Tether (USDT), the world’s largest stablecoin, briefly dropped 5% on Thursday, falling as low as $0.95.

The stablecoin has recovered some but is still trading at $0.98, according to data from CoinMarketCap. It has a market capitalization of more than $81 billion. 

Tether’s volatile price action comes amid a tumultuous week for the industry, following the implosion of Terra’s stablecoin UST and a steep 10% drop from market leader Bitcoin

Once the third-largest stablecoin, UST first de-pegged by just a few cents last weekend.

Since then, however, its collapse has been monumental. It briefly fell as low as $0.2998, a 71% decline from its dollar peg, on May 11, 2022. 

The coin currently trades at $0.62, according to data from CoinMarketCap.

USDT and UST are two different types of stablecoins. UST is an algorithmic stablecoin controlled by smart contracts, and USDT is backed by Tether’s reserves.

Understanding Tether’s USDT

One USDT is issued for one dollar’s worth in an equivalent asset deposited into Tether and vice-versa. According to Tether’s transparency report, these assets include cash, corporate bonds, commercial paper, and other assets. 

The reserves of Tether backing USDT includes 83.74% cash and cash equivalent, 4.61% corporate bonds and precious metals, 5.27% of secured loans, and 6.38% of other investments, including digital tokens.

Of that 83.74% cash and cash equivalent figure, the firm reports that just 6.36% is in cash and bank deposits. 

Breakdown of Tether’s cash equivalents. Source: Tether.

Of late, redemptions for these digital…


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