins were created with the goal of being an asset to shelter from market volatility and being an easy token to trade. Tether and USDC, the two largest stablecoins, are meant to be backed by a sufficient amount of money in a reserve to ensure that depositors can receive their dollars when they want to make a withdrawal.
Several analysts, at the time, have stated that they were not sure that Tether has enough assets to support its $1 peg. However, the company commented that all of its coins were backed and held in a reserve.
However, after a settlement with the New York Attorney General, it was revealed that Tether relied on a variety of other assets, including commercial paper, a form of short-term unsecured debt, to back its token. Since then, Tether has reduced the amount of commercial paper in its reserves and says it plans to further reduce its holdings over time.
This Thursday morning, Tether CTO Paolo Ardoino clarified that Tether holders would always receive $1 when redeeming their tokens. And that happened despite the fact that around 300 million tokens were withdrawn in the last 24 hours “without a drop of sweat”, he tweeted.
