Tether Holdings Ltd.’s USDT, the world’s largest stablecoin, deviated slightly from its peg to the US dollar on Thursday as a crypto market signal suggested some investors were offloading the token.
(Bloomberg) — Tether Holdings Ltd.’s USDT, the world’s largest stablecoin, deviated slightly from its peg to the US dollar on Thursday as a crypto market signal suggested some investors were offloading the token.
In a slide that began around 4 a.m. in London, USDT slowly fell before reaching a low of 99.53 cents at around 7:17 a.m. It has since pared some of that loss to trade around 99.68 cents. Stablecoins typically rely on reserves of cash and cash-equivalents to maintain a one-to-one value with a less volatile asset, usually the US dollar.
Curve’s 3Pool, a so-called liquidity pool that allows traders to swap between the three biggest stablecoins, showed an elevated supply of Tether, with the token accounting for 74% of the total as of Thursday. That is an indication that investors remain cautious about holding Tether. The last time its share trended above 50% was during the collapse of crypto exchange FTX in November 2022, according 21Shares research analyst Tom Wan.
Tether is prepared to handle any potential wave of redemption requests for its token, Chief Technology Officer Paolo Ardoino said in a tweet.
The total market circulation of USDT is presently at around $83.3 billion, according to data from CoinGecko. Since the slide from its dollar peg began on Thursday morning, USDT has lost around $278 million in circulation — an indicator that investors are also redeeming USDT tokens, beyond swapping them on Curve’s 3pool. The token’s peg wavered on most crypto exchanges including Coinbase, Gemini and Kraken, blockchain analytics firm Kaiko said in a tweet, citing heavy selling pressure.
Tether is one of the most important token issuers in crypto and a linchpin of the market. Stablecoins are popular with digital asset investors who use them to trade against other more volatile cryptocurrencies. They offer a way to retain profits in a more stable asset without having to exit the cryptocurrency market by converting back into traditional money.
Read more: If Stablecoins Are Stable, Why Are Regulators Tense?: QuickTake
USDT’s tie to the dollar wavered several times in 2022, most significantly around the failure of FTX in November and the collapse of algorithmic stablecoin TerraUSD in May. The biggest worry among investors is whether every Tether is fully backed by one dollar. The company releases quarterly attestations which provide a snapshot in time of its reserves.
The exact reason for USDT’s drift on Thursday was unclear. “Naturally, traders and arbitrageurs will swap where’s the most liquidity for smooth trades,” Eliezer Ndinga, director of research for 21Shares, said in a message, adding that mismatches like these are occasionally taken advantage of by short sellers.
–With assistance from Muyao Shen.
(Updates with price chart, context from second paragraph onward. An earlier version of this story corrected the price.)
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