Since Tether temporarily lost its dollar peg last week, it appears that massive liquidation has occurred. The crypto meltdown caused by the de-pegging of another stablecoin, Terra’s UST, appears to have had a substantial impact on market sentiment.
Significant Tether Liquidation
According to CoinGecko data, up to $7 billion(R111B) of Tether has been sold in a single week. The world’s largest stablecoin’s market cap has plummeted from $83 billion(R1.3TN) last Tuesday to $75 billion(R1.2TN) presently.
Tether is also the third-largest cryptocurrency in the world right now. USDC, another stablecoin, ranks fourth in terms of market cap, with a market cap of $52 billion(R828B). Despite strong market resistance to stablecoins, USDC’s circulating supply increased by $4 billion(R64B) from $48 billion(R764B) last week.
Tether’s price fell to 95 cents(R15.12) on Thursday amid a stablecoin breakdown in the cryptocurrency market. This sparked a debate among traders over the reliability of stablecoins. The issue was whether there were enough fund reserves to act as collateral to back the stablecoin supply.
‘Tether Completely Backed’
In this context, Paolo Ardoino, chief technology officer of Tether, said, “Tether is fully backed.” He was responding to a tweet on Tuesday from an analyst asking if all the $75 billion worth of Tether is fully-backed or not.
“We have redeemed 7B in 48h, without the blink of an eye. How many institutions can do the same? We can keep going if the market wants, we have all the liquidity to handle big redemptions and pay all 1-to-1. Yes, Tether is fully backed.”
Furthermore, FTX CEO Sam Bankman-Fried stated that the successful redemption of $7 billion demonstrates that there were reserves to send back.
The recent disaster with the precipitous collapse of Terra’s UST has fueled concerns about the stability of stablecoins. It had also raised concerns about the currency reserves of several stablecoins.
However, Bitfinex, the cryptocurrency exchange that operates Tether, asserts that almost 84% of Tether’s value is supported by cash and cash equivalents. Tether is now working on an audit, as previously reported, Ardoino added in the tweet thread.